A commission investigating COVID-19 corruption in Karnataka has recommended prosecuting former CM BS Yediyurappa and ex-Health Minister B Sriramulu over irregularities in PPE kit procurement during the pandemic
Published Nov 09, 2024 | 3:08 PM ⚊ Updated Nov 09, 2024 | 3:08 PM
Report makes COVID corruption allegations against Karnataka BJP
In a major development, a commission set up to investigate alleged corruption during the COVID-19 pandemic in Karnataka has recommended the prosecution of two senior leaders from the state’s ruling Bharatiya Janata Party (BJP)—former Chief Minister BS Yediyurappa and former Health Minister B Sriramulu—for irregularities in the procurement of personal protective equipment (PPE) kits.
It has now been confirmed what many suspected: the @BJP4Karnataka government profited during COVID while people were lost their lives for Govt’s apathy.
As per media reports, Commission set up to probe #CoronaCorruption in Karnataka has recommended prosecuting former Karnataka… pic.twitter.com/9IF8MgJnwH
— Priyank Kharge / ಪ್ರಿಯಾಂಕ್ ಖರ್ಗೆ (@PriyankKharge) November 9, 2024
The findings, which have surfaced through media reports, suggest that over 300,000 PPE kits were procured at inflated prices from Chinese suppliers, bypassing standard procurement procedures and transparency norms.
These irregularities allegedly occurred at a time when the state was struggling to manage the COVID-19 crisis, with hospitals overwhelmed and citizens grappling with the lack of basic medical supplies.
The commission’s report accuses Yediyurappa and Sriramulu of directly influencing the procurement process, which led to the purchase of the PPE kits at significantly higher rates than local suppliers offered. It is alleged that the standard procurement process was deliberately bypassed, and records were manipulated to reflect post-facto approval for these transactions.
Despite the availability of local manufacturers who could supply the necessary kits at more competitive prices, the state government opted to purchase the PPE kits from foreign companies, including DHB Global and Big Pharmaceuticals, based in Hong Kong and China.
The report claims that these decisions were taken in a manner that raises serious questions about quid pro quo arrangements and potential corruption.
The probe specifically highlights a series of official documents and approvals related to the procurement. Among them is an annexure to a government order dated 2 July, 2020, which shows that Yediyurappa, in his capacity as Chief Minister, and Sriramulu, as the Health Minister, had personally approved the purchase of 300,000 PPE kits from China.
The report points out that these purchases were made at prices of ₹ 2,117.53 per unit, which is far higher than the estimated cost of ₹ 2,049.84 per unit, as per the records of a price fixation committee meeting held in April 2020.
Documents also reveal that the decision to purchase these kits was made under the guise of urgency, with the government invoking a special clause of the Karnataka Transparency in Public Procurement (KTPP) Act to bypass competitive bidding.
The procurement process was marked by multiple purchase orders being issued to DHB Global and Big Pharmaceuticals, with penalties included for delayed deliveries.
Further investigations revealed that, in a meeting held on 23 March, 2020, the state’s COVID-19 task force approved the procurement of PPE kits from international suppliers, despite the existence of local manufacturers capable of meeting the state’s requirements.
The revelations have sparked widespread outrage, with political opponents and civil society groups calling for accountability. As calls for action mount, the probe has now been forwarded to the state’s anti-corruption bureau, which is expected to review the commission’s findings and take further steps.
“Award of non-urgent contract without competition”
The report states that after analysing the sequence of events in the purchase of PPE Kits, ‘serious irregularities are noted in the above procurement of PPE kits from China.’
“The Commission finds that there were a number of instances where PPE Kits were procured by KSMSCL from domestic suppliers at much lower rates.
In once such instance, 1,50,000 quantities of PPE Kits were procured via PO dated 14.03.2020 at Rs. 330.40 per unit from M/s Plasti Surge Industries Pvt. Ltd. Under Section 4(g) of KTPP Act. But surprisingly the PO was amended by issuing a Corrigendum on 27.03.2020 to unilaterally increase the rate to Rs. 725 per kit. The Commission has recommended legal action against the concerned officers/officials of the KSMSCL.
The second procurement was made from M/s Indus Bio Solutions for 2000 quantities of PPE Kites on 24.03.2020. Here the rate was Rs. 656.26 per kit. The then CM it writes approved procurement of Kits from 08 other companies on 23.04.2020 at unit rate of Rs. 1,444.80.
These purchases clearly point out that PPE Kits were readily available in domestic market at reasonably lower rate…” the report stated.
The report questions why in spite of local suppliers being in a position to supply 5,00,000 quantities of PPE Kits, imported Chinese Kits were given preference. The Note sheet stated that local suppliers were not in a position to supply the require numbers. “This explanation appears to have been put forward as mere ruse to justify the supplies from the select supplier identified by the CM and the Health Minister.”
In the report it further added that while PPT Kits were available in the domestic market with prices ranging from ₹ 400 to ₹ 1,444.80, “the rate paid to the foreign company namely DHB Global was double the amount paid to Indian Firms,” it said.
“Non-transparent and arbitrary selection of suppliers”
The report claims that the procurement was made purely on the directions of the CM and the Health Minister without following the basic procurement rules and procedures.
