NEWS
24/09/2020 9:08 AM IST | Updated 24/09/2020 9:13 AM IST

Company With No Ventilator Model Got Rs 373 Cr PM CARES Order To Make 10,000 Ventilators

Trivitron Healthcare told HuffPost India that they began designing the ventilator and procuring the components only after they were given the contract.

Representative Image/ Getty
A medical staff checks on a ventilator of an intensive care unit at a newly inaugurated hospital.

NEW DELHI: In early April, Trivitron Healthcare, a 23-year old Chennai-based medical technology company, got government orders to build 7,000 “basic” and 3,000 “advanced” ventilators, paid for from the PM CARES fund. But when Trivitron got the order, neither of their basic nor advanced ventilator models existed—not even working prototypes.

The total value of Trivitron’s order works out to Rs 373 crore, based on a simple cost-per-unit calculation including Goods and Services Tax.

The “advanced” model was priced at Rs 8,56,800, five times the “basic” model which was priced at Rs 1,66,376, information accessed through RTI requests filed by transparency activist Venkatesh Nayak have revealed. 

These prices for Trivitron models – which were yet to be developed at the time — were based on the costs submitted by its competitors: the cost of the basic model is exactly the same as a competitor product by AgVa; while the advanced model was Rs 8,56,800, just Rs 5,600 cheaper than the bid submitted by Allied Medical Limited. (Prices are inclusive of GST)

But the tender documents contained only one set of qualifying technical specifications, and no stated provisions for procuring two different types of ventilators at such vastly different prices. The tender was issued by HLL Lifecare Limited, a public sector enterprise tasked with procuring Covid-19-related supplies, including ventilators, for the Narendra Modi government.

Trivitron’s order did not come from HLL. It came from Andhra Pradesh Medtech Zone (AMTZ), a public sector enterprise under the government of AP, which has a 270-acre zone dedicated for medical device manufacturing. HLL gave AMTZ an order to manufacture 13,500 ventilators and AMTZ passed on 10,000 of these to Trivitron. Trivitron told HuffPost India that they got the orders when they responded to a request for procurement put out by AMTZ, at prices set by AMTZ.

Five months later, this opaque two-step contracting process between HLL and AMTZ has unravelled into a shambles even as Trivitron, the private company, says they are stuck in the middle bearing the consequences.

HuffPost India
PM CARES ventilator order details

Trivitron told HuffPost India that they have manufactured the ventilators at great cost and effort in the midst of a pandemic, but HLL is yet to issue them a dispatch order for their ventilators. As a consequence, Trivitron has not supplied a single ventilator that they say they developed specially for this contract.

“Immediately after we received the order, we started the process of procuring the components and simultaneously designing a ventilator to meet specs given by HLL,” said Satyaki Banerjee, Trivitron’s co-CEO.

“Despite huge exposure of our investments into this project, we have no certainty of supplies, despite following everything which was mentioned in our P.O. given by AMTZ endorsed by HLL,” Banerjee said in an email. “We do hope better sense prevails and a fair and transparent procedure is followed by the Tendering authority and DGHS [Directorate General of Health Services] and they fulfil the purchase order given to us.”

(A “P.O.” is a purchase order)

The strange case of how Trivitron, a company that had never made a ventilator before, won an emergency government contract to make 10,000 ventilators and is now still to receive a delivery dispatch, is illustrative of the Modi government’s opaque, arbitrary and misguided attempts at procuring 58,850 ventilators for a total cost of around Rs 2,000 crore from the PM CARES fund. While defence public sector enterprise Bharat Electronics Limited was directly tasked with making 30,000 ventilators, procurement for the remaining orders was handled by HLL.

As the following account makes clear, every step of the Modi government’s ventilator procurement process has been riddled with anomalies. 

Trivitron, for its part, says it proceeded “honestly and sincerely”, motivated by a desire to help India’s fight against Covid-19.

“Despite being one of India’s largest Medical Technology companies, whose factory was inaugurated by our Hon Prime Minister in 2016, we are being pulled and pushed in different directions in this project,” Banerjee said in the email.  

Other ventilator manufacturers, some of whom also won contracts and some who didn’t, have blamed HLL, the public sector enterprise tasked with procuring the ventilators.

“HLL messed up from day zero,” one ventilator manufacturer who bid for HLL’s contract said on condition of anonymity. “The process was opaque, arbitrary and designed to fail.”

Nayak, the transparency activist who shared information obtained under RTI with HuffPost India, said the botched procurement illustrates just why the PM CARES fund must be under the purview of the Right to Information Act with regular audits and the results made public. 

“In the RTI response, HLL did not provide specific queries related to formation of technical committees, quantities of ventilators which failed to perform or did not meet technical specifications, and details of hospitals where ventilators were supplied,” said Nayak of Commonwealth Human Rights Initiative. “Several of these companies do not have a well-established track record of manufacturing crucial medical supplies to be used in critical patients. Withholding such crucial information is problematic.”

