Kickbacks to Ministers, Health officials, said World Bank but Govt sits on report

The World Bank’s internal anti-corruption unit has alleged widespread corruption, including “witness statements” that kickbacks were paid

The World Bank’s internal anti-corruption unit has alleged widespread corruption, including “witness statements” that kickbacks were paid to Ministers and officials of the Union Health Ministry, in its multi-million-dollar projects to reduce maternal and infant mortality. The report, prepared in late 2005, said that projects worth $2 billion were “beset with corruption or were at risk.”

This had led to the Bank suspending healthcare loans worth over $1 billion, as first reported by The Indian Express — the suspension was lifted after strong lobbying by New Delhi which is the Bank’s largest borrower but the report remained under wraps.

Now obtained by The Indian Express, the report is not only embarrassing for the government and the Bank — whose procurement and anti-corruption policies are under cloud — it also raises questions over another key sponsor of the Reproductive and Child Health programme, the British government, through its Department for International Development.

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The report acquires significance since the Bank is expected, in a fortnight, to submit a detailed review of key health-sector projects it has funded in India.

The main findings of the report, submitted by the Bank’s Department of Institutional Integrity (also known as INT) in late 2005:

• Among the projects where evidence of corruption was found: $165-million Malaria Control Project (now succeeded by a ‘Vector Borne Disease Control Project’); $90.7-million Orissa Health Systems Development Project, $110-million Uttar Pradesh Health Systems Development Project and the Tuberculosis Control Project.

• Routine kickbacks paid to government officials, including officials at the Ministry of Health and Family Welfare; “oral testimony” by witnesses of kickbacks to Ministers.

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• 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.

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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.

The Bank’s next report will come at an interesting time for new chief Bob Zoellick — a panel headed by former Federal Reserve chairman Paul Volcker is to submit a report about the anti-corruption unit’s functioning next week.