Public procurement should be made an effective means to stimulate economic growth: CUTS International

March 24, 2015, New Delhi

“An efficient public procurement regime in India has the potential to contribute at least one per cent additional growth to the Indian economy, which can generate five million additional employment annually over the next ten years,” said Bipul Chatterjee, Deputy Executive Director, CUTS International at a consultation meeting on the need for adopting a public procurement policy in India held in New Delhi earlier this week.

The meeting was held under a project entitled ‘National Public Procurement Policy in India’ which is implemented by CUTS International with support from the British High Commission in New Delhi under the Prosperity Fund of the UK’s Foreign and Commonwealth Office. It has explored various aspects of the management of public expenditure in India which is currently valued at about 30 per cent of India’s gross domestic product (GDP).

He further expressed that given that the present government’s, ‘emphasis on public infrastructure led growth’, the importance of a national policy on public procurement has increased manifold. “In India, public procurement is an activity not merely for meeting day to day functional requirements of the government but also for underpinning various services that are delivered by the government, for example, infrastructure, national defence and security, utilities, social services and so on,” he said.

Sanjay Aggrawal, Director, Public Procurement Division, Department of Expenditure, Government of India, thanked CUTS for organising a platform to interact with the concerned stakeholders on this subject. He explained the decentralised framework of public procurement followed in India since early 1950s and informed the participants a recent initiative of establishing a specialised division on public procurement under the Department of Expenditure.

He expressed that public procurement law is indeed a vital subject to be considered for discussion in present times. He apprised that the Department of Expenditure has started a new round of consultation on the lapsed Public Procurement Bill, 2012, and sought inputs and comments from all the participants. A new version of the Public Procurement Bill has been uploaded onto the Department of Expenditure’s website for public comments till 10th April, 2015.

Aurodeep Nandi, Senior Trade Advisor, British High Commission in New Delhi, articulated that the objective of the government of the United Kingdom is to create conditions for global growth by increasing trade, opening markets, ensuring access to resources, and promoting sustainable growth through “openness’ as a condition of growth and works for transparency and a strong rules- based international economic system”. He underlined the three essential Ts – Tax, Trade and Transparency – being propagated by the UK government and the role of Prosperity Fund under which this project is supported.

He highlighted the importance of public procurement in India in the context of on-going negotiations of a comprehensive trade and investment agreement with the European Union. He further expressed that an efficient public procurement regime is a stepping stone towards more economic growth through stimulation of competition and innovation.

Bulbul Sen, Consultant, CUTS International and Archana Jatkar, Coordinator and Deputy Head, CUTS Centre for International Trade, Economics & Environment, expressed: “There is neither a formal public procurement policy nor a law in India. There is a pressing need for both, as rules without law lack enforceability and law without policy support suffers from a lack of coherent justification or rationale for the provisions made,” they said.

In their presentation, they highlighted the major areas which are to be addressed while drafting a public procurement policy. Those areas reflected the current needs of the country and examined the subject under three major areas:

  • reorientation needed in the proposed legislation to bring it in tune with current preoccupations of the government
  • enduring principles which should be up-holded by a policy
  • coherence which a public procurement policy must maintain with other major macro level policies of the country

They argued that though the intention to fulfil social objectives through offsets was clearly spelt out in the Public Procurement Bill, 2012, it is time for a policy to precede the law in order to:

  • encourage the growth of Indian manufacturing, particularly that of micro, small and medium enterprises
    move to green and sustainable procurement
  • incorporate mechanisms to benefit disadvantaged classes of the Indian society
  • facilitate the implementation of other major macro-economic policies such as fiscal policy, competition policy, trade policy including in respect to their linkages with public procurement.

Shankar Lal, Country Focal Point (Procurement) of the World Bank in India, narrated the World Bank’s experience with public procurement regimes in various states of India. He noted that it is extremely crucial for India to create a transparent, competitive and fair system which provides its stakeholders greater value for money. He also explained various studies conducted by the World Bank and suggested the need to conduct impact assessment public procurement laws adopted in three states, viz. Karnataka, Rajasthan and Tamil Nadu.

Anubhuti Bhrayn, Head, Government Affairs, Wipro Technologies, expressed her happiness in regard to the quality of participation of the Department of Expenditure in this meeting. She stressed upon the need to have a national public procurement policy and elucidated on the challenges relating to model request for proposal (RFP). She said that the RFP/tender processes followed by government authorities, and more particularly contract terms and conditions, are consistently maintaining an inflexible approach. She highlighted the need to include services in the public procurement system and suggested of keeping it at par with product procurement.

According to her, there is a need for defining a separate chapter for services where basic terms and conditions can remain same but technical aspects are to defined separately. This should be coupled with inclusion of delivery guidelines so as to be clear and effective when it comes to procurement of services. She then concluded by saying that the big question that needs to be addressed is, once the Public Procurement Bill is adopted as an act by the central government, whether it would be only a guidance for the states or will it be implemented through a directive thereby highlighting the need for putting in place a national public procurement policy.

Somi Hazari, Managing Director, Shoshova Group of Companies, asserted that the growth of micro, small and medium enterprises can be made more robust if a national public procurement policy is adopted and utilised with full vigour. He reckoned that such a policy should facilitate a coherent and cohesive plan of action for all procuring departments of the government including state and local governments in order to be effective, transparent and to provide level playing field to micro, small and medium enterprises.

About 70 stakeholders, representing the Federation of Indian Chambers of Commerce & Industry and other bodies including the MSME sector actively participated in the meeting signifying the importance of addressing the core issues of ensuring better transparency, probity, competition and innovation in the Indian public procurement regime, which can usher in a better system of economic governance enhancing the quality and efficiency of the country’s growth and generating new employment opportunities.

They expressed their support towards adopting a national public procurement policy in India. According to them, such a policy will not only aid good implementation of the proposed legislation but will also help improving the country’s fiscal regime and can be an effective tool to achieve various socio-economic objectives as the Indian economy progresses..
For more information, please contact:

Bipul Chatterjee, +91(0)9829285921,
Archana Jatkar, +91(0)9928207628,