The OMNI scandal and its impacts

In late January, a Nepali student completing his doctorate degree in Wuhan, China, tested positive for the coronavirus. That was the first Covid-19 case reported in South Asia. Globally, Nepal was the seventh country to confirm the case of deadly virus, after the US, Thailand, Vietnam, Japan, Singapore, and Korea. It was widely predicted that the virus would cause devastating economic impacts in every nation. Specialized global health bodies like the World Health Organization had warned that Nepal too would suffer a serious health crisis.

As predicted, the virus soon got a foothold in Nepal and began to spread. But the government of Nepal, mainly the Ministry of Health and Population (MoHP), did nothing substantive to arrange for the essential medical equipment required to protect its people and contain the spread of the virus. Up until March, when Covid-19 cases started to spike, the government had not rolled out any interventions. The only response to the looming crisis was to have the Department of Health Service (DoHS) initiate a public bidding process to procure medical equipment--two weeks after the first case of virus infection in the nation. Nineteen private firms seeking to supply the equipment applied to make a bid.

 The department only expedited the health-equipment procurement process in the third week of March, by when Covid-19 was raging across the country. To contain the spread of the virus, the government had announced a nationwide lockdown during the same period.

Just as the cases were just beginning to spike, Prime Minister KP Sharma Oli was admitted to Tribhuvan University Teaching Hospital for his second kidney transplant. Before being taken to hospital, the prime minister had formed a high-level committee led by Deputy Prime Minister and Defense Minister Ishwar Pokhrel to handle the Covid-19 crisis in his absence. 

 Many believe the committee, comprising the chief secretary to the health minister and other line ministers, didn’t think it important to expedite the medical procurement process. Instead, its members were focused on meddling with the ongoing bidding process--in order to serve their own ends. Consequently, it came under enormous pressure from the committee members, and the DoHS was forced to cancel the first bidding process. The bureaucrats involved in the procurement process blamed private firms for not being able to supply the equipment, who in turn blamed the turmoil in the medical equipment markets worldwide. The politicians involved in this process did not take responsibility for their failure; nor were they held accountable for complicating the equipment supply process in order to capitalize on the crisis. 

After the cancellation of the tender on March 24, the day when the first nationwide lockdown was announced, the department summoned 11 private firms to initiate fresh procurement bids and asked them to submit their proposals within 24 hours. 

Only six companies attended the meeting called to tender company bids. According to the then director general of the DoHS, Ram Prasad Shrestha, three of the companies--including the Omni Business Corporate International (OBCI) P. Ltd--were shortlisted. During the meeting, OBCI was awarded the contract to supply medical equipment worth $10,300,904. The other companies’ bids were rejected because they would not be able to supply goods on time.

But in the end OBCI couldn’t supply the equipment as promised--despite having full government backing. By the contract’s deadline, it was able to deliver only 10 percent of the total amount of goods they had promised to procure from China. And in clear violation of their contract, the company had imported questionable RDT kits, which were supposed to have been obtained only in the third phase of the procurement process. Shockingly, the government did nothing to ensure that OBCI would get the proper equipment, and at a time when medical professionals in Nepal were facing an acute shortage of personal protection equipment gear and hospitals badly needed RT PCR testing machines. 

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Later, when the public and the press began to question the OBCI deal, the government arranged a chartered flight, in a bid to speed up supply, and coordinated with India, Bangladesh, and China to clear airspace for a Nepal Airline aircraft. (The state-run airline has still not received the millions it is owed for the chartered airfare because of a row over whether the government or the supplier is to settle the fare).  

 Documents show the DoHS had asked OBCI to prepare to supply the medical equipment on March 27. Things apparently started off well. The company managed to procure the first lot of goods from China within a day after getting the go-ahead from the department. But this also shows that some sort of informal agreement had already been reached between the government and OBCI, which had reportedly established ties in PM KP Oli’s inner circles. 

 The price for the medical equipment procured by OBCI was almost three times higher than the usual market price. Under widespread criticism, the department, which later scrapped the procurement deal with OBCI, admitted that they had awarded the multi-million rupee contract to the OBCI even though the prices they had quoted were 20 percent higher than the going market prices for the equipment.  

