Publication: The Economic Times Mumbai;Date: Jun 3, 2013;Section: Economy;Page: 14

PPP Projects Prone to Corruption Evasion of revenue due to the govt by private partners is the biggest menace, finds United Nations body
VIKAS DHOOT NEW DELHI

Public private partnerships (PPP) projects in Indias 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 Indias preparedness to deal with such corruption in its report on Probity in Public Procurement, underlining that such spending from the exchequer accounts for 20-30% of Indias gross domestic product (GDP) much higher than the 15% of global GDP spent 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 like education and healthcare. But as the UN has pointed out, there is no central law to govern either PPPs or public procurements. Between 2012 and 2017, India aims to invest a trillion dollars 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 surveys 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 translate 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 revenuesharing 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 UPAs 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 dont 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 doesnt 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 adhoc 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 dont develop conflicts of interest. These processes need to be strengthened on a high priority, its reports said. The report has also warned that though eprocurement can bring more transparency into public expenditure, it cant 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.