By Subir Bhaumik

BBC News, Guwahati



Coins are much sought-after in India's north-east (Photos: Subhamoy Bhattacharjee)

Police in Calcutta say that the recent arrest of a grocer highlights the extent of the problem. They seized what they said was a huge coin-melting unit which he was operating in a run-down shack.

The grocer confessed to melting down tens of thousands of Indian coins into razor blades which were then smuggled into Bangladesh, police said.

"Our one rupee coin is in fact worth 35 rupees, because we make five to seven blades out of them," the grocer allegedly told the police. "Bangladeshi smugglers take delivery of the blades at regular intervals."

Out of circulation

Police say that initially the smugglers took coins into Bangladesh and then melted them down, but as the scale of the operation has increased, more and more criminals in India are melting them down first, and then selling them as razor blades.

To deal with the coin shortage, some tea gardens in the north-eastern state of Assam have resorted to issuing cardboard coin-slips to their workers.

The denomination is marked on these slips and they are used for buying and selling within the gardens.

Notes are more common than coins in Guwahati

The cardboard coins are the same size as the real ones and their value is marked on them.

"We will commit an offence if these cardboard slips go out, but we have to use them in our gardens because there are hardly any Indian coins in circulation here," said a manager of a tea garden in northern Assam.

He is not willing to be named because the disclosure could cause legal complications for the estate.

'Do our best'

Indian revenue intelligence officials say millions of coins are finding their way into Bangladesh.

They say they have alerted the paramilitary Border Security Force (BSF) - which is deployed on the India-Bangladesh border - to check the smuggling.

Coins can even be seen 'for sale' in Guwahati market stalls

"We are aware of our coins going across the border in some quantities and we will do our best to stop it," senior BSF official SK Datta told the BBC.

Revenue intelligence officials, who do not wish to be named, say criminals can make five to six blades from a five-rupee coin.

"We are investigating this closely," said one official posted in north-eastern India.

Earlier, Indian coins were being melted in huge quantities in places like Calcutta.

The mints took corrective action - scaling down the metal content of the coins - but that has not stopped the shortages.

Distributing coins

The authorities have taken various steps to deal with the problem.

In Calcutta alone, India's central bank - the Reserve Bank of India - has distributed coins worth nearly six million rupees ($150,000) to overcome the shortage in the last two weeks, bank treasurer Nilanjan Saha said.

We have to accept very soiled notes of one or five rupees, so soiled that the banks will not change it

Agartala resident Sushil Choudhury

Long queues form outside the bank's regional office in the city centre every time this happens.

Unscrupulous touts set up makeshift shops and collect as many of the coins as they can, only to sell them later at a premium.

"We stand in long queues but the coins are finished within no time. Those in front pick them up and we can see some of them later selling the coins at a big margin," complained small trader Nitai Banik, who needs a lot of coins for his retail trade in small garments.

Begging coins

Shopkeepers ask customers to buy more to make it a round figure so that small change does not have to be given out.

"The shopkeepers give us toffees or cigarettes to make it a round figure," said student Debolina Sen.

In desperation, some shopkeepers have even turned to beggars to maintain their coin supplies.

The beggars get given coins by passers-by and then sell them on at a profit.

They are worth more melted down as razor blades

"They charge a smaller premium, much less compared to the touts outside the Reserve Bank," says businessman Tarun Jain.

The coin shortage is most acute in the north-eastern frontier town of Agartala, right on the border with Bangladesh and believed to be a major centre for contraband trade with Bangladesh.

Here, rickshaw pullers tell you that they cannot provide any coins in change because they have none left.

"So we have to accept very soiled notes of one or five rupees, so soiled that the banks will not change it," says Agartala resident Sushil Choudhury.

In Guwahati, Assam's capital and the business hub of India's northeast, small coins like 50 paisa have completely dropped out of circulation.