PPE kit purchase comes back to haunt LDF govt.

The allegations faced by the Left Democratic Front (LDF) government during the Covid-19 pandemic, that the State exchequer suffered significant losses through the irregular purchase of personal protection (PPE) kits by Kerala Medical Services Corporation Ltd. (KMSCL), is coming back to haunt the government, with the CAG audit report authenticating these charges.

The CAG report on the State Health sector performance for the audit period of 2016-22, tabled in the Assembly on Tuesday, clearly puts KMSCL in the dock, for its “irregular procurement of PPE kits”, which led to losses to the tune of ₹10.23 crore for the State.

The report notes that though the State government had exempted Covid-time purchases from tender formalities because of the emergency situation in March 2020, the unit rates for PPE kits had been set by the government at ₹545.

Four firms, which included three regular suppliers to KMSCL, had offered to supply PPE kits during March 2020 at rates falling within or slightly higher than government approved rates. Yet, procurement was also made from five firms during March and April 2020 at much higher rates, as high as 300% above the unit rate or at higher rates.

The audit notes that one firm, M/s Anitha Texcot (India) Pvt. Ltd, had on March 28, 2020, offered to supply PPE kits at the rate of ₹550 which was close to the unit rates (₹545) prescribed by the government.

The CAG points out that KMSCL offered to purchase just 10,000 PPE kits only from this firm while much larger quotations — ranging from 15,000 to two lakh kits — were ordered from companies which quoted rates ranging from ₹800 to ₹1,550 per unit.

Also, the supply order given to the firm was cancelled on receipt of the supply of 50% of the ordered quantity, within 18 days of issue of supply order, claiming that the receipt against supply order was less.

The audit notes that KMSCL had not included any clause in the Letter of Indent (LoI) stipulating supply period and 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 State government’s explanation was that it was an emergency purchase during the pandemic, for which Union government had given permission. But the CAG said that though it was an emergency situation, it did not justify cancelling purchase orders which were economical for the government. Thus, the purchases made from suppliers who were new in the market, at significantly higher rates, resulted in extra expenditure of ₹10.23 crore.

The CAG also points out that KMSCL extended undue favours to M/s San Pharma, which had offered to supply PPE kits at the highest rate of ₹1,550 per unit, by paying it 100% purchase value as advance payment when KMSCL was authorised to pay only up to 50% of the purchase value as advance payment.

The firm was issued (March 2020) orders to supply 15,000 PPE kits at ₹1,550 per unit for which KMSCL paid advance amount of ₹2.32 crore (March 2020) which was the total value of the supply order and the supply was effected in May 2020.

The State government contended that the advance of ₹2.32 crore was paid against the LoI for the purchase of 50,000 kits and that hence it had paid only 29% of the total purchase price of ₹9.35 crore.

But the CAG dismissed that argument as the LoI was for 50,000 kits, the purchase order was for only 15,000 kits, for which the full price was paid in advance, even though San Pharma was a new firm and the quality of its product had not been verified.

Satheesan’s charge

The CAG report tabled in the Assembly on Tuesday is a clear vindication of the corruption allegations that the UDF had raised about Covid-time purchases, Leader of the Opposition V.D. Satheesan said, claiming that the corrupt deals had been executed with the full knowledge and consent of the Chief Minister and the then Health Minister, K.K. Shailaja.

The PR agency image build-up of the State’s Covid-time management has been shattered by the CAG report, Mr. Satheesan added.

He said that the CAG report has brought out various misdemeanours of KMSCL, including undue favours to certain suppliers and non-levy of liquidated damages for delay in supplies.

The case filed by the Opposition about the Covid-time corruption is under the consideration of the Lok Ayukta. The Opposition will pursue this case to the finish, Mr. Satheesan said.