Govt. Response to the World Bank Reported Irregularities in Health Projects

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IRREGULARITIES IN HEALTH PROJECTS, Statement at the LOK SABHA

On the 11th January, 2008, the World Bank has shared with us a

report, viz., DIR. This report is based on the review of five health

sector projects which were being implemented during periods varying

from 1997 till 2006 end. One project was under State health sector.

In this report, the World Bank has mentioned deficiencies relating to

procurement, oversight and implementation like collusion, bid

rigging, deficiency in civil works, equipments not installed because

of lack of staff etc. Majority of the deficiencies reported relate to

decentralized procurements at the district level, which are

implemented at the State level.

The World Bank report suffers from several infirmities. Ministry of

Health & Family Welfare has already conveyed its response on the

infirmities in the methodology adopted by World Bank emphasizing that

the World Bank did not discuss with any of the programme officers

either during the review or before finalizing the review report.

These discussions would have clarified most of the issues mentioned

in the report. Had this been done, most of the inferences would have

been different.

Government of India is committed to elimination of any deficiencies

or irregularities which are detected. Structural deficiencies which

were noted in the earlier programmes have been taken care of in the

successor programmes. It has been aware of some irregularities and

has taken action, if required in the past. Several criminal, penal

and disciplinary actions have been taken such as:

(i) Suspended business with two firms viz. M/s. Nestor

Pharmaceuticals and M/s. Pure Pharma in July, 2005 on charges of

reported collusion.

(ii) A case was registered by CBI on 21.8.2006 against M/s. Pure

Pharma and M/s. Nestor Pharmaceuticals and the case is at an advanced

stage of investigation.

(iii) Two officers (Shri M.P. Gupta of Hospital Services Consultancy

Corporation and Shri Vasant Bhat of Hindustan Latex Limited) from the

Procurement Support Agencies, who were allegedly involved in

procurement irregularities, were suspended in 2006 and continue to be

under suspension. Departmental proceedings against them are also at

an advanced stge.

The World Bank report also did not take note of the structural

changes which have been initiated post 2005. A very important

structural change which has been initiated by Government of India is

the launch of National Rural Health Mission (NRHM) in April, 2005.

NRHM has initiated the following architectural corrections in the

public health delivery system:

• NRHM has in-built institutional and financial monitoring mechanism,

e.g., Programme Management Units (PMUs) at State/District/Sub-

district levels consisting of management, financial and IT experts.

• Community ownership, accountability and oversight through Village

Health and Sanitation Committees at the village level and Rogi Kalyan

Samitis (Patients Welfare Societies) at Sub-district and District

Hospital levels consisting of representatives of Panchayati Raj

Institutions, civil society and Government health functionaries.

• The Mission emphasizes on `service guarantees' and not merely on

the creation of buildings and purchase of equipments.

• Capacity building of States for decentralized procurement.

• Electronic transfer of funds from Government of India to States and

States to districts and E-banking for real time financial reporting

and monitoring.

In addition, in centralized procurement, following corrective actions

have been taken:

(i) Shifted the procurement responsibility from Procurement Support

Agencies to the United Nation Office for Project Services for Bank

supported operations.

(ii) Set up an Empowered Procurement Wing (EPW) to provide oversight

to the procurement handled by Procurement Agents (PA). Developed

procurement policies and standards for the health sector; and working

on state procurement capacity building.

(iii)Introduced measures to improve the competition, transparency and

quality through the Governance and Accountability Action Plan (GAAP)

agreed for all health projects by the Bank in 2006.

(iv) Prepared a compendium of technical specifications for medical

equipment (more than 800) which is uploaded on the Health Ministry's

website.

(v) Created the Financial Management Group (FMG) at the Health

Ministry, supported finance staff at State and District levels,

developed details project specific financial management manuals.

(vi)Developed detailed guidelines and operational manuals for

procurement of NGOs and Public Private Partnerships (PPPs) under

HIV/AIDS control programme.

(vii) Developed detailed procurement and financial manuals and

trained state personnel.

(viii)Introduced evaluation of NGO performance by Committee having

one external evaluator under HIV/AIDS control programme; and

terminated contracts of about 25% NGOs which were non-complaint with

the guidelines.

(ix) Pre-award validation/certification of WHO GMP made mandatory in

all cases.

Further, after receipt of the report, following actions have been

taken:

(i) To address the systemic deficiencies pointed out in the World

Bank report relating to procurement, implementation and oversight a

Joint Action Plan has been finalized after intensive discussions with

the World Bank keeping in mind specific interventions and timelines.

(ii) Three new cases pertaining to Chhattisgarh and Karnataka

referred to CBI for further investigation. One of these was

identified through an analysis of the audit report. In a similar case

the Government of Orissa has filed a criminal case and initiated

departmental proceedings.

(iii) Government of Orissa has now ordered a full-fledged vigilance

inquiry to look into all deficiencies pointed in the World Bank

report regarding the State Health System project.

This information was given by the Minister of State for Health &

Family Welfare, Smt. Panabaaka Lakshmi in a written reply to a

question in the Lok Sabha.

http://pib.nic.in/release/release.asp?relid=36005