 Alarmed by the growing corruption in the procurement processes, the country’s youths, united under the banner of Enough is Enough, took to the streets to protest the government’s mishandling of the crisis. They demanded that the government stop with the unreliable RDT tests, which were mostly being used to screen working class Nepali migrants returning from India. (Because of the faulty RDT tests many migrants who initially tested negative later died because they were not treated for Covid-19. Quite a few migrants also died on the journey home or in the badly managed quarantines). The protesting youths demanded that the government provide the details of the expenses the government had incurred for controlling the coronavirus.  

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Under pressure from the public, and amid widespread criticism, director general Shrestha was removed from his position. But other members of the high-level committee, which was later renamed as Corona Crisis Management Center (CCMC), were left untouched. 

 Just before getting transferred to another ministry, Shrestha had scrapped the procurement deal reached with OBCI, announced the confiscation of the company’s deposit made for the procurement deal, halted the use of 75,000 RDT kits, and initiated a fresh procurement process. 

Later, the government roped in the Nepal Army to procure test kits. The government awarded the army the procurement deal because the army enjoys constitutional immunity even in cases of financial irregularities. Constitutionally, the judiciary and the army lie beyond the ambit of any anti-graft bodies. 

 Six months after the original procurement deal was scrapped, the Office of Public Procurement blacklisted OBCI for a year. But before the public procurement office came after it, OBCI had already moved the Supreme Court, seeking to recoup their deposit, and to avoid possible action against them, including the blacklisting of the company. In response to a second writ petition filed by the controversial supplier, a single bench of apex court justice Purushottam Bhandari temporarily ordered the government not to blacklist the supplier. Observers say the recent court judgement might have been issued under political influence--as a part of a larger controversial settlement plan. 

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 But though the OBCI deal was scrapped, the politicians accused in the scam were spared. Furthermore, the Commission for Investigation of Abuse of Authority, which has been accused of shielding powerful leaders in recent years, has done nothing to hold wrongdoers accountable. In the CIAA’s defense, Spokesperson Taranath Adhikari, has said the investigation into the procurement deal is still ongoing. But the OBCI saga still remains shrouded in a cloak of mystery. 

Over the course of the pandemic, the government has procured medical equipment such as gloves, masks, RT PCR testing machines, ICU equipment, and ventilators. But it still has not made public the details of the goods procured and the processes used in procuring them. Nevertheless, it’s become common knowledge that several procurement provisions were suspended to fast-track the procurement deals--these moves were made to favour the suppliers. 

In the days after the youths took to the streets, demanding transparency in the procurement process, the government was reluctant to release the details. Now, months after the first protests, the government has said that through mid-August it had spent about NRs 12 billion to handle the Covid-19 crisis. But it still hasn’t elaborated on how the money was spent.

 To make matters worse, despite the exorbitant price paid for the equipment and the money that went into kickbacks, some of the equipment didn’t work when they were sent to the provincial and local levels. For example, Karnali Province had to resort to buying two RT PCR testing machines on its own after a machine sent from the federal government didn’t work. 

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 “The machine sent to us was counterfeit, so it didn’t work,” said Mahendra Bahadur Shahi, chief minister of Karnali Province. “We thus procured two machines—one from TU and another from China--and we are returning the faulty machine provided by the federal government.”

 In Parsa, the PCR machines supplied by the federal government were incompatible with the test kits provided. These machines were later blamed for the spread of coronavirus in the district. 

 In Nepal, procurement remains a major corruption-prone area, and bureaucrats and politicians are often dragged into controversies stemming from procurement practices. Political influence and collusion among major political forces often play a role in the awarding of mega procurement deals. The Sudan scam is considered a textbook example, wherein the top leaders of the major political parties back then--the Nepali Congress, the CPN-Maoist, and the Communist Party of Nepal (Unified Marxist Leninist)--were found to have been involved in embezzling NRs 290 million in the process of procuring arms and arranging the logistics for Nepali peacekeepers in Darfur, Sudan. The problems were kept under wraps, until the UN objected after Nepali forces were left in the lurch, owing to a lack of arms and because of shoddy logistics.

