Health schemes caught between government & World Bank

By Sumana Narayanan
Published: Friday 15 February 2008

-- india is set to make another round of changes in procurement norms for health schemes funded by World Bank loans. This follows the bank's review of Indian projects running on its loans, highlighting corrupt practices in procurement of drugs and other items by the government and drug companies. While such practices are well known--the bank's own reviews have repeatedly mentioned them--the timing of the latest review has raised eyebrows.

Public health researchers doubt the bank's motive the review is more about wresting control than removing corruption. There are suggestions that it's about getting the bank's favourite firms on board. How this will arrest corruption is not clear. In 2006, Pricewater-houseCoopers had appraised the bank's review system, finding it inadequate. The review detailed the nexus between government bodies and pharma firms.This leads to corruption at several levels (see box News you can't use). The centre accepted the report and announced a series of changes in procurement norms. The schemes at stake deal with critical health concerns tuberculosis, hiv/aids, malaria, and reproductive and child health. Procurement--of drugs, testing kits, bandages and equipment--is a major part of these programmes.

The schemes had recently completed five-year cycles, and were up for renewal. In fact, the bank has already sanctioned the next lot of funds, but hasn't released them. This is where the questions arise. When the bank knew of corruption all along, why did it continue funding projects for years? The bank reviews projects every six months. What's the point if they don't help check corruption?

The striking aspect of these reviews--conducted by consultants at the bank's high rates--is that they are paid for out of loans. Independent reviews show that up to 20 per cent of loans is spent on consultants.

Musical chairs In 2005, the bank had released some findings of its review of the first phase of the reproductive and child health project. It had 'found' inconsistencies in the purchase of vitamins. The bank suggested funds go directly to states, instead of being routed through the centre. It recommended Tamil Nadu's methods, which cut corruption and delays the state was buying drugs directly from suppliers, instead of dealing with procurement agencies. It didn't take long to realize that all states did not have this capacity. A year ago, the bank came up with an alternative to government agencies buying through their flawed tendering process the un Office for Project Services (unops) was called in to handle procurement for projects running on the bank's loans. The assumption being a un agency wouldn't be corrupt.

Around that time, the Union Ministry of Health and Family Welfare realized it was time for another government agency, and decided to call it the Empowered Procurement Wing. A British consultant, Crown Agent, was en-gaged to streamline procurement. All solutions featured foreign agencies. Little attention has gone into a investigation and punishment.

If the bank wanted to clean up health schemes, it would have tried to bring the guilty to the book. But it provides nothing for criminal proceedings and is not usable as evidence in a court. Nor does it identify corrupt officials and suppliers. After the bank released the long-term review, health secretary Naresh Dayal has announced a probe.

Look who's talking What really weakens the bank's position is recent events in its own house. Suzanne Rich-Folsom, director of the bank's Department of Institutional Integrity that published the review of Indian health schemes, resigned on January 18. There is talk of corruption. Her credibility suffered further because she was also a counsellor to the previous World Bank president, Paul Wolfowitz, who resigned under a cloud.

Which is why when the bank talks about corruption in the Indian government, it doesn't sound convincing.

News you can't use The World Bank's assessed five projects one each on HIV/AIDS, malaria and tuberculosis; the Food and Drug Capacity Building Project; and the Orissa Health Systems Development Project. These use bank loans of US $569 million. The review showed the following problems were common

  • Some bidders were favoured in violation of bank's bidding norms
  • Fraudulent bids
  • Uninstalled and improperly installed equipment; substandard material
  • Ministry set up panel to oversee bids. It often overruled project's bid evaluation committee's decisions.
  • Bank had okayed contracts in spite of finding shortcomings
  • lack of financial record-keeping
  • Fictitious NGOs awarded contracts
  • Lack of controls to monitor funds
  • Bribing of health ministry officials

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