No, It Won’t Take Six Months To Replace Old Currency Notes. Here’s A More Accurate Estimate.
Media reports have been saying that it will take six months to replenish the new Rs 500 and Rs 2,000 notes. They have arrived at this figure by estimating the capacity of the printing presses operating currently in the country.
However, this estimate is false.
Saumitra Chaudhuri in an Economic Times report makes a more accurate estimation.
As on March 31, 2016, 86% of the value of currency notes issued were in denominations of Rs 500 (48%) and Rs 1,000 (39%), involving 1,571 crore pieces of Rs 500 and 633 crore pieces of Rs 1,000 denomination respectively.
The Bharatiya Reserve Bank Note Mudran Pvt Ltd (BRBNMPL), which previously produced the Rs 1,000 notes and is now printing the new Rs 2,000 ones, can produce 133 crore pieces a month on a two-shift basis, says Chaudhuri.
If these two shifts could be stretched out to three, given the situation at hand, the production capacity of the central bank-operated presses under BRBNMPL goes up to about 200 crore pieces a month.
In this scenario, it would take not more than two months to replace the Rs 1,000 notes with Rs 2,000 notes, not six months as reported in the media.
Additionally, the assumption made in arriving at the six-month figure is that one Rs 2,000 note is replacing one Rs 1,000 note. Which is obviously not the case since Rs 2,000 carries twice the value of Rs 1,000 (and four times that of Rs 500). It’s the value of the currency being replaced that matters, not the number of notes.
Yes, there is a serious delay in the replacement of Rs 500 notes, which is being carried out by government-owned presses under the Security Printing and Minting Corp. of India Ltd (SPMCIL). They have printed only 15 million pieces of the new Rs 500 note when the order was for as many as 400 million by November.
But the gap should be reduced significantly in the next couple of months. Here’s why.
Mint reported recently that BRBNMPL has already printed nearly 1.5 billion pieces of Rs 2,000 notes. Its presses in Mysuru (Karnataka) and Salboni (West Bengal) together had an order to print 3.5 billion pieces. So they will be meeting their target soon. After completing this order, they will start printing the new Rs 500 notes, accelerating the replacement of the notes significantly.
An official on the condition of anonymity told Mint:
We planned to first bring the 2,000 rupee notes as the focus was to create high-value notes to ensure the smooth replacement of the old 500 and 1,000 rupee notes. We would have to print four 500 rupee notes for every one 2,000 rupee note. If we would have focused on printing the 500 rupee notes, the entire printing exercise would have taken much longer.
So therefore, six months is a very long time frame. A more accurate estimate should cut this figure down by at least a couple of months.