Funds diverted, equipment unused in specialty hospital

CAG audit exposes the reasons behind continued inefficiency of government health care institutions in providing quality services to citizens.

Even after receiving funds amounting to Rs.126.79 crore, Super Speciality Hospital of Bangalore Medical College and Research Institute (BMCRI) does not have necessary equipment for its smooth functioning. What little equipment purchased has been gathering dust in stores, unused and useless. This was what the Comptroller Auditor General of India (CAG) found out while auditing the books of BMRCI.

Funds for the Super Speciality Hospital cum college were floated under Pradhan Mantri Swasthya Suraksha Yojana (PMSSY). The CAG audit was conducted between March-May 2013.

While scrutinising Medical Education Department records, CAG inspected the establishment of BMCRI which was supposed to construct a Super Speciality Hospital with a nursing home and hostel. Civil work of the hospital was completed in July 2010, however even today the hospital remains non-functional due to lack of equipments and staff.

So, what happened to Rs.100 crore allotted by Government of India and 26.79 crore by the Government of Karnataka?


Government of Karnataka had plans to start post-graduate courses in neurology, cardiology, plastic surgery, pediatric surgery, surgical gastroenterology and endocrinology in BMCRI. For this a Super Speciality Hospital with a nursing college and hostel (SSH) was proposed to be constructed.

Aim of the Pradhan Mantri Swasthya Suraksha Yojana (PMSSY) was  to correct imbalances in the availability of affordable healthcare facilities in different parts of the country in general, and augmenting facilities for quality medical education in the some states in particular.

In March 2006, national scheme Pradhan Mantri Swasthya Suraksha Yojana (PMSSY) was announced. Under PMSSY Ministry of Health and Family Welfare cleared the BMCRI’s proposal to build and equip SSH.

The Ministry appointed the Hindustan Latex Limited (HLL) as Project Consultant and Executioner for the entire upgradation works. CAG reported that HLL is a government of India enterprise. Presently it is called as HLL Lifecare Limited.

Re-allocation of equipment cost

The mismanagement of funds started right from the beginning. The increased cost of civil works led to adjustment of funds allocated for equipment from Rs.46.93 crore to Rs.40.06 crore.

The increase in cost of civil works was due to price adjustment paid as per the contract, increase in depth of foundation and quantity of reinforcement steel, increase in the provision for ducts, fire doors, rising main and electrical works, provision of solar water heating system for nursing hostel etc.

The increase in cost of civil works resulted in adjustment in allocation of funds for procurement of equipment. Money was directly awarded to the agency by Government of India. Out of Rs. 40.06 crore allocated for equipment, the government released Rs. 2.21 crore for procurement of low end equipment on December 2008, directly to BMCRI, which placed orders for these in July 2009 and December 2010.

Out of the remaining Rs.37.85 crore allocated by for equipment, HLL had supplied equipment costing only Rs.34.09 crore as of January 2013.

In the unspent amount of Rs.3.76 crore, the Ministry had approved HLL’s  proposal to purchase 50 monitors at a cost of Rs.2.00 crore in January 2013. From the remaining amount, operation tables for the hospital had been supplied in August 2013.

After checking the books, the CAG found that out of Rs. 34.09 crore allocated by Union government for equipments only 64 % of the amount (Rs.21.88 crore) was used. However, instead of spending this amount for strengthening the departments of the hospital, it diverted the amount to various departments of already existing four hospitals under the control of BMCRI: Victoria Hospital , Vani Vilas Women and Children’s Hospital, Minto Ophthalmic Hospital and Bowring & Lady Curzon Hospital

BMCRI, out of Rs. 2.21 crore released by Central government for procuring low end equipment, spent Rs.1.27 crore on equipment for its four sister hospitals. Though infrastructure had been created in the Super Speciality Hospital for a laboratory and X-ray room, the laboratory remained non-functional due to non-procurement of equipment required for its functioning while the X-ray room had been used for storing drugs, reported the CAG.

Money deposited in banks at low interest

CAG observed that the original project proposal submitted to the Ministry had left out the equipment required for the Departments of Cardiothoracic Vascular Surgery and Neurosurgery. Therefore in the original proposal, allocation for it was not made. The State Government drafted a fresh proposal of Rs.41.66 crore to Union Government regarding the left out equipment. However, the Union Government refused to pay any additional funds as maximum share of the Union Government was only Rs. 100 crore.

“Neither BMCRI nor the State Government thought of additional means to mobilise funds, which were not covered by PMSSY,” said the CAG report.

Following this, in January 2008, State Government decided to release additional funds of Rs. 6.79 crore — Rs.1.93 crore for computerisation, Rs. 3.57 crore for purchase of low end equipment and Rs.1.29 crore for high end equipment. This amount was released to BMCRI in March 2010.

Instead of procuring pending equipment out of Rs.6.79 crore, BMCRI parked Rs.6 crore in a Fixed Deposit (FD) only in March 2012 — the money did not earn any interest for two years. This money remained in the FD account till March 2013. Rest of the amount was deposited in a Savings Bank account till March 2013 at an interest rate 4% p.a. which was much lower than FD 9% per annum. Net loss in this affair was Rs.78 lakh.

Thus initially the funds meant for equipment necessary for smooth running of the hospital were diverted elsewhere. Civil works for the Super Speciality Hospital were completed by July 2010. The hospital became functional from August 2012, but its various wings still lacked required equipment, while the money allotted remained unspent for more than three years. BMCRI even failed to furnish any reasons for non-utilisation of funds, said the CAG report.

Lack of operation tables kept the Departments of Neurosurgery, Plastic Surgery, Surgical Gastroenterology and Pediatric Surgery non-functional. They were eventually purchased, in August 2013, but till the reports were filed by the CAG December 2013, the operation tables were not installed.

