Rationale for adopting SPP in India

The economic theory says that market provides solution to all problems facing the world. But we have seen in the past that market has failed not once but on many occasions because the underlying assumptions for these theories to work are not valid in the real world. That is why we need to bring a government regulation to overcome this situation. The government has a dual role to play to optimize sustainability both as a consumer of non-renewable resources and use its market power as a major influence on the behaviour of the private sector and the development of green products. Government cannot shy away from taking action to bring formidable changes and has to take leadership position. Can there be better way of assuming leadership other than leading by example?

There are three compelling reasons why government action in this area is so important:

•       Public sector consumption constitutes substantial chunk of total consumption basket of India;
•       Procurement practices can play a key role in stimulating markets for sustainable products and services
•     Government policies and practices send important signals to people about public priorities while unfavorable or inconsistent policy signals can undermine the best efforts of Government to motivate sustainable consumption.

Challenges and Opportunities

In India, annual procurement by the government is estimated at approximately Euro 35 billion (INR 2,200 billion) and public sector procurement estimated at about Euro 114 billion (INR 7180 billion). Public Procurement in India is governed by the General Financial Rule (GFR), 2005 and Delegation of financial powers Rules (DFPR), 1978. The Department of Expenditure, Ministry of Finance has also issued three separate Manuals on Procurement of Goods, Services and Works as guidelines to all central government departments in the matters of procurement.  Further, the Central Vigilance Commission (CVC) has also issued guidelines prescribing procurement procedure to be followed by all Central Ministries.

Although these guidelines do not stop any government agency to procure green products and services within this policy framework, they neither explicitly mandate government agency to integrate environmental concerns in their procurement decision.  But in absence of such policy guidelines, GPP has remained a non-starter in India. In India too, green procurement can potentially have huge benefits, both environmentally as well as economically, considering huge procurement and consumption levels of the public sectors. The variety of experiences and approaches undertaken by pioneer countries demonstrate that implementation of GPP policy in any country is a daunting task. There are several challenges to green procurement that need to be resolved for successfully implementing green procurement in any country.

The study carried out by the author shows that there exist many hurdles for implementing green procurement in India. These relate to absence of policy framework, regulations, internal awareness, availability and higher cost of green products and services. The most important among them is having no aim of Government to implement GPP. Similarly, a dedicated legal or policy framework is critical to give legitimacy needed to break through and become embedded into the traditional thinking and financing that is commonplace in the public procurement. The critical issues with procurement professional are lack of knowledge to avoid legal and technical problems during the procurement process (inclusion, evaluation and monitoring), no knowledge & experiences of using tools such as LCC and LCA (CO₂ emission assessment), dependency on experts to define specifications and to mitigate potential financial risks due to perceived high costs of greener products. Vendors want that SPP is implemented in a transparent way with sufficient time to react, Intellectual Property Rights (IPR) is respected and products quality is guaranteed by third party certification.

Therefore, making green procurement as goal and communicating it through policy documents to all stakeholders is the first and foremost action to be taken to prepare ground for implementing GPP. The Government can stimulate green market and be the game changer by giving right signal to the market of its intent to purchase environmentally preferable products and services. Simultaneously, the focus may have to be on development of environmental criteria, demonstrating relevance of green procurement on environment based on credible data; and study on cost implication of different green products and services vis-à-vis conventional products and services. This would need cooperation and collaboration of all stakeholders like Ministry of Environment and Forest, Bureau of Indian Standard (BIS), Bureau of Energy Efficiency (BEE), Ministry of Law & Justice, Ministry of Finance, major procuring ministries and not to forget various industry chambers, NGOs and the consumers.  

Recent Developments on Green Procurement in India

There have been two recent developments in India on this subject that are worth mentioning here. Firstly in 2011, Ministry of Environment & Forest, Govt. of India had nominated a committee to formulate guidelines on Green Public Procurement. The committee has recommended a legislation to establish the necessary provisions and institutional arrangement for encouraging central government to procure greener products and services. Secondly, the Cabinet has cleared Draft Public Procurement Bill-2012, which states  “evaluation criteria shall relate to the subject matter of procurement and may include - (a) the price; (b) the cost of operating, maintaining and repairing goods or works, ….., the characteristics of the subject matter of procurement, such as the functional characteristics of goods or works and the environmental characteristics of the subject matter, …….”.This law, once enacted, would provide legitimacy to procurer’s decision of integrating environmental concerns in public buying. These developments are certainly welcome for the cause of sustainable development in India.

The implementation of SPP in practice would require not only laws & guidelines but also change in mind-sets amongst producers & consumers. What is now urgently needed is a shift towards an understanding that spending public money is an opportunity to directly foster sustainable development and innovation. This calls for huge capacity building of all stakeholders. Equipping public buyers with the know-how on how to include sustainability requirements into their purchasing processes would be a key to successful implementation of SPP in India.