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Reforming procurement process

| | in Oped

The over-abundance of legal framework has neither deterred nor prevented professionalised cartelisation, collusive bidding and bid rigging that are being practised by suppliers connected to the public procurement chain

Public procurement is a vulnerable vital activity of the Government as it constitutes about 30 per cent of the gross domestic product. With a total annual expenditure of approximately Rs15-Rs20 lakh crore, the Union Government alone spends about Rs2.5-Rs3 lakh crore. Corruption thrives with the mutual consent of the involved political parties, like in consensual sex, and its only the tip of the iceberg that is visible when a few persons are caught red-handed for criminal offence like reported rape cases.

There is no clearly laid down policy on public procurement activity in the Government, which is largely procedure-centric and demonstrating apparent adherence to the ‘open tendering’ process. Multiple procurement guidelines and recommendations are issued by multifarious agencies and watchdogs of different pedigrees like the Central Vigilance Commission, the Central Bureau of Investigation, the Competition Commission and other regulatory bodies — and, of course, the big eyes of the financial watch dog, the Comptroller and Auditor-General of India.

Currently, there is a plethora of agencies and guidelines but without any integrated public procurement policy or standard. There is no single nodal agency to deal with this not-so-holy activity of the Government. Added to the confusion caused by multiple agencies issuing cross-cutting instructions at times, there is a lack of uniform procedures, trained manpower and incomplete documentation. Unlike in the developed world, in India, only a few departments like Indian Railways and the Directorate General of Supplies and Disposals have created a specialised cadre for procurement.

Despite the Central Vigilance Commission’s insistence to introduce e-procurement and e-payment systems with digitisation of the entire activities, massive supply and demand side corruption thrives with manual tendering systems, particularly in some of the states, self-governing urban local bodies like corporations municipalities, district administration and the panchayati raj institutions. In the Constitution, ‘State Procurement’ does not figure in any of the three Lists in the Seventh Schedule as a distinct subject. The plethora of rules and guidelines befuddles the credible, artful dodger of rules in the form of General Financial Rules, various departmental and corporate manuals, CVC guidelines, recommendations of the CAG, parliamentary and legislative committees and the Lokayuktas or ombudsmen in some States.

The broader framework is provided by Contract Act, Sale of Goods Act, Arbitration Act, Limitations Act, and Right to Information Act and various case laws and judicial pronouncements in PIL cases by the High Courts and the Supreme Court. The question is: Do these over-abundance of legal framework deter or prevent professionalised cartelisation, collusive bidding and bid rigging being practised by the suppliers? While it is true that many initiative like the e-tendering and reverse auctioning have been by and large initiated by many State Governments and public sector enterprises, tracking and effectively monitoring and arresting the persisting irregularities in public procurement in a systemic manner under a comprehensive legal framework, is conspicuously amiss.

The reform initiative of the earlier Government in the form of the Public Procurement Bill, 2012, was in the right direction to address many of the evil practices of public procurement including cartelisation, anti-competitive concerns in procurement process including bid-rigging, collusive bidding. With the new Budget and further economic reforms intending to open up new horizons for FII and FDI investments, it seems the present Government is also equally keen to bring this important legislation to keep in line with the developed economies of the world.

The need for a comprehensive act creating an independent regulatory authority to ensure compliance by all procuring agencies is felt more than in the past now. Along with legislation, establishing systems and procedures to ensure probity, transparency, accountability and quality of goods by encouraging fair competition will be indispensable to arrest malpractices. The earlier Public Procurement Bill, 2012, referred to the Parliamentary Standing Committee of Finance, has since lapsed. Only with a robust procurement legislation the competition concerns like collusive bidding, creation of entry barriers for new entrants, bid suppression, complementary or proxy bidding, bid rotation, subcontracting, price fixing arrangements strategic boycotts, quantity restrictions or capacity constraints to boost demand artificially can be tackled effectively. The guidelines of the Organisation for Economic Cooperation and Development and other benchmarked practices may add valuable inputs for bringing in an adequate public procurement legislation and synchronising it with the existing bunch of regulations.

 
 
 
 
 
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