Procurement policy will pay

The Hindu, March 11, 2012
Health and pharmaceuticals make up a large chunk of government procurement. The Public Procurement Bill could be a positive step towards reforming the system, says a study

The Public Procurement Bill proposed by the Union Government is a positive step in reforming the procurement regime to make it more open and transparent, according to Bipul Chatterjee, deputy executive director, CUTS international.

According to a study by his organisation on government procurement, the estimated size of this market at the Central government level is about $300 billion and it is expected to grow by more than 10 per cent annually in the coming years. As part of its study, CUTS looked at procurement policies, practices and functioning of institutions in three sectors — health including pharmaceuticals, railways, information technology and IT-enabled services. These sectors represent a large volume of the Indian public procurement market and are expected to grow significantly.

At present only two states — Karnataka and Tamil Nadu — have a law governing public procurement. CUTS is in support of the decision of the Group of Ministers on Corruption to clear the present draft of the Public Procurement Bill, 2012. The Bill is expected to be cleared by the Union Cabinet soon. It is expected that the Bill will be tabled during the Budget session of Parliament.

Mr. Chatterjee, while speaking at an event on government procurement in India which was supported by the British High Commission, expressed surprise that though public procurement accounts for 15 to 20 per cent of our national economy there is no central law governing the sector. He said multiplicity of laws and regulations implemented by multiple agencies has created a regime where rent-seeking behaviour on the part of stakeholders has almost become a norm.

He felt stakeholders such as government officials, suppliers of goods and services and consumers should support this legislation as it will be one of the biggest reform measures which will help the growth and development of the economy. Public procurement is one of the least researched and least debated subjects in India.

The present system leads to procedural delays, lack of uniformity and standardisation in procurement specifications. There is no effective grievance redressal system, which is a pre-requisite for any investment. There are anti-competitive practices such as bid rigging, predatory pricing, and also entry barriers in respect to vendor registration and approval.

For instance, by 2020 it is estimated that Indian Railways will need additional investment of Rs. 20,000 crore for modernisation and capacity expansion. At present, Indian IT companies are accessing just two per cent of the foreign public procurement market and efforts should be made to increase this share.

In 2011, India has become an observer to the WTO Plurilateral Agreement on Government Procurement. Many stakeholders have argued that a decision on whether India negotiates or not should be made after doing a comprehensive cost-benefit analysis including taking into account stakeholders’ views and concerns.

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