A Detailed Implementation Review (DIR), launched by the World Bank in 2006 and supported by the Government of India, has found “significant indicators of fraud and corruption” that include “collusive behaviour, bid-rigging, bribery and manipulative bid practices.”

The findings have shaken both the Government and the World Bank whose Board of Directors was presented with a copy of this report in Washington today. Since the 1990s, health accounts for 37 per cent of India’s new financial commitments to the Bank.

“This probe has revealed unacceptable indicators of fraud and corruption,” said World Bank Group President Robert B. Zoellick, in a statement today. “The Government of India and the World Bank are committed to getting to the bottom of how these problems occurred...On the Bank’s side, there were weaknesses in project design, supervision and evaluation. There are also systemic flaws. I am determined to fix these problems,” he said.

The report alleges serious discrepancies in project implementation, including deficient civil works certified as complete, broken or damaged equipment certified as compliant and under delivery of services. Also, it highlights that there were no audit and internal control systems.

What’s ringing alarm bells is the fact that this comes after a World Bank investigation in 2005 into a Reproductive and Child Health project found similar instances of corruption, including alleged kickbacks to Government officials.

Following those findings, the Bank withheld funds worth nearly $2 billion meant for pending proposals in the health sector. When the report came to light in 2007, the Government responded by banning two drug companies, starting a CBI inquiry and streamlining procurement operations. Ironically, it was following this that the Government of India agreed to conduct a DIR into five other projects in the sector.

This DIR began in mid-2006 and involved over 75 Bank staff and consultants. Investigators and forensic accountants analysed 835 available international competitive bidding cases reviewed more than 1,400 bidding contracts. The World Bank calls these findings “red flags” and has urged India to conduct its own investigation.

Reacting to the report, Naresh Dayal, Secretary, Ministry of Health told The Indian Express: “The report has come today. We are setting up four groups to go into every aspect of it. We have already taken action following the first investigation into RCH. We are going to start civil, criminal prosecution proceedings wherever required following this too.”

The key cases highlighted in the report:

• Food and Drug Capacity Building Project, $54 million (2003-2008): Project was meant to upgrade food testing labs and technicians. The report alleges questionable procurement practices in contracts representing 88% of value of equipment procured; shifting of bidding deadlines and favouritism; widespread deficiencies in delivery and installation of equipment in all 15 labs; more than half of 282 equipment uninstalled or undelivered.

• Orissa Heath Systems Development project, $82.1 million (1998-2006): This is the only state-level project that seeks to improve health in Orissa which has the highest infant mortality rate in the country. Project, meant to renovate healthcare facilities, supplying additional medical equipment, was marred by fraud. As high as 93% of the 55 project hospitals had problems like uninitiated or incomplete work, leaking roofs, crumbling ceilings and moulding walls and non-functional sewage system. And yet all were given completion certificates. The report cites 17 types of equipment that violated project technical specifications, including autoclaves that could explode and neonatal equipment that lacked adequate electrical grounding, exposing babies and medical staff to electrical shocks.

• Second National AIDS Control Project, $193.7 million (1999 to 2006): Project aimed to reduce the spread of HIV infection in India and strengthen country’s capacity to respond to HIV/AIDS. The review found that selection and oversight of NGOs chosen for workshops and targeted interventions was corrupt. Procurement officials demanded and received bribes in exchange for awarding contracts. Many NGOs were not qualified to carry out HIV prevention activities and some did not even exist. They furnished false certificates to show their eligibility. Fraud was detected in 82% of the 217 locally procured contracts.

• Malaria Control Project, $114 million (1997-2005): Project sought to assist National Malaria Eradication programme by introducing effective mechanisms to control malaria. Review found bid-rigging, bribery, and collusion in procurement of medicine, bed nets, and pharmaceuticals. Same firms debarred by the Bank for collusive behaviour in the earlier review were found indulging in similar practices here.

• Tuberculosis Control Project, $124.8 million (1997-2006): At the launch of this programme, it was estimated that up to half of India’s population was infected with TB and it meant to support India’s newly-launched DOTS programme. The review found collusion, fraud or corruption in 100 of 143 contracts. There were indicators like competing bids with the same language and presentation, bidders sharing same telephone numbers and addresses. There was even document-tampering and record-keeping deficiencies.