Former TDP minister K Atchen Naidu arrested in Rs 150 Cr ESI scam

Amaravati: Former minister and TDP senior leader K Atchen Naidu has been taken into custody by sleuths of Anti Corruption Bureau of Andhra Pradesh, for his alleged involvement in the Employees State Insurance scam.

A team of ACB officials on June 11th, from Vijayawada and Visakhapatnam bureau, visited the former minister Atchen Naiud’s residence at Nimmada and the arrest followed. "

It may be recalled that Andhra Pradesh vigilance and enforcement department unearthed a multi crore scam in purchases of medicines and medical equipment for the ESI. Investigation revealed that a huge amount spent on procuring the equipment was around Rs 975 crore. However, there is no clarity, yet, on the amount siphoned off.

It was during then, former minister Atchen Naidu served as the labour and employment minister, between 2014 and 2019. The ACB officials are likely to speak to the media, later in the day to explain the minister's role in the scam.

#Watch:Anti Corruption Bureau-AP arrested former minister Kingarapu Atchen Naidu and (TDP) leader for his alleged involvement in Rs 975 crore medical equipment scam. A team of ACB officials from #Vijayawada and #Visakhapatnam arrested him from his residence at Nimmada. pic.twitter.com/VjFHzL1FYo

— NewsMeter (@NewsMeter_In) June 12, 2020

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ESI Scam:

ESI Scheme is being monitored and implemented by the Director of Insurance Medical Services (DIMS) In Andhra Pradesh. The Employers and Employees of the relevant sectors contribute their share @ of 3.25% and 0.75% of their salary respectively for ESI Scheme. The expenditure ratio between the State government and ESI Corporation is 1:7.

The entire expenditure is initially be met by the State government and subsequently, the ESIC reimburses

its share. In the past 05 years, Dr.B.Ravi Kumar, Dr.C.K.Ramesh Kumar and Dr.G.Vijaya Kumar worked as Directors of IMS and they all together issued purchase orders for procurement of Drugs, Medical Equipment, Surgical Items, Lab Kits and Furniture worth Rs.975.79 Crore by violating procedures & guidelines issued by government of Andhra Pradesh

Investigation done by the Vigilance and enforcement wing found that, ESI Corporation from time to time without constituting Drug Procurement Committee and without calling for Open Tenders and caused huge wrongful loss to the government exchequer.

The following observations made during the Vigilance Enquiry:-

Fabricated quotations-During the verification of the quotations of Non-Rate Contract firms, most of the quotations are found fabricated and the writings on the envelop covers of the quotations are similar to the hand writings of the staff of DIMS. On examination of K.Dhana Lakshmi, Pharmacist and E.Ramesh Babu, Senior Assistant, they admitted that they fabricated the quotations in connivance with Non-Rate Contract firms. The Directors issued Purchase Orders for procurement of drugs, medicines, surgical items, lab kits, lab equipment and furniture basing on those fabricated quotations. The quotations were fabricated to avoid competitive bidding and to favour Non-Rate Contract firms of their choice

Purchase of drugs

The total budget allocation for the purchase of drugs and medicines during their tenure of the Directors is Rs.293.51 Cr. Whereas, the Directors purchased drugs and medicines from Rate Contract and Non-Rate Contract firms worth Rs.698.36 Cr. by exceeding the budget provision by violating the procedural guidelines. The Directors issued Purchase Orders beyond the budget provisions to favour Non-Rate Contract firms.

During enquiry randomly verified the purchase invoice price with sale invoice price of Non-Rate Contract firm i.e., M/s Raasi Pharma and M/s.Veeresh Pharma. It is noticed that the Directors issued Purchase Order to the above

firms and procured drugs worth Rs.15.93 Cr. On verification of the invoice price of those two Non Rate Contract firms, the value of those drugs comes to Rs.8.52 Cr. After considering trade margin of 20%, the value of those drugs comes to Rs.10.22 Cr. The difference price between the Purchase Invoice and Sale Invoice of the above two firms comes to Rs.5.70 Cr. (Rs.15.93 Cr. – Rs.10.22 Cr.).

In the similar manner, the Directors purchased drugs from several Non-Rate Contract firms at exorbitant rates

The Directors, IMS procured most of the drugs under Non-Rate Contract instead of Rate Contract by violating GO, and ESIC guidelines at exorbitant rates and caused huge wrongful loss to the government exchequer.

During 2014-15 to 2018-19, the Directors procured drugs worth Rs.89.58 Cr from Non-Rate Contract firms. The value of those drugs under Rate Contract prices comes to Rs.38.56 Cr. In the past five years, an excess amount of Rs.51.02 Cr. (132%) was paid to Non-Rate Contract firms, when compared with the price of

ESIC- Rate Contract.