Sustainable Public Procurement: Towards a lowâcarbon economy

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84 Sustainable Public Procurement: Towards a low carbon economy Regulatory impediments gaps. It also makes a harmonized policy formulation in incorporating energy efficiency standards in procurement difficult. With respect to procurement, there is multiplicity of institutions with roles not clearly defined in terms of their regulatory authority over public procurement. This not only results in overlapping functions and jurisdictions but also leads to a negative influence on procurement itself as the institutional dynamics and its overall value determines its role in governing the public procurement system in India. A clear example of this can be illustrated in terms of the application of General Finance Rules and CVC guidelines. GFRs are considered to be the main rules governing public procurement in India yet the flexibilities that it provides vis-à-vis making procurement more sustainable is rarely utilized due to concomitant application of another instrument, i.e. the CVC guidelines. The stringent guidelines issued by the CVC have had a negative impact on the managers in terms of curtailing their operational freedom to explore the flexibility provided within the GFR to go for “best value for money” and opt for energy efficient goods. Although CVC guidelines are not statutory in nature, they are a stronger instrument of command and control with companies and departments adhering to them. This adherence emanates from the nature of CVC as an institution that is of a statutory body to oversee the functioning of government ministries and departments and ensures corruption free functioning. The fear of punitive sanctions is in itself sufficient to create a negative incentive for procurement officers to adopt any practices that deviate from the CVC guidelines. Apart from the audit requirements, many times complying with other government directives such as preferences and reservations may cause an impediment to a successful implementation of energy efficiency within the procurement process. Certain criteria with regard to preference in procurement may come in direct conflict with energy efficiency criteria, which often requires sophisticated and high investments. (Small-scale industries may not have such capacity at times). Thus while some ongoing public sector reforms may accelerate introducing SPP, some may actually act as a deterrent (preference policies, strict accountability etc. which restricts flexibility in making procurement decisions). T E R I Report No. 2007GL01 84
85 Sustainable Public Procurement: Towards a low carbon economy Nature and structure of industry and company Supply choices Our research and consultations also suggested that even where enabling, government policies are vital, they by themselves are not sufficient in enabling the practice of SPP. Internal factors such as nature of the industry, nature and quantum of products to be procured, institutional culture and internal company specific policies are crucial in determining whether or not energy efficiency can be a factor to be considered in public procurement. The level of decentralization, decision-making structure, approaches towards environmental and social responsibility etc. are all influential in internalising energy efficiency or any other kind of sustainability within the procurement process. While procurement based on energy efficiency may be conducive in certain kinds of goods, it may not be feasible for all the goods. Similarly, it also depends upon the scale of procurement and nature of industry in general. Supply choices are very important in procuring energy efficient products. While most of our stakeholders, including NTPC and IFFCO mentioned that they had not faced a lack of suppliers for their specifications, they admitted that specifications are designed keeping in mind the supply options available in the market. The capacity of suppliers to provide energy efficient options in viable costs is also a challenge as it requires a huge financial as well as technical capacity on the part of the manufacturing agency. Another way in which supply choice may get affected is through market instruments. Although, this needed to be further corroborated as planned, in our second round of consultations, it was observed that market based instruments have an important role to play in creating a market for adopting sustainability criteria like energy efficiency within the procurement process and that they were mutually supportive and could benefit from such a scenario. Market based instruments such as the energy star rating by BEE emerged as a good option to explore in this regard. However, BEE found it to be a costly option in the short term and therefore is moving gradually with the energy star rating at its planned pace, and is taking lead in pushing energy efficiency through inter alia, procurement by developing energy calculators and setting up of inter ministerial taskforce etc. T E R I Report No. 2007GL01 85
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