COVID19: Rapid Test Kits Supplier Would Have Earned a Massive 145% Profits, says Delhi HC

Moneylife Digital Team 27 April 2020

Economy & Nation

A trial in Delhi High Court has revealed massive profiteering and over-pricing by two firms in the COVID-19 test kits sold to Indian Council of Medical Research (ICMR). The $3 per test SARS CoV-2 antibody test kits are being imported from China's Wondfo Biotech and sold to ICMR at Rs600 or Rs30 crore for five lakh test kits.

While hearing a plea by Rare Metabolics Life Sciences to seek release of 7.24 lakh rapid test kits and other COVID-19 related material being imported by the respondent from China, the single bench of Justice Najmi Waziri found that the supplier had earned a massive profit of over 140%.

Delhi High Court judgement in Rare Metabolics v Matrix Labs has revealed scandalous details about the import of 5 lac Wondfo antibody test kits, ordered by @ICMRDELHI at Rs 30cr through intermediaries who were taking a cut of 18.75 cr @CDSCO_INDIA_INF @MoHFW_INDIA @NITIAayog 1/n pic.twitter.com/hhxo3F2Mvv
— Malini Aisola (@malini_aisola) April 26, 2020

ICMR had placed an order with Rare Metabolics for 500,000 test kits at Rs600 each on 27th and 28 March 2020 for a total cost of Rs30 crore.

Rare Metabolics routed the order through Matrix, which is licensed to import medical material. Matrix imported the kits at Rs245 each, or a total of Rs12.25 crore, the court said.

It then supplied the kits to Rare Metabolics for Rs21 crore. Rare Metabolics then sold the five lakh test kits to ICMR for Rs30 crore.

The court observed that Rare Metabolics in turn made a profit of Rs9 crore "despite no value addition to the imported medical material". Of the Rs30 crore, which is to be paid by ICMR, Rs18.7 crore constituted the intermediaries' margin, the court says.

"The country is going through an unprecedented medical crisis affecting public order. People have been cloistered in their homes or constrained to stay wherever they were on 24 March 2020. The economy is virtually at a standstill for the last one month. There is an element of disquiet apropos one's safety. Public interest must outweigh private gain. The lis between the parties should give way to the larger public good," the court observed.

The Delhi High Court then capped the maximum price of each rapid test kit imported by Matrix Labs at Rs400, including GST.

"For the people to be assured that the pandemic is under control and for the governments to ensure, and for agencies engaged in the frontline battle to safeguard people's health, more kits/tests should be made available urgently at the lowest cost throughout the country," said Justice Waziri while capping the price of the medical kits.

While the firms have delivered 276,000 kits to the ICMR, the court has instructed that the remaining 224,000 kits be delivered when the consignment lands in India.

Meanwhile, the union ministry of health and family welfare said that no payment has been made by the ICMR for the faulty Chinese testing kits for Covid-19.

Addressing a press conference, Lav Agarwal, joint secretary in the ministry, said that ICMR cancelled the order as soon as it found out that the kits were faulty.

"The ICMR followed the due process to finalise tenders for the purchase of rapid testing kits, based on sensitivity and specificity. When complaints from the field arose, ICMR reacted promptly and cancelled the orders. No payment was made to the vendors. No payment has been made by the ICMR to the companies whose testing kits were found to be faulty," Mr Agarwal told the media.

The ICMR had earlier clarified that it followed proper procedure for the procurement of the rapid testing kits from a Chinese company.

In a statement, the ICMR says that it tried to procure the kits directly from Wondfo company in China, but due to the terms and conditions regarding guarantee of the product and 100% advance payment, it decided to procure the kits from Wondfo's exclusive distributor for India, which quoted an all inclusive price for free on-boad (FOB) (logistics) without any clause for advance.

The quotation received for direct procurement had issues like being FOB without any commitment on logistics and 100% direct advance payment without any guarantee.

"There was no commitment on timelines. Also, the rates were communicated in US dollars without any clause for accounting for fluctuations in prices," ICMR says.

Separately, the ICMR has on Monday directed state governments to stop using rapid antibody test kits procured from China-based Guangzhou Wondfo Biotech and Zhuhai Livzon Diagnostics after their results showed wide variations.

Comments

User

Prasanna

6 years ago

There needs to be clarity on (1) What are the different types of Tests that are recommended by ICMR (2) From which source is the material for these Tests being procured (3) Can it not be made in India (4) If yes, why is there a delay in making them?

m.prabhu.shankar

6 years ago

Are citizens supposed to believe that there is absolutely no quid-pro-quo and this private company tried to cheat everybody - Central govt, ICMR and all others ? -::))). In that case is our estabilishment so stupid that an authorized distributor of a chinese company will be able to cheat the entire country ? Let us be very clear where is there is a money laundering there is a political estabilishment behind the scene. who are they in this case is the only question ?

raviforjustice

6 years ago

While the nation does want to know why there wasn't a government to government transaction in this case, it may not be irrelevant to recollect that there was a report of a plane loaded with medical stores to France/Spain which was diverted to the US of A due to the latter offering payment by cash.

In the current case I hope that the cost of Rs 400/- arrived at by the judge is based on hard facts, taking into consideration the cost of logistics in getting the stuff from the China to the users in India, whether the importers had paid the cost in advance, the interest on this amount as loan from a bank etc etc.

About comments like 'Public interest must outweigh private gain', coming from the judiciary, I must say that it will be difficult to accept it even with a sack full of salt. The courts would do well to find some remedy for the total denial of justice by them, based on the fundamental principle that justice delayed is justice denied. When they can't even ensure the raison d'Ãªtre for their existence they should stop making unwarranted comments.

ongcalok

6 years ago

Middleman should not be allowed in purchase of goods and services by government or PSUs, it should be banned by law.

rajiv.pec

6 years ago

The verdict reveals that corruption is only increasing. The fact is that only the beneficiaries change?
Why ICMR could not buy directly? Why the GoI could not utilize their good office & force Beijng to ensure the supplies? Why the diplomacy could not be exercised for supply?
Are the intermediaries not tolerated for facilitation of corruption & which is but obvious in this case?
Did ICMR pay the complete value of these faulty kits in advance?
Dr. Velumani of Thyrocare had pointed to such mis-management on the national television?
The GoI wanted the private laboratories to conduct test for free while indulging into such blatant corruption?
Is the GOI not responsible to find out the truth by conducting the forensic audit & identify the culprits?
Why such looting of the exchequer be permitted & tolerated if we have a non corrupt government?

balakrishnanr

6 years ago

The contract with MyLabs also needs to be delved in to. How come only one supplier? How was the tender framed? And what is the price? WHO OWNS MYLABS? Our businessmen and politicians do not even spare a national calamity. And the next big thing will be an unproven vaccine.

Nahom

6 years ago

Appears Hon. Judge richly smelled the filth. Corruption knows no pandemic, wars or lives.

mahesh.kalkar

6 years ago

Have sent this article to a Cabinet Minister who represents my constituency.