The Justice John Michael D’Cunha Commission’s report reveals shocking irregularities in Karnataka’s COVID-19 PPE procurement process. Over 300,000 kits were purchased from Chinese suppliers at inflated prices, bypassing local vendors offering competitive rates. The commission calls for the prosecution of top officials, including Chief Minister B.S. Yediyurappa and Health Minister B. Sriramulu, for their roles in this corruption.
By PC Bureau
The politics surrounding the findings of the Justice John Michael D’Cunha Commission, which investigated alleged irregularities in COVID-19 procurements and management in Karnataka, may attempt to obscure the truth. However, the facts remain indisputable: the commission’s damning report exposes a grim narrative of egregious corruption and exploitation in the procurement of PPE kits during a time when tens of thousands of people were struggling to protect themselves from the threat of the disease.
Below are the key findings and recommendations from the report, which has called for the prosecution of then-Chief Minister B.S. Yediyurappa and his Minister for Health and Family Welfare B. Sriramulu over the purchase of 300,000 PPE kits from two Chinese firms in April 2020 at exorbitant rates, despite there being no “compelling reason” for such a decision.
1. Award of Non-Urgent Contract Without Competition
The report highlights serious irregularities in the procurement of PPE kits from China. It reveals that the kits were procured at significantly inflated prices compared to those from domestic suppliers.
- Domestic Procurement at Lower Rates: For instance, 150,000 PPE kits were procured from Plasti Surge Industries Pvt. Ltd. on 14.03.2020 at Rs. 330.40 per unit. However, a corrigendum issued on 27.03.2020 unilaterally increased the price to Rs. 725 per kit.
- Recommendation for Legal Action: The commission recommends legal action against the concerned officers at KSMSCL for these amendments.
- Procurement from M/s Indus Bio Solutions: Similarly, 2,000 PPE kits were procured at Rs. 656.26 per kit on 24.03.2020, with further procurement from 8 other companies at Rs. 1,444.80 per kit approved by the CM on 23.04.2020.
- The report raises questions about why local suppliers were not prioritized, even though they could supply up to 500,000 kits at more competitive rates.
2. Preference for Imported Kits Despite Domestic Availability
The report questions why imported Chinese PPE kits were preferred, despite the availability of local suppliers who could meet the demand at lower prices (ranging from Rs. 400 to Rs. 1,444.80 per kit). Officials claimed local suppliers could not meet the required quantities, a justification the commission suggests may have been fabricated to justify selecting foreign suppliers favored by the CM and Health Minister.
3. Non-Transparent and Arbitrary Selection of Suppliers
The report asserts that the procurement process was carried out solely under the directions of the CM and Health Minister, bypassing basic procurement rules. Notably:
- Manipulated Process: No quotations were invited before the procurement process, and it remains unclear how prices were received from foreign suppliers.
4. Higher Rates and Delayed Supply
The report exposes discrepancies in the decision to place an order with M/s DHB Global, even though M/s Big Pharmaceuticals offered a lower rate:
- Cost Discrepancies: M/s DHB Global quoted USD 27.72 per kit, with shipping costs bringing the unit price to Rs. 2,117.53 per kit. Meanwhile, M/s Big Pharmaceuticals quoted USD 26.00 per kit but was excluded due to the lack of USFDA/CE certification, even though the company had committed to providing the certification post-order.
- Injudicious Decision: The decision to award the order to M/s DHB Global at a significantly higher rate led to avoidable expenditure of Rs. 67,69,000 for the procurement of 100,000 PPE kits.
5. Additional Costs for Freight and Transport
The report also highlights significant discrepancies regarding freight and transport costs:
- DHB Global: After issuing the purchase order, a corrigendum altered the contract to an FOB contract, shifting responsibility for transport costs to the procuring entity. This resulted in an additional Rs. 11,99,22,390 for transportation.
- Big Pharmaceuticals: Although Big Pharmaceuticals’ quoted price included transport costs, the commission finds it difficult to justify the separate undertaking for transport costs, leading to an extra Rs. 9,35,03,682 for transportation.
- The total transportation costs of Rs. 14,21,72,421 were deemed arbitrary, malafide, and without legal authority, designed to confer undue advantage to the foreign suppliers.
6. Financial Impropriety and Misconduct
The commission considers the actions of the then-Additional Director, who approved such terms and changes, to be financial impropriety and misconduct under the KCS Conduct Rules, warranting disciplinary action. It also points to the criminal misconduct of the CM and Health Minister for approving contracts and subsequent amendments, invoking sections 7 and 11 of the Prevention of Corruption Act.
Summary and Recommendations:
The commission’s report details multiple irregularities, including the manipulation of procurement procedures and financial misconduct, which led to unnecessary financial losses for the state. Key points include:
- Preference for overpriced foreign kits over competitively priced domestic suppliers.
- Non-transparent supplier selection processes.
- Unjustified price increases and manipulation of contract terms to favor specific suppliers.
- Avoidable transportation costs that further inflated expenses.
The commission has called for legal action against the officials involved in manipulating the procurement process and awarding contracts unfairly. It has urged further investigation into financial impropriety and misconduct, with recommendations for disciplinary action and criminal investigation as per relevant corruption laws.
The report, as quoted by several media outlets, claims that over 300,000 PPE kits were procured at inflated prices from Chinese suppliers, bypassing established procurement procedures and transparency norms. These irregularities allegedly took place during the pandemic when hospitals were overwhelmed and the public struggled to access essential medical supplies.
The findings suggest that Yediyurappa and Sriramulu directly influenced the procurement process, ensuring that the kits were purchased at rates far higher than those offered by local suppliers. Despite cheaper, domestically-produced PPE kits being available, the state government chose to purchase from foreign firms like DHB Global and Big Pharmaceuticals, based in China and Hong Kong. The report raises serious questions about potential corruption and quid pro quo arrangements.
One of the report’s key points is that the procurement was done 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 purchases were made at much higher rates than those from local manufacturers, with no competitive quotations sought before the process began.
Additionally, the report reveals discrepancies such as a sudden price hike for PPE kits ordered from local manufacturers and apparent manipulation of official documents to justify purchases from foreign suppliers. The commission has called for legal action against the officers involved in these irregularities.
The revelations have sparked public outcry, with opposition parties and civil society groups demanding accountability. The commission’s findings have now been forwarded to the state’s anti-corruption bureau, which is expected to review the evidence and take further action.
