• PSUs appointed as procurement agencies, Kerala-based Hindustan Latex and HSCC Limited, sought bribes (three to 15% of contract value), sold competitors’ bid information, punished companies that were not corrupt and even routed companies’ bribes to ministry officials

• Bidders colluded to win the majority of contracts among themselves at significantly above-market prices — for example, 62% more than market price was paid for Folic acid tablets

• Procurement controls were evaded and performance certificates falsified

• Quality of drugs were sub-standard and quantities less than required; syringes and hypodermics were sourced from unlicenced Chinese suppliers

The report urged the Government to initiate a criminal investigation and prosecute the responsible companies, individuals and government officials. Ironically, the government upgraded Hindustan Latex to a Schedule ‘B’ PSU in April 2006 and then awarded it a Mini Ratna status on August 31, 2006. An official from one of the two companies told INT that there were no “proper systems to manage documents, files or even contracts” and that both PSUs lacked basic procurement safeguards.

When contacted, a bank spokesperson told The Indian Express that the detailed report expected this month was possible only because of cooperation from the government.

“The government and the Bank agreed that the health sector could benefit from closer scrutiny and the current detailed review of five health projects forms part of a larger collaborative effort to strengthen quality control of pharmaceuticals and improve the procurement of medical goods,” he said. Two pharma firms named in the report, Nestor Pharma and Pure Pharma, have already been debarred from bank contracts.

... contd.