NEW DELHI - India's eastern Bihar state is exploiting prejudice against eunuchs to collect overdue municipal taxes from defaulting shopkeepers.

On their first day on the job last week, the garishly-dressed and outlandishly-behaved tax collectors proved successful, gathering 425,000 rupees (about $14,200).

Dancing and singing to the beat of drums, about 20 eunuchs went from shop to shop, demanding that the owners pay their outstanding dues or face "special treatment".

They were accompanied by revenue officials with tax records to instantly settle the arrears.

"We are confident that their reputation and persuasive skills will come in handy to collect taxes from defaulters," Bharat Sharma, a city revenue officer, said.

The eunuchs receive 4 per cent of the amount collected from defaulters, municipal administrator Atul Prasad said, and were likely to be also used to collect outstanding taxes from private homes.

They are part of a bizarre freemasonry that makes most of its money by intimidating and embarrassing people on the streets with outrageous behaviour, obscene language and vulgar gestures - the "special treatment" promised to the shopkeepers .

Most of the eunuchs' victims pay to be left alone rather than suffer public humiliation.

The eunuchs dress like women, wearing ill-fitting skimpy blouses and saris, and gaudy costume jewellery.

Many are gay men who, in a society not sympathetic to homosexuality, find it easier to pose as eunuchs.

The eunuchs operate in small groups or clans, each headed by a "mummy".

They sustain their numbers by kidnapping young boys and castrating them with a razor in a secret and barbaric ritual presided over by the clan mummy.

Some of the boys do not survive this ritual, claim activists working to better the lot of eunuchs.

In recent years, India's eunuchs have reinvented themselves as debt collectors hired by businessmen, banks and other financial institutions - and now Government authorities.