“Admittedly, no quotations were invited before the commencement of the process and it is not known as to how the price list were received from foreign entities. Undeniably, as on the date of SO, there was no order under Sec.4(a) of the KTPP Act, exempting the provisions of the said Act,” the report highlighted.
It goes on to state that, “the whole process was manipulated to grant the contract to the select and favoured supplier of the CM and the Health Minister apparently with a view to obtain unfair advantage.”
“Higher Rate and Delayed Supply”
The report cites an email correspondence dated 01.04.2020 sent by the Commissioner for Industrial Development and Director, Industries and Commerce to the Principal Secretary (HFW).
Two companies from abroad had given rates for PPE Kites; M/s DHB Global and M/s Big Pharmaceuticals. While the rate offered by DHB Global per Kit was USD 27.72 and cost of shipping and logistics was USD 1.056778, the rate from Big Pharmaceuticals was USD 26.00.
The report states, “However, M/s DHB Global was treated as L1 solely on the ground that M/s Big Pharmaceuticals did not possess USFDA/CE certification… even though the said firm undertook to produce the same after issuance of the PO.”
“In the said circumstance the decision to place the purchase order with M/s DHB Global at unit cost of Rs. 2117.53 as against the lower price quoted by M/s Big Pharmaceuticals was injudicious and has resulted in avoidable expenditure of Rs. 67, 69, 000 on purchase of 1,00,000 PPT Kits,” it added.
“Additional cost towards Freight and Transport”
The report states that both M/s DHB Global and M/s Big Pharmaceuticals had added freight and transportation charges in their quoted rates.
But, it is noted that in the case of M/s DHB Global, 4 days after the issuance of the PO, a Corrigendum came to be issued incorporating amendments to the terms and condition of the PO.
The report added, “…, by this Corrigendum, not only the fundamental terms of the contract were altered with regard to the specifications of the equipment, but also the terms of transportation were changed to the detriment of the procuring entity. By altering the contract into FOB contract, the procuring entity is seen to have agreed to bear the additional transportation fee from the point in the delivery of the shipment…” A total sum of Rs. 11,99,22,390 was incurred for transportation according to details provided.
Similar the case with M/s Big Pharmaceuticals where the report says, “It is difficult to fathom the reason for giving an undertaking in so far as the supply of 1,00,000 PPE Kits agreed to be supplied by M/s Big Pharmaceuticals when the price quoted by it included the transport cost until delivery in Bengaluru.” A total sum of Rs. 9,35,03,682 was incurred for transportation according to details provided.
It is stated in the report that, “the consequent payment of freight and transportation charges was wholly arbitrary, malafide, without authority of law and was intended to confer undue advantage to the supplier to the extent of Rs. 14,21,72,421. The said act and conduct of the then Additional Directory tantamount to financial impropriety and misconduct within the provisions of the KCS Conduct Rules warranting disciplinary action and the acts and conduct of the then Chief Minister and the then Health Minister in approving the contract and the subsequent Corrigendum amounts to criminal misconduct with the meaning of Sec.7 and Sec.11 of the Prevention of Corruption Act.”
Reacting to the allegations, former CM & BJP leader BS Yediyurappa said, “There’s no need to worry. We have always conducted all our work within the parameters of the law. Those with malicious intent are trying to bring up past matters, but it won’t benefit them. I believe we are not guilty and have acted faithfully.”
“Whatever the investigation, it won’t change the truth, and everyone knows it. The opposition is raising these issues because they have no other way to bring us down. This will not benefit them. My party workers and I have always acted lawfully,” he added.
“Over 1,500 pages of documents have been submitted, and the subcommittee formed to investigate is examining the matter,” said Congress leader and Karnataka Health Minister Dinesh Gundu Rao.
“This investigation is not based on enmity or ulterior motives. During COVID, when we (Congress) were the opposition party in Karnataka, the then BJP government engaged in corruption, and we provided extensive evidence to both the public and the committee,” he stated.
“The former government exploited the grim period of COVID, and we condemned their actions back then. Now, with us in power, we are moving forward with this investigation. The first report has already been released, and the second one will follow soon.”
He added, “The then CM Yediyurappa and health minister have been directly implicated in the report, and it is factual. Approximately ₹16 crore was misused for purchasing PPE kits and health equipment at inflated prices. When PPE kits were available within the country, they opted to import from China and Hong Kong at higher costs.”
“They violated terms and conditions to secure undue benefits from these schemes. We are committed to prosecuting the CM and health minister under the Prevention of Corruption Act,” Gundu Rao affirmed.
Recommending action against the leaders, the report stated, “In the light of the above finding, the Commission recommends initiation of disciplinary action against the then Additional Director/Signatory to the above Corrigendum, and initiation of criminal prosecution against the then Chief Minister and the then Health Minister for the offence under Sec.7 and Sec.11 of the Prevention of Corruption Act 1988, as amended and Sec.405/406 of IPC and simultaneous action for recovery of the said excess amount of Rs.14,21,72,421/- from the supplier M/s DHB Global Hong Kong(China) as per law.”
(Edited by Ananya Rao with inputs from Nolan Pinto)
