A Performance audit covering drug policy of Delhi Government, procurement policies, procedures and practices followed in the Department and its subordinate offices i.e. DHS, CPA, Central Store and EPC for procurement of drugs, surgical items, equipments and their testing for the period 2003-2008 was carried out during June to December 2008. Performance audit of procurement of drugs and medical equipment and its impact on delivery of health services in Delhi revealed that due to lack of documented procurement procedures and instructions, ad-hoc systems and practices were adopted by the department. Failure of indenting units to assess the actual requirements resulted in stock outs of essential life saving drugs in spite of having sufficient budget for their procurements. In spite of having a centralized system of procurement of equipments, there was no efforts made to standardize equipments and monitor performance of firms after finalisation of A/Ts. No system has been put in place for monitoring quality of drugs being supplied to hospitals/ institutes and dispensaries. Testing of CPA drugs and surgical items were carried out in a routine manner and there was no tracking of supplies at CPA and the Central Store level to ensure that testing of all batches was carried out. Further, distribution of drugs before conducting quality testing of drugs and further delay in circulating reports about failed tests to the end users put lives of patients at risk. The department further failed to initiate action against erring suppliers and placed orders with same suppliers/ manufacturers. No Management Information System, either manually or in computerized environment was devised at department, DHS, CPA and Central Store level for planning and managing procurements and supplies. It infers that despite creating all the infrastructure by the department to assist in providing health care services to nearly 1.70 crore population of Delhi, the object based on equality and health care for the under-privileged sought to be attained through Delhi Health Policy was defeated.