Massive Scam in import of Chinese Covid Kits as 61% profit for Intermediaries- INDvestigations Special

By Raja Chowdhury

When the country is under Lockdown and people are finding it difficult to make two ends meet, the middlemen or intermediaries procuring Covid kits from China for Indian Council of Medical Research (ICMR) and Government of Tamil Nadu are making 61 percent profit on a single kit. Procuring a kit from China at Rs. 245 and selling it at Rs. 600 to ICMR.

Due to the legal dispute between Rare Metabolics and Matrix Labs, dirty secrets about the costs have tumbled out of the closet.  It's hard to imagine that an institute like Indian Council of Medical Research was unaware of the profiteering by Intermediaries. It would have known wondfo price of USD 3 per kit, prices of kits from other manufacturers and also prices at which they are being procured. Chattisgarh would have been a perfect example for ICMR as they procured the kit for Rs. 400. This raises an important question that we all know through ages. Why are all these prices decided behind closed doors instead of open bidding?

The dirty game of middlemen was revealed through a Delhi High Court judgement in Rare Metabolics Vs Matrix Labs  related to the import of 5 Lakh Wondfo antibody test kits, imported from China and ordered by Indian Council of Medical Research, New Delh at Rs. 30 Crores through middlemen who took a cut of Rs. 18.75 crore.

According to documents available, The Rare Metabolics Life Sciences (RMLC) sought the release of 7.24 lakh Covid 1 Rapid Test Kits and other Covid 19 related materials which has been imported and/or are being imported by Matrix Labs. Both the organisations entered into a contract making RMLC the exclusive distributor of medical products imported into India by Matrix Labs.

Later, another agreement was signed in which RMLC appointed a partner company as its distributors for Covid 19 Rapid Test Kits and other related materials to which Matrix Lab was a signatory.

On 25th March, 2020, RMLC had expressed a desire to import One Million tests of WONDFO SARS CoV-2 Antibody tests.

It requested Matrix labs to send it a proforma Invoice and specify the delivery time at the earliest.

Matrix Labs acknowledged the order and replied that it would process and sent the Proforma Invoice soon. On 27th and 28th  of March, 2020,  the Indian Council of Medical Research (ICMR) / National Institute of Cancer Prevention and Research placed an order with the second company for 5 Lakh COVID 19 Rapid test kits at the rate of Rs. 600 per test kit. The total order value was Rs. 30 Crores.

Matrix Lab, being the importer, obtained the licence to import the medical kits and other materials. No custom duty was payable for supplies made to ICMR as duty is exempted on all such materials. Of the said order of 5 Lakh test kits, 2.76 Lakh test kits have already been delivered to ICMR and the remaining 2.24 kits was expected to be delivered soon.

According to the agreement between the two companies, the materials cannot be distributed in India except through RMLC which has already paid Rs. 12.75 Crores to Matrix Labs and the amount covers the cost of import of 5 lakh tests at the rate of USD 3 per test and the freight cost.

According to the information available, the freight cost is in the range of Rs. 2 Crores, for One million test kits. 50 percent of the same amount would be applicable to the orders placed by the ICMR.

The cost of import by Matrix Labs per test kit works out to: USD 3 per test X Rs. 75 (USD to INR Exchange rate) =Rs. 225 plus Rs. 20 Freight cost = Rs. 245 per test kit.

Multiplied by 5 Lakh test kits, the total cost to Matrix Labs for ICMR destined Kits is Rs. 12 Crore and 25 Lakhs. (Rs. 225 x 500,000).

Coming back to the agreement, Matrix Labs was to supply these goods to the partner company of RMLC for Rs. 20 Crore plus 5 percent GST which amounts to Rs. 21 crore.  at an apparent 45 percent profit of 7.75 crores. On the other hand, the same company will get Rs.30 crores plus GST from ICMR, for a similar evident profit of Rs. 9 Crores despite no value addition to the imported medical materials.

So, from the Rs, 30 crore to be paid by ICMR for the 5 lakh test kits, Rs. 18.75 Crores will be shared by the intermediaries because the actual cost of the material paid to the supplier/ exporter was only Rs. 11,25,00,000.

The Delhi High Court was informed that the medical goods aere being flown in by Air India from China. In the circumstances, the freight cost of Rs. 2 crore for the one million kits/ tests  may also be an issue but for the moment kept aside.

The money by ICMR was to be paid only if it met the requisite standards of the ICMR.  The first consignment of 2.76 lakh test kits was delivered to ICMR on 17th April, 2020 for which the Invoice was already raised  but the payment is awaited.

Matrix Labs claimed in the Delhi High Court that in the agreement, it was clearly mentioned that the entire amount for 5 lakh kits was to paid in advance by RMLC. But RMLC says that as soon as ICMR pays, the amount would be transferred to Matrix Lab's account.

In the judgement, Justice Najmi Waziri ordered that the rest of the kits (2.24 lakh) shall be delivered immediately to ICMR on its arrival in India.

The court also held that Matrix Labs has received an order of 50 thousand test kits from Government of Tamil Nadu through an intermediary dealer M/S Shan Biotech & Diagnostic at the ICMR approved rate of Rs. 600 per test. Of this order, 24 thousand has been supplied and 26,000 more are to be supplied directly to the state government immediately upon its arrival in India.

The court also ordered that in the given cirsumstances when people are dying and the economy is at a standstill,  a profit of 61 percent, Rs. 155 on a product procured at Rs 245 is much on the higher side and fixed Rs. 400 including GST as the final cost.