Karnataka PPE Kits Scam: Panel calls for prosecution of Former CM, Health Minister over alleged corruption

Bengaluru: A report by the Justice John Michael D'Cunha Commission has revealed that Karnataka's former BJP government overpaid by at least Rs 14.24 crore to two Chinese companies that supplied three lakh PPE kits during the COVID pandemic in 2020. The commission's findings have sparked calls for criminal prosecution against the then-Chief Minister B.S. Yediyurappa and then-Health Minister B. Sriramulu.

The reports from the commission revealed that the Karnataka government procured PPE kits from two Chinese suppliers, DHB Global Hong Kong and Big Pharmaceuticals, in April 2020. The findings suggest that these PPE kits were purchased at three different rates, each costing over ₹2,000 per piece.

After the approval by Yeddyurappa and Sriramulu a direct purchase order was placed with DHB Global Hong Kong on April 2, 2020, for one lakh PPE kits due to the urgency of the pandemic.

These orders were placed at rates significantly above the price set by the Price Fixation Committee, which had estimated the cost of each PPE kit at ₹2,117.53, based on a meeting held on April 1, 2020. However, three separate purchase orders were issued which cost around Rs 62.71 crore. Following the three orders one purchase order was issued on April 10 with this quotation, a second order was issued four days later with Rs 2,104.53 per unit to the same company DHB, and a third one was issued to Big Pharmaceuticals at Rs 2,049.84 apiece — each order for 1 lakh kits.

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As per the recent media report by the Deccan Herald, the commission found that there was no "compelling reason" to import the kits from China at such exorbitant rates because the Karnataka State Medical Supplies Corporation (KSMSCL) had previously procured the kits multiple times at much cheaper rates, ranging from Rs 330 to Rs 1,444, and they were "readily available in the domestic market at reasonably lower rates".

These rates were also decided without calling for any quotations and were injudicious due to the disparities between purchase orders. The resulting disparity in pricing between the various orders led to a loss of ₹1.22 crore for the state.

In addition, the report also revealed that the explanation stating local suppliers couldn't meet the required supply volume was a "mere ruse" to justify sourcing from select suppliers. These processes were found to be manipulated to grant contracts to favored suppliers of the then Chief Minister and Health Minister.

Although the reports included freight and transport costs until the kits reached Bengaluru, an additional ₹21.34 crore was spent on cargo expenditures. With the exception of more than Rs 7 crore for GST and IGST, this has given the suppliers an unfair advantage of Rs 14.21 crore because the freight and transportation fees that were subsequently paid were "wholly arbitrary, mala fide, without authority of law." Additionally, DHB Global was paid more than Rs 2.96 lakh because 140 kits were not provided.

Following the findings of the report, Health and Family Welfare Minister Dinesh Gundu Rao stated that the report "clearly details" the involvement of former Chief Minister B.S. Yediyurappa and former Health Minister B.Sriramulu in "Covid corruption." He stated that although PPE kits were available in the domestic market at Rs 330 per kit, kits were purchased from Chinese companies at Rs 2,104 per kit. It was noted by the report that this led to a loss of Rs 14 crore to the exchequer.

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Rao informed that after the elections a cabinet subcommittee meeting would take place, and a group of officials led by an IAS officer would probably be assembled to act on the commission's recommendations.

He further clarified that this was not being done out of political differences or any hatred. He stated that the government would take cautious steps, not hasty decisions.