Late last year, the U.S. Government passed a new lay making it illegal to melt down pennies and nickels. (Which is silly and won't work- more on that later.)

India has just recently done the same, with very interesting and strange results.

Copper prices have been ever rising making older denominations of pennies work more than $0.01 in scrap metal. There has been other strangeness as well. It's a common problem for power companies to find that copper power & ground lines have been stolen. (Sometimes there's a fried body near by, again showing you don't have to be smart to be a thief.)

USA Today story on melting U.S. pennies

India is a lot further down this curve of coin vs. metal value.
BBC story on India coin melting

Interesting points from the India problem:
-"Our one rupee coin is in fact worth 35 rupees..."
-Some businesses are using cardboard tokens internally, because they don't have enough coins
-Enterprising individuals stand in line outside banks when the new coins come out, then resell them at a profit
-Shopkeepers are giving away small items (thus losing money) to avoid having to give out small coins .
-Rickshaw drivers aren't giving change because they don't have small coins
-Beggars get these small coins, and then re-sell them above face value to businesses that need change.


Here's the fun part. What is the Indian government's solution?
-Make more coins. Even so, the government can't make the coins fast enough to replace the melted ones.
-Reduce the metal content of coins. So far, that's not helping enough.
-More boarder guards, more laws, more police investigations.

In essence, the government is running a huge operation to sell metal to the public at a steep discount. They lose every step of the way.

India is still learning that you can't outlaw making a profit. If even street beggars can make a profit from the government's incompetence, more laws aren't the solution. Real solutions are glaringly obvious. It boggles the mind that India's
government, bureaucratic though it be, can't figure this stuff out.
-Make the really low value coins really small. (Ever see old Roman coins? Some are pea sized or smaller.)
-Make the coins out of a very low value metal. The U.S. did this during WW2, making steel pennies one year.
-Give up and stop making 1 rupee coins. Other counties have done this. Let shop keepers figure out how to round off prices.

(Thanks to Bruce Schneier for reporting this)

Realted Links:
-Melting Pennies for Profit, Part 2