Prelude : If you have the time, the patience and the ability to coerce and bribe people efficiently, you can save money by going directly to the passport office and interacting with the peon there. It seems that with good interaction skills, the passport can be had in a weeks time with a bribe of only 1000.
Preparation : If you lack the time, then, be prepared to spend around 4K. The list of documents required would be your
=> ID proof - pan card, Driving licence.
=> Residence proof - electricity bill, voter id card.
=> Age proof - school leaving certificate.
=> References - people who could vouch for you - someone who stays close by.
Step 1 : Look out for ads in newspapers for people who make passports. You can also ask people who hang around ATMs (offereing credit cards or policies). They generally work in association with the passport offices to "easily" get your form filled and application passed. When you are filling the application, remember to write your name and sign. Give all documents - they should not need the original documents (because they have some setup with the passport office). And pay them their "form submission fee" - which is passport fee + agent fee = around 2K. You can bargain. There are also agencies who specialize in making of passport and pan-card.
Step 2 : Followup with the "agent" to get the receipt of submission of application for passport. The actual process of creation of passport starts only after the application is submitted. If your agent has good connections and has greased the palms nicely with the money you have given, then you would get the receipt very fast.
Step 3 : Once the application receipt is in your hand - have another list of documents ready and wait -
=> ID proof
=> Residence proof - which shows residence at the location for more than a year.
=> Age proof
=> Residence proof of past addresses - at least two location where you have stayed earlier.
Step 4 : In 7-15 days time you would get an official from Intelligence department who would come to your house for verification. He would ask for all sorts of documents and keep you running around the house. The point he basically wants to make is that unless you grease his palms, he wont sign and forward the documents further. If you can show him all the documents he asks for, you will have an edge over him and may be able to bargain with him for the bribe money. Ofcourse he would start the bargain at 1K, but if your negotiation skills are good, you can bring him down to 500. Another point he will make is the police department (to whom he will be forwarding your app) can be bargained with - but do not trust him. The less you pay in the process of making him happy - the better.
Step 5 : Again wait for the police official who will come in a week's time. He will carry a file with him with maybe around 100 applications. He will start asking questions about where you have stayed earlier and the time of your stay. If you happen to carry residence proof of past addresses - you can have an edge over him. Else you have to just play along. If he threatens you that your past locations cannot be verified, dont worry - he is just trying to make you nervous - so he could extract more money in the bribe. Ask him gently about "how much would be needed to get the verification done ?" and he might ask for 1000 - again. If you try to bargain - he would say that he could make your application go around police stations for six months and your case will be lost. Dont worry - just bargain gently. If you tell him that the previous intelligence guy asked for the same amount - he would say that the guy had only a single sign to do - and he is supposed to get 3-4 signatures to do. Just play along and if possible, bring him down to 500. Pay him and wait.
Step 6 : Keep on checking the status of your passport online at http://passport.gov.in/. You will get a notification that your passport is on way. Keep a tab on the local post office and your snail-mail box.
Step 7 : A guy from the post may come to deliver the passport - within 15-20 days time. He would ask for "chai-pani". Dont offer him tea. Simply hand him 20-50 rs and get your passport.
The point to note here is that at every stage a hand has to be greased. Even if the details given by you are wrong, you would still get your passport if the hands are greased properly. Only the amount of grease will vary. With the 6th pay commission in force now - you might have hoped that the officials would be less greedy. But it has only lead to increase in the greed of the government officials and now they charge more for than before.