National law for public procurement needed

Matters India, January 14, 2021

By George Cheriyan & Madhu Sudan Sharma

Bengaluru: Public procurement refers to the purchase by governments and state-owned enterprises of goods, services and works.
In recent years, and especially during the pandemic, the issues related to public procurement have received increased attention from Media, academia, social watchdog organizations, various political parties and others at national and state level due to its increased importance in Public Financial Management (PFM) Systems.

Public Procurement is highly important and a critical part of the PFM System. As estimated by the Competition Commission of India (CCI) the annual public sector procurement in India would be of the order of 8 trillion rupees, while a rough estimation of direct Government procurement is between 2.5 to 3 trillion rupees. This puts the total public procurement figure for India at around 10 to 11 trillion rupees per year, which comes around 25-30 percent of Indian GDP.

A well-functioning and efficient public procurement system helps the system to promotion of the efficiency, efficacy, probity, avoid mismanagement and waste of public funds, it also helps in ensuring vigorous competition among suppliers, responsibility, accountability and procuring materials/services of specified quality at the most competitive prices in a transparent and non-arbitrary manner and thus, it helps the development process by improving the public administration.

Plethora of Regulatory Laws:
Unlike many countries, India does not have a comprehensive procurement legislation at the national level, and the procurement regime in the country appears to be fragmented and inconsistent. Public procurement is governed by myriad of legal, constitutional and legislative provisions such as the Contract Act 1872, Sale of Goods Act 1930, Prevention of Corruption Act 1988, Arbitration and Conciliation Act 1996.

There are some comprehensive administrative rules and directives on financial management and procedures for government procurement are contained in the General Financial Rules (GFR) initially implemented in 1947 and last modified in 2017. In addition, the Manual for Procurement of Goods, 2017 (MPG) contains guidelines for the purchase of goods, and the Delegation of Financial Powers Rules, 1978 (DFPR) delegate the government’s financial powers to various ministries and subordinate authorities.

Some individual ministries/departments such as defense and railways are supplemented by manuals and policies governing procurement, guidelines issued by the Directorate General of Supplies and Disposals (DGS&D), the central purchase organization, Public Procurement (Preference to Make in India) Order 2017, Central Vigilance Commission (CVC), the Competition Commission of India (CCI), the Central Bureau of Investigation (CBI) and the Supreme Court of India Guidelines.

State Public Procurement Laws: A step ahead
Various studies increasingly point to the fact that some Indian states are able to achieve better public policy outcomes manifested through bringing in innovative laws and policies ahead of the Central Government. There are few examples, such as the Tamil Nadu Transparency in Tenders Act, 1998, Karnataka Transparency in Public Procurement Act, 1999, the Rajasthan Transparency in Public Procurement Act, 2012.

These acts govern the procedures for procurement in these states and provide effective regulatory framework for public procurement and as per an estimate so far these states have done procurement of around 30-40 lakh crore of rupees, so far under these new procurement laws despite the fact that at the level of Central Government still there is no such overarching law exists. So there is an urgent need for learning from the state experiences and brining in similar legislation at Central level too.

Covid-19 and reimagining public procurement:

Covid-19 has impacted the procurement practices in a big way. As the pandemic evolved, the medicines and treatment protocols for Covid-19 constantly changed. All levels of Governments had to create new infrastructure or upgrade the existing one to manage the surge in cases in a short period time.

During the pandemic, thousands of quarantine centers and testing labs were created, some of the testing labs were upgraded, the capacity of manufacturing of required equipment like surgical gloves, PPE kits were either newly created or increased manifold to address the demand, new trained professionals and existing human resource were deployed in Covid-19 duty or care, public places and offices were equipped to combat the virus spread and most of the available resources, which were limited in nature, had to be diverted for combating Covid-19.

During the pandemic, the regular procurement norms were totally relaxed and procurement was done under emergency procurement norms. It’s a fact that these emergency norms are at times flouted which costs a lot to the state and central exchequer.

Public procurement is a high-risk area. Since it is the meeting point between the public authorities and businesses/private players, the chances of corruption are high. Strong, transparent and accountable national law for public procurement, which is prudent and an efficient can change the state of public finance management and public expenditure outcomes. A good procurement law can turn in to a tool for socio-economic development and poverty eradication as well.

In a situation where, India does not have a national law and public procurement is dealt by a rage of laws, regulations and guidelines, makes this area highly vague, muddled and less efficient. Now, it’s up to the Government of India to reimagine the public procurement and develop a new model legislative framework for public procurement in the country so the limited public resources can be used optimally and nation can achieve its developmental goals in years to come.

(The writers are with CUTS International, a global public policy research and consumer advocacy group, headquartered in Jaipur)

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