Scores of police officers, including the then police chief, Ramesh Chanda Thakuri, and local supplier Shambhu Bharati of Bharati Traders were booked by the apex court. But the bureaucrats and politicians responsible for endorsing the procurement deal--including the ministers at the Ministry of Home Affairs who oversee the police--were never implicated in the scam. And the main supplier, Micheal Rider of London-based Assured Risk P. Ltd, was never made to appear before the court despite being chargesheeted. 

Besides getting embroiled in the medical equipment fiasco, the Oli government has come under fire for its decision to award two companies contracts for importing chemical fertilizers worth NRs 4 billion. Because of the ineffective fertilizer procured by the companies, whose proprietors have deep political connections, millions of farmers faced a farming crisis this monsoon. As part of a politically influenced deal, the government had awarded Shailung Enterprises P. Ltd, owned by Sharada Prasad Adhikari, and Honiko Multiple P Ltd, owned by Humnath Adhikari, a Nepali Congress leader. And just as OBCI did, fertilizer supplier Adhikari, who is Nepal Communist Party’s executive chairman Pushpa Kamal Dahal’s landlord, also began waging a legal battle against the government after his company was blacklisted. 

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For Nepal’s authorities, it has long been the norm to hand out procurement contracts to those who curry favour with them. These malpractices occurred during previous crises too--in the aftermath of the 2015 earthquakes and during the subsequent economic blockade imposed by India. And now, during the Covid-19 pandemic, authorities--from those at the central level to the local--have been mired in controversies too. 

 These problems have not arisen for lack of laws. Experts blame the politicians and bureaucrats for the prevalence of faulty procurement deals. “I don’t see any problem in the law as such. The problem lies in the implementation of the law, particularly owing to the malintent of politicians,” says Suryanath Upadhyay, former chief commissioner of the CIAA. 

The Public Procurement Act clearly states that the authorities should award contracts to the lowest bidder or choose the second lowest bidder if the lower bidder’s quote compromises quality. But bureaucrats rarely opt for the second option, as they have to explain every specification to justify why they rejected the lowest bidder. According to experts, collusion among politicians, bureaucrats, and suppliers often complicates the bidding process, and deserving contractors often have no way to land the contracts. And medical equipment procurement cases allow ample room for government malfeasance--they represent cases where collusion among interest groups determine the outcome of the bids.  

A probe team formed to study the OBCI procurement saga has raised questions about the involvement of Health Minister Bhanu Bhakta Dhakal, and the Health Minister’s Advisor Dr Khem Karki in the procurement-finalizing process. Legally, the director general of the DoHS or a Secretary at the ministry are responsible for awarding such contracts. But in the OBCI deal, circumventing legal provisions, Health Minister Dhakal and his advisor Dr Khem Karki had attended a meeting called to finalize the contract’s specifications, which were pivotal to determining the winning bid.  

Former CIAA chief Upadhyay has pointed out the chief flaws in the OBCI deal. “The procurement process should have proceeded in accordance with existing laws. But the formation of a high-level committee headed by the deputy prime minister undermined their relevance,” said Upadhyay. “The problem began there.”

 To avoid similar irregularities in the future, Upadhyay has underscored the need for the sincere implementation of the law, to entrust responsible procurement bodies when issues related to procurement arise, and to not allow politician-led committees to get involved in procurement deals.  

During this pandemic, despite the blatant looting that occurred in the name of managing the crisis, the authorities mandated to probe into financial irregularities and to book the wrong doers have not taken any action against wrongdoers, as their politically backed commissioners intend to protect their political masters. Experts say anti-corruption agencies like the CIAA and parliamentary committees have failed spectacularly in probing the corruption cases that have emerged during the pandemic.

“Both the parliamentary committees and the Akhtiyar [CIAA] also missed the opportunity to take action against those involved in the faulty procurement deals,” says Upadhyay.