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.

... contd.