In what has now come to be known as the 'ESI Scam' unearthed by the Andhra Pradesh vigilance department, Rs 151 crore was allegedly misappropriated in the Insurance Medical Services between 2014 and 2019 when the Telugu Desam Party was in power in the state.
The state Vigilance and Enforcement Department conducted an inquiry and unearthed facts in the case and the Anti-Corruption Bureau followed it up with a further investigation, leading to the arrest of the then Labour Minister Kinjarapu Atchannaidu and five other officials of the IMS on Friday.
When it unearthed the 'scam' in February,the Vigilance said three Directors of Insurance Medical Services were the "kingpins of the procurement scam in theESI, where gross irregularities were committed in purchase of drugs, medicines, lab kits, surgical items and furniture between 2014-15 and 2018-19, causing a loss of over Rs 151 crore to the state exchequer."
The ACB took the investigation further, on the recommendation of the Vigilance and Enforcement Department, and arrested the former minister and others today.
Along with Atchannaidu, former Directors of Insurance Medical Services B Ravi Kumar and G Vijay Kumar were arrested in Tirupati and Rajamahendravaram respectively.
A retired joint director V Janardhan was arrested in Kadapa while superintendent M K Chakravarthy (currently under suspension) and senior assistant E Ramesh Babu were arrested in Vijayawada.
Of the total Rs 975.79 crore worth of purchases made during the period, the three DIMS, along with other staff, violated all procedures and guidelines of the government and ESIC and caused "huge wrongful loss to the exchequer," a Vigilance report prepared by Director General K V Rajendranath Reddy has said.
B Ravi Kumar, C K Ramesh Kumar (retired) and G Vijaya Kumar were the three directors of Insurance Medical Services during the five-year period of TDP and were found guilty of the large-scale irregularities, it said.
While the total budget allocation for the purchase of drugs and medicines during their tenure was Rs 293.51 crore, they made purchases worth Rs 698.36 crore, an excess of Rs 404.86 crore, in violation of procedural guidelines, it said.
Of this, Rs 51 crore was found to be paid in excess as the drugs were purchased from non-rate contract firms, in clear violation of guidelines, the report said.
An excess of Rs 85.32 crore was paid to three private firms on purchase of laboratory kits and another Rs 10.43 crore on surgical items.
"The Directors purchased furniture worth Rs 6.62 crore without calling for open tenders and, when compared randomly with the market prices, the purchases were made at 70 per cent excess than market prices.
This caused a loss of Rs 4.63 crore to the government," the Vigilance report noted.
The overall loss from all such purchases was thus calculated at Rs 151.40 crore from 2014-15 to 2018-19.
When the scam came to light in February this year, Atchannaidu, who is currently deputy leader of the Telugu Desam Legislature Party, denied any wrongdoing and said he merely implemented the directives of Prime Minister Narendra Modi.
"In 2016, the Prime Minister convened a meeting of ESIC and wanted the states to introduce tele health services and the Centre wrote a letter to all states in December 2016 on the same.
We had decided to implement that and I asked our officials to follow the Telangana model and issued a note," Atchannaidu had said in a video message from his village in Srikakulam district.
Maintaining that all relevant records were available and could be verified, the former minister then said he was ready to face any inquiry.