1 Public Procurement in a BRIC Economy: The Indian Experience Public Procurement Law: International & Regional Perspectives International Public Procurement Law Day, Bangor University Dr Sangeeta Khorana 30 th March 2012

2 Outline Background and overview Case study: India SWOT Analysis: India’s GPA Accession? Conclusions and the way forward Bangor University Procurement Week 30March 2012

3 Background Government procurement under the GATT/WTO Special provisions for developing countries: (Article V GPA)  Price preference programs Art V: 3(a)  Offsets Art V: 3(b)  Phased-in addition of entities Art V: 3 (c)  Higher thresholds Art V: 3 (d) Still lack of interest - increasing bilateral focus Persisting protectionism is also a cause for worry Bangor University Procurement Week 30March 2012

4 Economic rationale Bangor University Procurement Week 30March 2012 Improved market access Enhanced domestic competition and international competitiveness Lower costs from efficient tendering Efficiency in public spending, knock-on economy-wide positive effects

5 Case study India specific focus  GPA Observer status  Large and growing market, stable economic indicators  Growing value of central government procurements - 5% of GDP ( prices)  Increasing public focus on corruption and general lack of transparency Bangor University Procurement Week 30March 2012

6 Existing legal framework Central government - General Financial Rules (2005, amended 1962), Delegation of FR 1978, manuals, DGS&D, supplementary rules by CVC Aspects of UNCITRAL, World Bank, Best Practices, GPA Constitution (Art 299), Contract Act 1872, Sale of Goods Act 1930 Rules and application, procurement thresholds – different for states and ministries Bangor University Procurement Week 30March 2012

7 Central government State governments Indian Railways Procedure for tenders Policy for preferential treatment Settlement of disputes Bids not invited value <$3,500 Open and Ltd tendering value > $50,000 Response time: 3 weeks domestic bidders 4 weeks foreign bidders Preferences allowed to SSI, PSEs and Cottage and Village industries DGS&D: review by the Standing Committee Bids invited limited tenders for < $2,500 Open tender > $20,333 Response time: same as central government Bids invited through Open tender value > $101,163 Additional price preference allowed to SSI, PSEs and Cottage and Village Industries Clause for price preference Appeals to Secretary (Industry), Disputes to State government officer Public procurement

8 Central government State governments Indian Railways Procedure for tenders Policy for preferential treatment Settlement of disputes Bids not invited value <$3,500 Open and Ltd tendering value > $50,000 Response time: 3 weeks domestic bidders 4 weeks foreign bidders Preferences allowed to SSI, PSEs and Cottage and Village industries DGS&D: review by the Standing Committee Bids invited limited tenders for < $2,500 Open tender > $20,333 Response time: same as central government Bids invited through Open tender value > $101,163 Additional price preference allowed to SSI, PSEs and Cottage and Village Industries Clause for price preference Appeals to Secretary (Industry), Disputes to State government officer Public procurement StrengthsWeaknesses Internal factors Reform in public procurement framework Recent institutional and regulatory framework reforms Lack of a coherent legal framework, bid challenge, dispute settlement mechanism Transaction costs Lack of reliable data and statistics Corruption in procuring activity OpportunitiesThreats External factors Benefit from low cost international suppliers Enhanced market access in foreign markets Spill-over effects S&D provisions Threat to small scale and medium firms from foreign suppliers Limited financial capability to bid for high thresholds - competitive disadvantage Loss of collective bargaining power SWOT Analysis

9 Current state: Prevention of Corruption Act, 2008 (amended 1998) Money Laundering Act, 2002 Right to Information Act, 2005 Public Interest Disclosure Act, 2010 But corruption is a major problem: CWG, 2G bandwidth spectrum licences, mining lease scams Where is India with regards to Corruption? Bangor University Procurement Week 30March 2012

10 Challenges and constraints outweigh benefits & opportunities Political commitment to cleaner procurements Next steps: Comprehensive national framework Strengthen redress and bid challenge Identify critical and sensitive sectors Enhance transparency, combat corruption, streamline tendering Conclusions and way forward Bangor University Procurement Week 30March 2012 For future GPA accession: Technical assistance and capacity-building Limit coverage commitments to central government entities Selective sub-central entities phase-in

11 Thank you Bangor University Procurement Week 30March 2012

12 GP market in India ActualBEActualBE 1GDP at current prices (bn Rs.) Plan expenditure Share in GDP0.04%0.05% Non-plan expenditure Share in GDP0.12% Total Expn : plan +non-plan (A) Total central government expenditure with no government procurement component (B) Total central government expenditure with government procurement component {(A)- (B)} % Share in GDP Expenditure on purchase of goods & Purchases subject to % **# Purchases subject to GPA- % **# Bangor University Procurement Week 30March 2012