Fear of anti-graft probe halts Indian government purchases

It was the perfect time to dispose a prickly sarkari file. Three weeks ago, the United Progressive Alliance (UPA) government and the media were preoccupied with a one-point agenda: Anna Hazare's fast. The file hoped to achieve something lofty: it had proposed to curb corruption in the government's most ambitious employment programme - the Mahatma Gandhi National Rural Employment Act (MNREGA).

By capturing the biometric profiles of all MNREGA workers, it hoped to cull 'ghost workers' from its rolls. Unfortunately, that was not to be. The secretary at rural development ministry baulked at the thought of issuing tenders for the project under his watch. The reason: he did not want to get embroiled in a controversy when public ire against corruption was peaking.

The secretary is not the only one playing it safe. Caution is the mantra in sarkari offices in Delhi. As a result, decisions on matters ranging from purchases of ambulances for the armed forces to raw material for PSUs, houses for paramilitary forces, fund managers for Employees Provident Fund Organisation (EPFO) and railways' diesel locomotive plant are all on hold.

What's the big deal if Indian babudom is not making decisions, cynics might ask. The answer is rather simple. The Indian bureaucracy wields a fat chequebook. Every year, the government spends Rs 14-15 lakh crore on public projects, goods and services. That sum makes up for over 20% of India's gross domestic product.

A slowdown in this spending impacts an economy already slowing down. "Private spending and consumption has already been slowing. At the current stage of the business cycle, if there is a sizeable compression in government spending, it might add to the economic slowdown," said Abheek Barua, chief economist at HDFC Bank.

The importance of government procurement and the problems plaguing it can be gauged from Prime Minister Manmohan Singh's promise to introduce a bill to monitor official purchases by the winter session of the Parliament in his Red Fort address on Independence Day.

Just Do It, But Later

So what's making the babus freeze? And how bad is the paralysis? "I think decisions are definitely getting slower," said former home secretary GK Pillai who retired in June this year. "In the light of all the scams that have been exposed, everyone is proceeding with great caution and is covering their own backs every step of the way," he said.

A good example of that caution is visible in the defence ministry, which has one of the heftiest allocations from this year's budget at Rs 2,02,572 crore. Besides delay in procurement of major war equipment like tanks and artillery guns, even files for routine purchases of fire-fighting equipment and ambulances for the armed forces are gathering dust.

They should have been cleared six months ago, but procurement files are taking double the time due to the lack of decision making and the fear factor according to a defence ministry official.

With increased public scrutiny of government procurement, ministers and bureaucrats are sitting on files to avoid a mention in a future Comptroller Auditor General (CAG) report or worse, an investigation.