Andhra Pradesh ESI Scam

Why in news?

The Andhra Pradesh Anti-Corruption Bureau (ACB) has arrested some big shots in the ESI Scam.

What is the ESI Scam?

• When Kinjarapu Atchanaidu was labour minister of Andhra Pradesh, there were several irregularities in the purchase of medicines, surgical equipment, and furniture worth Rs 975.79 crore for the
  1. 4 Employees’ State Insurance (ESI) hospitals,
  2. 3 ESI Diagnostic Centers and
  3. 78 ESI Dispensaries spread across the state.
• These purchases were in violation of the procedures and guidelines issued by Government of Andhra Pradesh, Ministry of Labour and Employment, Training and Factories, and ESI Corporation.

• The three former directors of Insurance Medical Services (IMS) made purchases from firms, which were not empanelled with the government or Non Rate Contract firms.
• [Insurance Medical Services implements the ESI scheme.]
• They are accused of fabricating quotations from Non Rate Contract firms and paying excess rates, sometimes as high as 36%.

What are the alleged irregularities?

• The three directors issued purchase orders without constituting Drug Procurement Committees and without calling for open tenders.
• The total budget allocation for the purchase of drugs during the tenure of the three directors was Rs 93.51 crore.
• But they purchased drugs from Rate and Non-Rate Contract firms worth Rs.698.36 Cr. by violating the procedural guidelines.

• Similarly, excess amount was paid to purchase furniture, establish a sewerage treatment plant, and procurement of bio-metric devices.
• Atchanaidu was accused of ordering one of the directors to entrust a tele-calling contract to Hyderabad-based Tele Health Services Pvt. Ltd.
• The director also did not follow the usual process of calling for tenders.
• The director awarded the contract to Tele Health Services simply based on a letter from Atchannaidu.
• The firm violated several rules and regulations cited in the agreement but was paid Rs 7.96 crore without proper verification.
• Tele Health Services Pvt Ltd was hired to provide toll free services and ECG services on nomination basis.

What are the violations by the service provider?

• As per MoU, the service provider has to provide toll free services to patients whenever they call for assistance.
• The director agreed to pay Rs 1.80 per month for each IP irrespective of calls attended.
• The service provider claimed the bill by submitting call logs of Telangana State IPs.
• The director paid the amount without verifying the genuineness of the call logs.
• The director also entered into MoU with the same service provider to provide ECG services to the patients at Rs 480 per ECG.
• It utilised the services of PG Diploma Clinical Cardiologists instead of qualified DM Cardiologists by violating agreement conditions and claimed the bills. 

What are ESI hospitals?

• The Government of India enacted ESI Act, 1948 for extending health care to employees who are earning salary less than Rs 21,000 per month in the industrial and service sectors.
• This is known as Employees State Insurance Scheme – ESIS.
• In 1978, the Insurance Medical Services (IMS) was established under the Ministry of Labour, Employment, Training & Factories Department by separating ESI branch from Medical & Health Department.
• 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 to the state government.

Source: The Indian Express