The latest Comptroller and Auditor General report has authenticated the charge that there was corruption in the purchase of PPE kits during COVID-19 in 2020.

The CAG report, which was tabled in the Assembly on Tuesday, January 21, cited two major indiscretions on the part of the first Pinarayi ministry in which K K Shylaja was the health minister.

One, advance payment was made to a firm violating norms. Two, kits were purchased at rates that were 300% higher than the usual rates, even when the product was available at considerably lower rates.

The CAG said the "irregular procurement" had caused an additional expenditure of Rs 10.23 crore.
Violation of norms
In March 2020, at the height of the pandemic, the State-Level Crisis Management Group (SLCMG) constituted for the management of COVID-19 authorised Kerala Medical Services Corporation Limited (KMSCL) to pay up to 50% of the purchase value as advance payment to suppliers of items needed for COVID management.

Flouting this, a 100% advance (Rs 2.32 crore) was made to San Pharma for the purchase of 15,000 Personal Protective Equipment (PPE) kits at Rs 1,550 per unit.

The state government's defence was that it had originally placed an order for 50,000 kits, and therefore, the advance amount of Rs 2.32 crore was just 29% of the total purchase value of Rs 7.75 crore (50,000 x 1550).

The CAG dismissed the contention. "Though the Letter of Indent (LoI) quantity was for 50,000 PPE kits, orders were placed for immediate supply of 15,000 numbers only, as the company was new and the product had not been verified. Further, scrutiny of the purchase file also indicated that, on March 31, 2020, it was decided to purchase 15,000 PPE kits only. Hence, the reply of the government that the advance was for 50,000 PPE kits is not tenable," the report said.
High purchase cost
Since the pandemic called for emergency measures, the LDF government had exempted COVID-19 purchases from tender/ quotation formalities.

Even then, the government had in March 2020 prescribed a rate of Rs 545 for each PPE kit so that prices of essential commodities are kept in control.

The CAG report said that four firms, which included three regular suppliers to the KMSCL/ Karunya division, had offered to supply PPE kits during March 2020 at rates falling within or slightly higher than Government approved rates: Careon Healthcare Solutions Pvt Ltd (Rs 425- Rs 445), Biomedics (Rs 475 + GST), Anitha Texcot (India) Pvt Ltd (Rs 550 +GST), and New Care Hygiene Solutions Pvt Ltd (Rs 450).

Earlier, while defending her actions, the then health minister Shylaja had said that it was the shortage of PPE kits in the market that had forced the government to purchase kits worth Rs 550 at Rs 1550. She also said that this was done at the instructions of Chief Minister Pinarayi Vijayan.

The CAG's findings contradicted Shylaja. Even before she placed an order for 15,000 kits with San Pharma, Anitha Texcot had offered to supply kits at Rs 550 per piece on March 28 itself.

"Despite the availability of offers at lower price ranges from regular suppliers as well as in local markets, procurements were also made from five firms during March and April 2020 at much higher rates, as high as 300 per cent above the unit rate (Rs 545) or at higher rates compared to previous purchases made," the CAG noted. This resulted in additional expenditure of Rs 10.23 crore.

The largest number of kits were purchased from Kitex Garments. On the same day - April 15, 2020 - the government placed orders for 60,000 and 1.4 lakh PPE kits at Rs 830 and Rs 800 per unit, respectively, with Kitex.

The costliest PPE kits were that of San Pharma and Innov Quotient Pvt. Ltd. Orders were placed with both companies for 15,000 units at Rs 1550; while for San Pharma the supply order was placed on March 30, it was April 6 for Innov.

On April 2, order was placed with A&A Trading Ventures Pvt. Ltd. for 1000 PPE kits at Rs 1185 per unit. Four days later on April 6, an order for 25,000 PPE kits was given to BNS Health Aids at Rs 1295 per unit.

Anitha’s woes
In fact, the KMSCL had initially decided to purchase 25,000 kits from Anitha Texcot, which quoted Rs 550, a price closest to the unit rate of Rs 545. However, purchase orders were issued only for 10,000. What's more, the order was cancelled when half the supplies (5000) came in. The reason the KMSCL gave was that the supply was late.

The CAG found this intriguing. "Audit noticed that KMSCL had not included any clause in LoI stipulating supply period and no records were available to suggest that KMSCL had set a time frame for supplying the PPE kits ordered," the CAG noted.

Besides, the suppliers who had offered substantially higher unit prices had carried out the supply 23 to 33 days after the issue of supply orders. Anitha had supplied within 18 days of the supply order.

"Thus, it is evident that KMSCL excluded a firm that was supplying PPE kits at a lower rate in order to purchase the item at higher rates from other vendors," the CAG noted.