Do you remember the poor quality polymer notes of Rs 10 denomination that were in circulation in Nepal until recently (and have since mostly been withdrawn by the central bank)?
Nine years after the polymer notes, also known popularly as plastic notes, first came into circulation in Nepal in 2002, it has been revealed that the poor quality notes were delivered to Nepal Rastra Bank (NRB) by an Australian printer—Note Printing Australia (NPA) – after it won the printing contract by bribing Nepali politicians and central bank officials.
A day after the Australian newspaper, Sydney Morning Herald, broke the bribery story, dubbing it “the largest corporate scandal in Australian history”, Nepali officials privy to the scandal concede that the Australian printer, through its local agent, bribed Nepali authorities to supply the poor quality notes.
According to the newspaper, an audit team that probed the scandal besetting NPA, has confirmed that the NPA agent had bribed officials in Nepal to win the note printing contract. “Our evidence include admissions by the agents that they used commission payments from NPA to bribe officials to secure banknote printing contracts from the central bank,” the newspaper quotes a senior central bank official as saying.
An NRB official privy to the scandal said NPA’s local agent, Himalaya Pande, promised, and later on paid, local officials and politicians 4 percent of his commission money to win the contract.
The total printing contract was worth AUS$ 3 million (Rs 130 million at 2002 exchange rates), of which Rs 5.22 million (4 percent of the contract amount) was paid as bribe to Nepali politicians and central bank officials, according to the NRB official.
Interestingly, following internal evaluations Australian authorities concerned had informed NRB and the Commission for Investigation of Abuse of Authority (CIAA) in 2007 about the possible bribery, drawing their attention to the need for a probe.
“We had received a copy of confidential information four years ago; however, no one took action,” the NRB official said.
When contacted, Pande declined to speak in detail but said, “As the case is currently being investigated by Australian Federal Police, it is inappropriate for me to comment. Nonetheless, I wish to say I quit as NPA’s agent of my own accord and was not sacked as Australian media reported” .
Officials familiar with the case told that NPA had used not just bribe money but also diplomatic influence, mobilizing senior Australian Embassy officials in Kathmandu to lobby NRB for printing the polymer notes, something against central bank policy then.
The embassy officials had met with top NRB and Ministry of Finance officials several times to pressure them for printing polymer notes of at least one denomination.
Dr Tilak Rawal was governor of NRB when the central bank awarded the contract and received the first lot of polymer notes.
When Rawal was asked about the bribery scandal, he flatly ruled out his own involvement and said, “If anyone proves that I was involved in the case I will pay 10 times the bribe amount.”
NRB rejected notes after first lot
The polymer notes drew serious criticism as soon as Nepal started receiving the first lot of 10 million notes in September 2002. The quality of the notes was extremely poor as they didn’t meet printing standards. According to NRB officials, NPA had committed itself to using Intaglio technology, a family of printmaking techniques in which the image is incised into a surface. “But we were delivered notes printed in off-set print,” said the official.
The print quality was so poor that the color faded on slight rubbing and the quality of the polymer itself was very poor also.
Meanwhile, Rawal retired as governor and Bijaya Nath Bhattarai replaced him. Bhattarai immediately conducted a public survey of note acceptance in Kathmandu Valley and it showed that only 27 percent of the people were satisfied with the quality of the plastic notes.
Governor Bhattarai then cancelled the agreement with the Australian printer to print more notes.
NRB changed rules to favor polymer notes
The NRB Act 2002 had provisions to print notes only on paper, but these were changed to meet the interests of the Australian printer.
NRB constituted a committee to find ways to get around the law. The committee worked with “unprecedented efficiency” and suggested that any note printing material containing cotton would be considered as good as paper.
Based on these suggestions, NRB top brass eventually persuaded their board members to print notes of Rs 10 denomination on special plastic made from Guardian polymer substrate that contains elements of cotton. Guardian polymer substrate is patented by Australia and it enjoys a global monopoly in its supply.
To quicken the contract award process, the bank management even tied the release of polymer notes with the coronation of then king Gyanendra Shah. It got the designs and contents approved by the cabinet.
Subsequently, on February 12, 2002, NRB called a 35-day global tender for printing Rs 10 polymer notes. NRB paid 2.5-fold more than the amount it was spending to print paper notes.
“Though the rate was higher, it was accepted on the ground that the polymer note lifespan was much longer (over 4 years) compared to 8 months for paper notes,” said a then member of the NRB board.
... ... ... nepalawaz
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