India Country Profile

Public Procurement and Contracting

Business Corruption

Companies face different procurement laws in different states, thus many companies find it difficult to operate in and between the complex procurement laws and procedures. Corruption in public procurement is thought to be worse at state level compared to the central level, primarily due to lack of qualified staff and political interference in the states.

See 'Licences, Infrastructure and Public Utilities' and 'Land Administration' in the Corruption Levels section for descriptions of corruption among contractors and high level officials in major infrastructure projects in India. See more on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Political Corruption

Public procurement and contracting in India has been marred by major corruption scandals involving high-level politicians. In 2006 rampant fraud and corruption related to procurement within the health and pharmaceutical sector has led the World Bank to withhold major loans for health projects, particularly in relation to the national HIV/AIDS prevention programme run by the Government of India. Corruption in the procurement process led to the circulation and use of dud HIV/AIDS testing kits across the country and the subsequent infection of hundreds of Indians from contaminated blood transfusions. The World Bank's Anti-Corruption Unit also discovered that massive kickbacks were paid to Indian ministers and officials of the office of Union Health Ministry in its USD multi-million projects to reduce maternal and infant mortality. Since 2007, cooperation with the World Bank has slowly been re-established after the government promised strong action against corruption in public procurement in the health sector.

Over the years, major corruption scandals have emerged in the awarding of military contracts. For example, in 2001, the Minister of Foreign Affairs and his son were found guilty of misconduct related to the United Nations' Oil-for-Food Program in Iraq. The minister has been identified as a major recipient of kickbacks in the scandal and has used his ties to the Indian National Congress to secure oil contracts. In 2009, the chairman of the state-controlled Ordinance Factory Board was also arrested for taking bribes in exchange of military contracts. The scandal has resulted in the blacklisting of 7 major Indian and international arms dealers.

See more on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Frequency

World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give the diversion of public funds to companies, individuals, or groups due to corruption a score of 3.6 on a 7-point scale (1 being 'very common' and 7 'never occurs').

- Business executives give the favouritism of government officials towards well-connected companies and individuals when deciding upon policies and contracts a score of 3.2 on a 7-point scale (1 being 'always show favouritism' and 7 'never show favouritism').

The World Bank & IFC: Enterprise Surveys 2006:
- In order to secure a government contract, companies expect to give a gift worth 1% of the contract.

- 24% of the companies surveyed expect to give gifts to secure a government contract.