India: Changes to demonetisation policy sparks anger

The Indian government has announced that old notes will no longer be accepted at petrol stations after Friday, fuelling anger over the scrapping of high denomination bills that has caused an unprecedented cash crunch.

Indians had been given until December 15 to use the old bills at filling stations but the government rushed forward the deadline on Thursday evening, giving millions of commuters still using the old 500 rupee notes barely 24 hours to spend them.

The government said the sweeping abolition of all high-value notes – some 86 percent of all bills in circulation – was meant to bring billions in so-called “black”, or undeclared, money back into the formal system.

“This cannot be right. First you say we have until December 15 and suddenly now you are saying something else,” RS Yadav, a government employee, told the AFP news agency as he waited for his turn on a rickety two-wheeler at a refuelling station in New Delhi.

IN PICTURES: Demonetisation in India – ‘How do I feed my family now?’

Nalin Kohli, a spokesman for the ruling Bharatiya Janata Party, defended the government decision to change the deadline.

“Many scrupulous elements were making attempts to convert their black money into white and based on feedback from the ground, government agencies stepped in to plug the loopholes,” he told Al Jazeera.

Prime Minister Narendra Modi sparked turmoil with his announcement on November 8 that all 500 rupee and 1,000 rupee notes – worth $7.5 and $14.5 respectively – would cease to be legal tender.

Critics say the demonetisation policy could have been rolled out gradually and better preparations made but the government insists this was the only way to fight corruption.

Paul Krugman, economist and Nobel laureate, told English language Hindustan Times newspaper that the gains from demonetisation were “uncertain” and that the government move was “highly disruptive”.

The move has triggered chaos with long queues forming outside banks as people try to deposit their old notes or withdraw new ones.

Frequent rule changes in response to pressure from various groups and growing disorder have made matters worse.

Banks and ATMs have also been running out of cash with limits being put on withdrawals, forcing people to cut down their spending.

Those with old notes are allowed to deposit them into their bank accounts until year end but long bank queues had prompted many to use them at petrol stations.

Cash accounts for 90 percent of transactions in India and the government has said it would take time before new bills are distributed.

“I was using my old notes up till now for filling petrol. Now I am dreading going to the bank. The government has no clue what we are being made to go through,” said Saurav Mallik, who works in the private sector.

The problem was not restricted to consumers, said Saima, who works as an attendant at a petrol filling station.

“I worry that there is going to be more confusion and chaos in the days ahead,” Saima, who uses only one name, told AFP. “Fights have already been breaking out.”