A warlike schadenfreude during the coronavirus emergency would, therefore, have to be skilfully identified and mitigated for the public good.
By Sandeep Verma
Schadenfreude is a German word that originated sometime around 1868, and is composed of ‘schaden’ (damage) and ‘freude’ (joy), literally meaning one person finding pleasure in another person’s misery. Defence professionals worldwide are, therefore, already all too well-aware of war-profiteering opportunities in times of battle—when many international arms and munitions manufacturers can unashamedly rig public procurement systems, working in tandem with unscrupulous government officials, traders, middlemen and stockists, in order to create artificial shortages and to ramp-up prices for munitions, spare-parts and maintenance services just when war-fighting governments need them the most.
It is unlikely that similar ‘merrymaking’ opportunities will not arise in the due course with public procurement of medical kits and equipment worldwide, just as national governments gear up to fight the coronavirus pandemic at an unprecedented scale in the midst of extensive global supply chain disruptions in raw material and labour. A warlike schadenfreude during the coronavirus emergency would, therefore, have to be skilfully identified and mitigated for the public good, using all possible legal, policy and nudge tools that may be available to interested governments and to their regional and international networks. And all of this would need to be executed in a manner that balances stakeholder interests to the fullest possible extent, resulting in maximising collaboration rather than minimising conflict—amongst genuine but sometimes competing interests ranging from those of consumers, regulators, manufacturers, importers, retailers, researchers, innovators and healthcare providers.
India gears up for Covid-19
Indian private marketplaces were beginning to see a drying up of supply and massive surges in prices of essential masks, coveralls and hand sanitisers, and both central and state governments have strongly responded to these developments. Recently, on March 20, the Ministry of Consumer Affairs, Food and Public Distribution in the Government of India (GoI) capped retail prices of masks and hand sanitisers, effective till June 20, but that means the battleground will now move to proper implementation of the directive, as well as ensuring the proper ramp-up of production; reinvigoration of closed or underutilised manufacturing facilities; public and private investing in development of quick-results testing kits and drug alternatives; and such like.
Adopting an epidemic Act-plus approach
A number of state governments across India started with notifications under the (1897-vintage) Epidemic Diseases Act, a century-old legislation that enables initial steps in combating the pandemic, and covers inspection of suspects, allowing for their segregation; providing for their accommodation; (by the central government) inspection of ships and vessels and temporary detention of persons using such modes of travel and transport; and temporary accommodation of epidemic suspects (Rajasthan, for instance, issued its set of instructions under this Act on March 22). These state-specific notifications seem to now have been overtaken by the issue of a much more comprehensive set of nationwide ‘lockdown’ instructions by the GoI under the National Disaster Management Act, 2005, issued on March 24, followed up by two addenda till date and a number of ministries of the GoI issuing further instructions such as those for movement of material and personnel for power generation (Ministry of Power, March 25) and for maintaining supplies of essential goods (Ministry of Home Affairs, March 26).
But unless checked properly, the schadenfreude in public contracting for the coronavirus pandemic can happen through a number of interesting ways, ranging from artificial scarcity of essential medical supplies, as well as possible bid-rigging of public procurement systems through artificially-high pricing and avoidance of liabilities for late/delayed supplies or non-supplies. All this can be too easily achieved by clever use of elementary tactics such as playing one public procuring agency against the other, or one state government being preferred over others in these emergent times of need; and then moving on to more complex mechanisms such as influencing technical specifications of medical kits being procured, or use of change of law/force majeure contract clauses for arm-twisting public procurement officials to drop penalties against government contractors for delayed/non-deliveries.
A more holistic approach to managing the coronavirus pandemic at a reasonable cost to the public and to the public exchequer will, therefore, necessarily involve an ‘Epidemic Act-PLUS’ approach in India and elsewhere, through proper shoring-up of domestic production using elements of existing legislations such as the Industrial (Development and Regulation) Act, 1951 (the IDRA) that allows for nudging and, wherever necessary, taking over of parts of industrial management and production; as well as proper use of state and national public procurement frameworks that allow for agglomeration of quantities, emergency procurement and measures for enhancement of competition, such as the Rajasthan Transparency in Public Procurement Act, 2012, and similar legislations in Assam (2017) and Punjab (2019).
The latter approach—through agglomeration of quantities that discourages suppliers from rigging prices by propping one agency requirements against another agency’s needs—has already been initiated by the Ministry of Textiles in the GoI a few days ago when it took a policy decision on March 18 to nominate HLL Lifecare Limited as the sole procurement agency for central and state government hospitals. Of course, agglomeration of quantities is once again only a beginner’s step, with competing options available such as rate contracts (framework agreements) as another effective method of procurement; these will necessarily be followed up by extremely high levels of efficiency and timeliness in organising sourcing, production and distribution logistics by HLL, both as a production agency as well as a procuring agency. This theatre of efficient sourcing, manufacturing and distribution of essential drugs, kits and equipment is where the action will now surely shift to and will have to be monitored carefully, and will necessarily involve the making of both strategic and tactical choices in use of a large number of legal, policy and nudge instruments available under various national and state legislations in India. Many states have initiated action on restoring supply chains for essential industrial manufacturing, such as instructions issued by the Industries Department in Rajasthan on March 26.
The range of tools for government use in India for the purpose is mind-boggling indeed for any student of public law and policy: from fostering industrial development through the IDRA and ensuring procurement efficiency using central/state public procurement frameworks as discussed earlier, to (should, God forbid, the need arises for) potentially using elements of consumer protection under the Consumer Protection Act 2019, anti-bid-rigging measures under the Competition Act 2002, ensuring delivery of essential services through the Essential Services Maintenance Act 1968, price and stock caps through the IRDA and the Essential Commodities Act 1955, and ensuring coordinated government responses as well as exclusive/preferential procurement of amenities from any person/authority via the National Disaster Management Act.
All these measures, of course, will necessarily be aided and impacted by clever use of some extremely recent and evolving ‘Make in India’ initiatives such as procurement preferences and indigenous content obligations, possibly by skilful and targeted rule-making in the short run—focusing on ensuring certainty of supplies until the pandemic stays strong—and suitably modifying such measures in the longer run (shifting focus to domestic manufacturing of kits, drugs and equipment once the pandemic subsides to a more manageable degree). To this end, and against the backdrop of sharp surges in prices of medical and other essential supplies and equipment required to battle the pandemic, the GoI has also announced dedicated hosting and shorted supply and bidding cycles for such items on its GeM (Government e-Marketplace) portal.
This amazing range of interventions, together with export caps and restrictions (such as the ones on surgical masks, ventilators and textile raw materials that came into force on March 19 and March 24 recently) coupled with smart and foresighted international/commercial diplomacy (such as relaxing certain item exports in February this year when other countries needed them more, with a clear eye on obtaining reciprocal supplies for India in her current times of need) make the handling of this pandemic a formidable and challenging task indeed for both public procurement and public management officials alike.
Implementation of all these measures, of course, will have to be timed and sequenced properly and carefully, and will need to be undertaken on a strictly ‘need to do’ basis given India’s political/administrative sensitivities and complexities, in order to avoid a panic situation within a difficult pandemic situation. If the ringing of bells and blowing of conches on March 22 throughout the country on the behest of India’s political leadership is any sign, then it surely was a very inspiring signal to the effect that India’s people and her public institutions and leaders are standing up united against the coronavirus pandemic, thus far and well beyond.
The author, an LLM, specialised in Government Procurement Law from The George Washington University Law School, Washington, DC. Views are personal