"Politicians and police are involved. Otherwise how can so much fake currency be smuggled?"

ALL PICS: RAJESH BHARDWAJ

CHANGING HANDS: A driver openly bribes a Nepali border policeman to allow him to get through last week in Birganj customs.

As the sun rose above the misty Tarai last week, policemen at Nepal's border with India at Birganj stirred awake to guard a checkpoint through which 80 per cent of Nepal's trade with the outside world passes. By the end of the day, Rs 30 million in fake Indian currency will have traveled from Nepal to India concealed in sacks on bicycles, rickshas, tangas and even on the knapsacks of pedestrians.

This is one of the most porous international borders in the world, at most places it is not even marked. Livestock go across to graze and people move about freely to work or shop. On both sides, people are desperately poor, and the lawlessness in the Tarai makes the Indo-Nepal border a haven for smugglers.

Criminal gangs here have been ferrying narcotics, fuel, timber, electronic goods and even people back and forth for decades. But these days, there is a new contraband: counterfeit Indian currency. Printed in Pakistan, Bangladesh, and lately in Thailand, the Rs 500 and Rs 1,000 notes are flown into Kathmandu airport by couriers, transported overland to Birganj and then taken across the border by smugglers to distributors on the other side.

"We have confiscated more than Rs 400,000. People from both sides are involved," says Birganj SP Yogeswor Romkhami, "this is an open border, we can't control the fake currency unless both sides cooperate." Political uncertainty in Nepal and the Madhes crisis have helped the trade, which thrives on an international criminal network that has found the weakest link to get the fake cash into India through Nepal.

Officials in New Delhi say Nepal is the main transit point for most of the counterfeit currency entering India. They estimate that Rs 1 billion worth of fake Indian notes are injected into the Indian money circulation every month via Nepal. At the pace it is growing, there will be Rs 100 billion worth of fake currency in circulation in India in the next two years.

"It is a matter of concern for the financial and security establishments and we are aware that the note come in through Nepal, Bangkok and various other centres," India's National Security Adviser, MK Narayanan said in an interview in Delhi.

Indian officials have long maintained that the racket is organised by Pakistani intelligence and has links to the Dubai-based underworld don, Dawood Ibrahim and his associates in Nepal. They say the intention is to fund terror and to subvert the Indian economy, and use Kathmandu airport and the Indo-Nepal border because it is so easy to smuggle contraband through them.

Raxaul is regarded as the most corrupt customs post on the Indian border. On the Nepal side, police at the border openly extort incoming Nepalis. A consignment of Rs 2 million fake Indian currency has just arrived in a village 20km from Birganj. A courier is getting a red bundle ready to take it across in his bicycle. He will ferry anything across if the price is right and doesn't ask questions. We watch as he casually pushes his bicycle across, past the Shankaracharya Gate, over the bridge into India. We catch up with him on the other side, where he will hand it over to Indian fake currency dealers and collect his payment. He says hundreds of couriers bring bundles of currency like this into India every day.

The fake currency used to be printed in Pakistan's Multan or Quetta, officials say, but they were shoddy and could be easily detected. Now, the counterfeiters print much better copies in Thailand and Bangladesh. It is flown into Kathmandu airport in special suitcases with foil linings so they can't be detected. The Kathmandu end of the operation gets IRs 500 for every IRs 1,000 that passes through. Bicycle courier here in Birganj get IRs 500 per bundle of IRs 100,000 they ferry across to Raxaul. Dealers in India buy the fake cash for Rs 700 for every counterfeit IRs 1,000 note. Nepali police sources arrange for us to meet a fake currency dealer in Birganj who they say is a double agent helping them penetrate the racket. He brings with him wads of fake Indian 500 and 1,000 notes from a fresh consignment. The cash looks real, too real. There is a water mark, and has the right tint to the ink, feels and even smells the same.

For most people in Birganj, what is surprising is not that there is a counterfeit currency racket going on but that the authorities in India and Nepal are either unable or unwilling to control it. It is clear the smuggling operation has high-level support in Nepal with the son of a former royal minister reportedly one of the ring-leaders with links to Dawood Ibrahim's D Company. The network runs so deep that Indian-origin businessmen here in Birganj don't even bother to deny they are involved.

"There has to be a much more serious effort to control the smuggling, Birganj has become a hub for fake Indian currency," admits Ashok Temani of the Birganj Chamber of Commerce and Industry. The fake cash also affects the Nepali economy because Indian currency is widely used across the Tarai. Jitendra Sonal, elected member to the CA from Bara, has no doubt that the Nepal government knows who is behind the racket. "Of course they know," he told us, "five lakhs worth of fake currency was caught in Simra airport recently, within 22 hours the fake cash had become real. How do you explain that?"

In Raxaul, assistant customs commissioner Shaukat Ali, says his officers keep a round-the-clock vigil for counterfeit currency. "There is smuggling, it's a tough job, but we are controlling it," he tell us. In Birganj, Shivnath Yadav, of Nepal Police says the sheer length open the border is the biggest challenge, and adds: "We work with our Indian colleagues, but there is no doubt the criminals stake advantage of the open bnorder." Bhaban Singh is an elected CA member who was accused in a series of bombs in Kathmandu last year that killed three students. He now lives most of the time in Raxaul and slips in and out of Nepal to attend assembly sessions in Kathmandu.

He puts it very simply: "Politicians and policemen are involved in the fake currency racket. Otherwise how can so much cash come in through Kathmandu?"

HOW TO TELL THE DIFFERENCE

1. The Gandhi watermark on the white part of the fake note (above) looks like a caricature and is not accurate, especially the expression on Gandhi's face in the real watermark (below).
2. Running your finger over the ink of the real note gives a raised 3-D
effect which is not as pronounced in the fake note