Economic Times: New Delhi:
Monday, June 03, 2013.
Public
private partnerships or PPP projects in India's roads and power sectors are
most prone to corruption, with private partners' evasion of revenue-share due
to the government emerging as the biggest menace, a United Nations' body has
found.
The UN Office
on Drugs and Crime (UNODC) has also flagged loopholes in Indian laws' ability
to curb such graft, and suggested that private partners in PPPs be designated
as public officials to make them accountable under the Right to Information
Act. This would also bring such projects under the proposed laws to protect
whistleblowers and guarantee service delivery to citizens.
The UNODC
reviewed India's preparedness to deal with such corruption in its report on
'Probity in Public Procurement', underlining that such spending from the
exchequer accounts for 20% to 30% of India's gross domestic product (GDP) -
much higher than the 15% of global GDP spend on public procurement.
India has
awarded around 758 PPP projects, worth nearly 4 lakh crore, in core sectors
such as roads, energy and airports as well as developmental sectors such as
education and healthcare. But as the UN has pointed out, there is no central
law to govern either PPPs or public procurement.
Between 2012 and 2017, India aims to invest a
trillion dollar in infrastructure creation, a bulk of which is to come through
the PPP route. "This growing trend merits the need for legislation and
procedures to address probity issues in PPPs," the UN report states.
The UNODC
reached out to 400 private sector and government officials to assess the ground
realities on corruption in PPPs, but just 100 responded. "Most entities
were silent, reticent or cautious in their responses to (queries about
corruption)... reluctance and fear to talk about corruption is an important
area that needs to be addressed," the body has stressed.
Despite its
limitations, the survey findings are illuminating. While 42% of firms feel
roads and power are the sectors most prone to corruption, 75% of government
officials perceived these two sectors as hotbeds of graft. Nearly 87% of
private players said that bidding norms and tender criteria were rigged to suit
certain bidders, to which over 44% of babus agreed.
Any
corruption in such contracts translates into sub-optimal or even no services
for the citizens they are intended for, 48% of private sector respondents said.
Over 56% of government officials attributed misrepresentation of revenues and
facts by private partners and bidders as the most common route of corruption.
The
government has relied on PPP projects with different forms of revenue-sharing
models for modernising airports and creating new capacities in energy and
transportation sectors, but babus have conceded that several private partners
siphon off revenues through creative structures to deprive the exchequer of its
rightful share.
The Public
Procurement Bill of 2012, now pending with the Rajya Sabha, does cover PPPs and
is the UPA's strategy to curb corruption in public purchases. If passed, the
law could make India largely compliant with procurement-related mandates under
the UN Convention Against Corruption, which the country had signed in 2011.
However,
several loose ends would still remain. For instance, the Bill restricts PPPs to
projects with concession periods of over five years and excludes construction
and maintenance projects that don't involve providing a service on payment of
user charges. This would leave out a large number of public projects and is in
contrast to the draft National PPP Policy of 2011.
The Bill also
doesn't have any reference to the concept of 'public purpose' though the draft
National PPP policy defines such projects as those where the benefit of the
state-owned asset is intended for the public at large or a service is
traditionally a sovereign function.
Though the
proposed law has a provision to debar bidders convicted of graft or crimes
under the Indian Penal Code for two to three years, the UNODC has mooted that
defaulting bidders must prove they have established integrity mechanisms before
being allowed to bid for public contracts again.
While the law
will bring all central ministries following different procurement systems on
the same page, states that are also aggressively betting on PPPs would continue
to operate in an ad-hoc manner. "Most states do not have a legislation to
regulate public procurement or PPPs," the report notes. States like Tamil
Nadu and Rajasthan have introduced such laws last year, but Andhra Pradesh,
which has the highest PPPs in the country, has been struggling to finalise a
law though Cabinet cleared the move in 2008.
The UN body
has called for a tighter vigil on the officials who award big-ticket contracts
by mandating them to declare their assets regularly, screening their
appointments more rigorously and ensuring they don't develop conflicts of
interest. These processes need to be strengthened on a high priority, its
reports said.
The report
has also warned that though e-procurement can bring more transparency into
public expenditure, it can't be considered the silver bullet to curb kickbacks
for contracts. "(ICT tools) may create challenges in large procurement and
bid documents like in infrastructure projects, there are dangers of manipulations,
hacking..." it noted.
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