J&K: CAG reports two different scams in purchase of equipments and medicines

Diagnostic equipment purchase scam

J&K: CAG is reported to have found astounding deficiencies related to supply orders for pharma equipment's for health institute’s in the state. Diagnostic equipment worth Rs 1.17 crore, supposed to have been ordered from AIIMS Delhi are allegedly fake supply orders. This has been noted by the auditors, adding to their apprehension of a bigger scam under the carpet.

The CAG report implied that there is a strong possibility that more of such procurement's have been done on a large scale. The CAG report has been tabled in the Legislative Assembly.

The institutions alleged to be involved in this scam of fake supply orders include names like GMC Jammu, GMC Srinagar and Directorate of Health Services.

A local newspaper reporting on the matter highlighted what the CAG report says, “Since the health institutions had placed supply orders on the basis of photocopies of the outside health institutions, the Audit team carried out cross verification of a sample of 24 supply orders issued by the AIIMS, New Delhi and PGI Chandigarh, which had been used by the test checked health institutions for procurement of different types of machinery/equipment, to ascertain the genuineness of the supply orders.”

However, a cross verification report done for the six supply orders imply that that there has been no purchase done from AIIMS Delhi. The supply order issued by AIIMS has not happened at all or has been tampered with.

The auditor report in addition implied that this is just one of the audit conducted by the CAG and a larger possibility of such fake procurement involving more health institutes in the state is a close reality now. The matter has reached the Commissioner-Secretary Health and now, the next step of action is awaited.

The report also alleges in its implication on the matter that the Director Finance of the Health Department has said that Health Department was aware of the matter. It is reported that the health department had complete information about the fake orders before the audit. It had even approached the Principal GMC Srinagar to initiate the required action on the matter.

The Director Finance is reported to have quoted the information furnished by the Director health Services Kashmir wherein it was stated that no payment had been released except Rs. 14.17 lakh in favour of the supplier during 2012-13 and that all the subordinate offices had been directed not to release any payment in favour of the supplier for the items procured during 2012-13.

“It was also stated that Police action had been initiated into the matter and lifetime ban been imposed on the supplier against participating in the tendering process”, the CAG report stated, adding that the “The reply was not convincing as the fraud had occurred due to non-finalisation of Rate Contracts for Machinery/Equipment and procurement thereof on the basis of RCs/Supply Orders finalised/placed by the other health institutions.”

Single Drug Scam

There is another medical scam brewing in the state in a separate audit by the CAG on purchase of a single drug done by different hospitals. There is a difference noted in the price of a single drug purchased by various hospital during the audit.  In other words, the same drug has been sold at different rates to various hospitals, resulting in a computed loss of Rs 78.5 crore by the CAG. This wide gap, according to CAG is due to the fact of not following a standard procurement policy and also because of expired rate contracts; therefore, resulting in a non-justifiable spending of Rs 78.5 crore. A non-standardized rate list can have result in discrimination of prices and result in huge loss for the ex- exchequer.

Take in to consideration the fact that an Injection Adrenaline was procured at a price of Rs 2.13 by Medical College Hospital Jammu. On the other hand, it was bought by Chest Diseases Hospital at a price of Rs 15.2 in 2014-15.  Likewise, Injection Ceftrioxone has a purchase price range between Rs. 14.86 to Rs. 36.50 in 2014-15, as compared to a price between Rs 14.08 and Rs 43.41 in 2013-14.

The CAG report implied that a huge volume purchase has been done, amounting to Rs 44.28 crore. This large scale transaction has been made on expired rate contracts, besides purchase from the local market. This happened because hospitals did not finalize their yearly rate contracts.

However, justifying their alleged action in haste, GMC Jammu has implied that it had opted for open market purchase for a single purpose to avoid loss of human lives. This is only one argument for the arbitrary purchase. On the contrary, the hospitals have been sanctioned only Rs 1 crore spent in a financial year; however, their expenses go beyond the limit.

A media report states that Rs. 90.44 crore have been spent by SMGS Jammu in local purchases in 2014-15. GMC Jammu has also been spending lavishly in local market with a figure of Rs. 47.17 crore.

Kashmir hospitals have been cautious on this front with Bone and Joint Hospital spending Rs. 7.19 crore in local purchases and Rs. 5.56 crore have been spent by Chest Disease Hospital.

‘Incurring of expenditure in excess of the delegation is irregular and action taken by the Medical Superintendents to have the excess over the delegations was neither on record, nor intimated to the Audit,’ CAG states. In addition, equipment worth Rs. 34.23 crore had been purchases in same manner. Rate contracts worth Rs. 11.41 crores were placed on the basis of expired rate contracts, a practice that CAG said had resulted in ‘extension of undue benefit to the supplier.’

Rs. 19.17 crore worth supply orders were on the basis of rate contracts finalized outside health institutions. And Rs 4.22 purchases involved orders from open market.