Para-medical help sought from other hospitals

State Government had sanctioned 317 posts exclusively for the Super Speciality Hospital. Out of the 317 posts, 313 posts were filled in May 2011 and rest four were filled in June 2012. However, only 182 nurses were appointed in July 2012. the hospital started operations in August 2012 without dedicated medical, paramedical and support staff.

As a result, medical and paramedical staff from other hospitals were called. This adversely affected the working of those hospitals which were operating with only 57 per cent of the medical and paramedical sanctioned staff as compared to the norms prescribed by the Medical Council of India.

Money wasted as equipment remains idle

The CAG in the report has listed examples on how pieces of equipment were not being put to use and continued to be idle:

  • The hospital became operational only from 18 August 2012. The items purchased by HLL at Rs. 12.01 crore between January 2009 and April 2009 were stored in Victoria hospital for more than 39 months without being put to use.

  • Batteries of 28 high end ventilators and 26 Pulse Oximeters (cost: Rs. 3.23 crore) supplied during April 2009 had drained out. As of September 2013, 18 high end ventilators and 20 Pulse Oximeters remained non-functional.

  • Two Anesthesia Work Stations (cost: Rs. 48.39 lakh), purchased in April 2009, required major repairs. As the warranty period of two years reckoned from the date of supply had already expired, the supplier offered to repair or replace the worn out parts only if the cost thereof was borne by the hospital. Though the SSH requested (August 2012) HLL to convince the supplier to replace the dead batteries and other worn out parts of the equipment, the equipment costing Rs. 3.71 crore had not been repaired and put to use till September 2013.

BMCRI detects software defects but no action taken

CAG reported that 36 channel Polysomnography unit (cost Rs. 7.12 lakh) meant for sleep recordings installed in Victoria Hospital during October 2009, had discrepancies in the auto scoring done by the software.

This defect was noticed after four months of its use i.e. on February 2010 by the hospital. BMCRI wrote to HLL after a year, in February 2011,  to rectify the software defects. However, no action was taken by HLL till April 2013, said the report.

Machines way below accepted standards

HLL had supplied to Victoria Hospital under PMSSY a One Side Viewing Duodenoscope costing Rs. 22.55 lakh and two Endoscopy Complete Systems-Upper and Lower GI Endoscopes costing Rs. 1.23 crore in January 2010. A report of the Head of the Department of Gastroenterology found that these items were not of the standard required for a Super Speciality Hospital to be used in a Super Speciality Hospital and the service provided by HLL was average.

When CAG officials sought an explanation from HLL, BMCRI said that they should not be held responsible for supplying equipment which were not as per the requirement of BMCRI as the technical specifications had been firmed up by the Ministry and technical evaluation had also been done by technical experts nominated by the Ministry.”

BMCRI flouts Transparency act in procurement

A meeting held under Chairmanship of Principal Secretary, Medical Education, in August 2011 decided to entrust the work of overall maintenance of Super Speciality Hospital including operation and maintenance of utility services, housekeeping, security, fire fighting etc., to HLL Lifecare Limited as they had already rendered such services in Jawaharlal Institute of Postgraduate Medical Education and Research, Puducherry and Medical College, Thiruvananthapuram. Hindustan Latex Limited and Hindustan Lifecare Limited (HLL)

Accordingly, BMCRI entrusted the consultancy services for providing staff required for operation and maintenance of Super Speciality Hospital to HLL for a period of one year — March 2012 to March 2013.

The Karnataka Transparency in Public Procurement Rules, 2000 (as amended in September 2003) (KTPPR) permits single source selection for consultancy services only in exceptional circumstances where :

  • The assignment represents a natural or direct continuation of a previous one and the performance of the incumbent consultant has been satisfactory;

  • A quick selection of the consultant is essential (e.g., in emergency operations such as natural disasters and financial crisis);

  • The contract is very small in value (less than Rs 5 lakh for consulting firms);

  • Only one consultant has the qualifications or has experience of exceptional worth to carry out the assignment.

However on CAG found that none of these conditions were satisfied to award contract to HLL. Thus BMCRI contravened the provisions of KTPPR.

Wrong calculation for consultancy charges

Before constructing Super Speciality Hospital, BMCRI would usually outsource operation and maintenance of its four sister hospitals after inviting e-tenders. But the same was not followed in case of this hospital. The same consulting agency, HLL was appointed to recruit people for operations and maintenance of SHH too. Tenders were called and the work was awarded to three agencies who submitted lowest bids.

Records showed that HLL was paid 23.75% — Rs 40.43 Lakh — as consultation fees. When CAG sought explanations on payment of consultancy fees, BMCRI said that the charges had been paid as per the rates of the Central Public Works Department (CPWD) for maintenance works.

However, CPWD code for departmental charges mandates a payment of 23.75 per cent to CPWD only  for construction and maintenance works undertaken on behalf of other departments. However, the CPWD code was not applicable here, as the HLL’s role was limited to finalising tenders for the outsourced work and overseeing the performance of contracts. Hence this point was objected by the CAG.

CAG calls for attention

CAG concluded that lack of planning and due diligence in procuring equipments and recruiting staff resulted in the non-delivery of expected better healthcare facilities. There was no benchmark to judge the outcome from the implementation of PMSSY, the CAG noted.

CAG also recommended that the State Government allocate funds for procuring all essential equipment required for effective functioning of the Super Speciality Hospital and sought urgent attention over unused equipments. They have also asked the State government to fill up the vacancies.

The above details were tabled in front of the Government six months ago, in August 2013. However till date the CAG has not received any reply.

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