Former TDP minister Atchannaidu has also been named in the alleged scam where medical supplies were procured by providing undue favours towards certain firms.

Andhra Vigilance Dept unearths Rs 404 crore financial fraud in ESI hospitals
news Scam Saturday, February 22, 2020 - 08:28

The Vigilance and Enforcement Department of Andhra Pradesh has revealed massive financial irregularities carried out by the directors of the Insurance Medical Services (IMS), in the procurement of medical supplies for ESI (Employees State Insurance) hospitals in the state. 

According to a note on the investigation into the matter, the three Directors of IMS, Dr B Ravi Kumar, Dr CK Ramesh Kumar and Dr G Vijaya Kumar were found to have procured medical supplies worth Rs 975.79 crore in the past five years, in violation of state government guidelines on selection of contract firms.  

The note states that the total budget allocation for purchase of drugs and medicines during the directors’ tenure was Rs 293.51 crore, while the actual expenditure came up to Rs 698.36, exceeding the budget by around Rs 404 crore. 

According to the note, the directors have caused huge losses to the state exchequer by purchasing drugs and other supplies without constituting a Drug Procurement Committee and without calling for Open Tenders. 

In the past five years, the directors have procured drugs worth Rs 89.58 crore from ‘non-rate contract firms’, whereas at rate contract prices, the drugs would’ve cost Rs 38.56 crore. This led to a loss of Rs 51.02 crore, the note said. 

Similarly, while purchasing lab kits and lab equipment as well, the note says the directors purchased supplies from certain firms at excess cost, doing ‘undue favours’ for these firms, without calling for open tenders. 

The purchase of surgical items was also found to have been done at excessive rates, with the different above rate contract prices amounting to Rs 47.77 crore. Even furniture was found to have been bought at an excess of 70 per cent above the market rate, causing a loss of Rs 4.63 crore.  

Thus, the prices paid overall for drugs and medicines, lab kits, surgical items and furniture was found to exceed expected prices by Rs 151.4 crore. 

Vigilance and Enforcement officials also found during the course of their investigation that the quotations by the non-rate contract firms (based on which the directors had issued Purchase Orders for procurement of medical supplies) were fabricated by the staff of the Director of IMS, the note said. 

The note also names former TDP minister Atchannaidu. In 2016, Atchannaidu, who was then Minister for Labour and Employment, had issued orders to the IMS to enter into an MoU with a firm named M/s Tele Health Services Pvt. Ltd. In a letter to the Director of IMS dated November 25, 2016,  Atchannaidu wrote that the Government of Telangana had entered into an MoU with M/s Tele Health Services Pvt. Ltd. in October 6, 2016, and further wrote, “In the similar lines, The Director, IMS, Govt. of A.P. is hereby ordered to enter MoU to entrust the work to the said firm, to set up ECG centres at all the ESI Hospitals and Dispensaries from w.e.f. 1.12.2016.”

With this, the MoU was signed without a call for open tenders, at excessive rates, the note said. The firm was later found to have committed several irregularities while providing these services, according to the note. 

Speaking to reporters, Atchannaidu denied that he had ordered the IMS to show undue favours to a particular firm. He claimed that in 2016, the Prime Minister and the central government had pushed for the implementation of telehealth services in ESI hospitals. “In a review meeting, it was decided that since tele-health services were already being provided in Telangana, we must follow the same. I wrote a letter asking the Director of IMS to implement tele-health services in Andhra Pradesh as it is being done in Telangana,” he said, claiming that he was not involved in corrupt activities. 

The note has also named various firms involved in the fraudulent procurement of tenders. 

The V&E Department has stated that the directors and staff of IMS, as well as the proprietors of the various firms involved in the irregularities, will attract the provisions of “Criminal Misconduct under Prevention of Corruption Act and cheating, criminal breach of trust, forgery for the purpose of cheating and using forged document as genuine and other offences of Indian Penal Code.”