HLL, the Union Health Ministry, and AMTZ did not respond to HuffPost India’s requests for comment.  

Tender Surrender

When HLL first announced tenders to procure ventilators, several Indian companies prepared their bids. Some had an established business of manufacturing ventilators, some like Trivitron were medical device companies looking to get into the ventilator business, and some were start-ups.

Ventilator makers told HuffPost India there was no clear-cut procurement process.  

The confusion began with the price at which HLL was willing to buy the devices.

A review of 8 different procurement orders issued by HLL between March 27 and April 17 for a total of 28,963 ventilators reveals that the company agreed to pay a per unit price of between Rs 1.67 lakh for AgVa’s basic-model ventilator to Rs 15.34 lakh for the Elisa 600 model ventilator supplied by BPL.  HuffPost India relied on information obtained by Nayak from CHRI and Anjali Bhardwaj of the Satark Nagrik Sangh under the Right to Information Act.

HuffPost India has reported on the many problems with the AgVa ventilators here and here.

So how did HLL justify paying such widely divergent prices for ventilators that corresponded to a common set of specifications?

A ventilator manufacturer who had bid for the HLL tender said the price bands were communicated verbally. 

“These details were not put in the public domain, but shared on a need to know basis,” the manufacturer said. “There was no such differentiation at the specification level. But later on, based on some unknown criteria, HLL categorised some machines as ‘advanced’ and some as ‘basic’.”

“The price was fixed by HLL with two sets of different specifications but the specifications kept on changing as the time progressed,” Trivitron co-CEO Banerjee told HuffPost India, adding that the pricing and specifications discussions were held between HLL and AMTZ.

Eventually, Banerjee said, the procurement committee created two price bands and specified the price HLL was willing to pay for both. “They gave manufacturers this option and let them choose if they wanted to take that,” he said.

Former government officials familiar with how government departments normally go about their procurement expressed surprise at how HLL conducted this tender.

EAS Sarma, a retired former secretary to the Government of India in the power and finance ministries, said the objective of any public tender is to ensure competition, transparent procedure, and obtain a product that conforms to the prior-stipulated technical specifications and is offered at a competitive price.

“The way the tender process has been described in the mail I have received does not appear to comply with the CVC’s guidelines,” Sarma said in an email correspondence, in which HuffPost India shared its findings. 

“If the tender issuing PSU wishes to procure two different kinds of ventilators, for the sake of transparency, the tender enquiry should specify not only the two different sets of technical specifications in advance but also the threshold prior-experience criteria,” Sarma said. 

Fluid Timelines

The procurement price wasn’t the only goal post that HLL shifted. Ventilator-makers said HLL initially required that companies deliver their ventilator by June 30. As a consequence, some established companies bid for small orders that they could realistically deliver within the mandated time period.

Yet, the June 30 deadline was subsequently relaxed for companies that won the bids.

Allied Medical Limited (AML), a 40-year-old company that has been selling ventilators for years, bid for and received an order of only 350 ventilators because of HLL’s insistence that all deliveries had to be made by June 30.

“We were given a clear-cut understanding that no supplies will be accepted after 30th June. And the last date of supply had to be 30 June,” Aditya Kohli, the Managing Director of AML, said. “That is the reason why we bid for 350 ventilators. Otherwise we would have also said that we could supply 10,000 or 30,000 or whatever quantities.”

Kohli said the procurement process was handled with “no common bidding ground”, and each company struck individual agreements with HLL. 

Delivery Delays

As of September 7, only 18% of the 28,963 ventilators ordered by HLL from private manufacturers have been delivered. The delay in delivery, companies say, is because HLL is yet to issue a dispatch order for the thousands of ventilators the Modi government has ordered.

“Our dilemma is that we received an order, invested a whole lot of money and efforts in developing a ventilator, and we want to supply them at a time when it’s really meaningful,” Banerjee from Trivitron said in an interview. “The number of Covid-19 cases in India are rising everyday, and we are ready to supply ventilators. All we need is a supply schedule.” 

The controversial healthcare start-up AgVa, which won a contract to make 10,000 low-cost ventilators, has delivered only half its order of 10,000 ventilators, while Jyoti CNC—the company whose ventilators have come under scrutiny for underperformance in Gujarat hospitalshas not delivered a single device.

In an emailed response, AgVa also said it’s awaiting a dispatch order for the next 5,000 machines. 

Thus far, the only company to have delivered a lion’s share of its order is Bharat Electronics Limited (BEL), a public sector enterprise under the Ministry of Defence, that was contracted to manufacture 30,000 ventilators by the Health Ministry. As of September 7, BEL had delivered 24,332 ventilators, or 80% of its order. The BEL ventilator has been manufactured in collaboration with Skanray, a Mysuru-based ventilator maker. 

HLL was not involved in the BEL contract.

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