Where did Rs 8,500 cr of UP’s health funds go?



Rs 8,500 cr in grants, and this is where women in UP are supposed to deliver their babies. You knew there was a scam. Now read the details. And be staggered. Fudged records. Imaginary mothers. Money stolen from the blind.  Ashish Khetan exposes the ugly story of how health funds were embezzled under Mayawati’s watch


Rotting in silence The government women’s hospital in Sisandi village
Rotting in silence The government women’s hospital in Sisandi village
Photo: Sushil Sahai

SUBHADRA CHAURASIA developed cataract in her right eye four years ago. In the past one year, visibility in her left eye has also faded. If the 75-year-old doesn’t receive medical attention soon, she will go completely blind. She has two sons, both married, who barely make a living from the 2.5 bighas they own in Raipur village, 10 km away from Lucknow. The yield from this land holding is just enough to save the family from starvation. With no money to buy even basic necessities of everyday life, Subhadra can’t dream of having an eye operation, something that would cost more than Rs 15,000. But if you go by official records, Subhadra has already been operated upon and cured.

In fact, many others from Subhadra’s village, whose ages are over 60, have been shown in health department files as having been cured of cataract or glaucoma, the two most common eye ailments which, if not treated, result in blindness. NGOs, private nursing homes and doctors have siphoned off crores of taxpayers’ money intended for eye operations for the rural poor in the state over the past five years.

The modus operandi was simple. Names and addresses of villagers over 60 years of age were gleaned from electoral lists and then added in the register of patients who got free eye surgery under the National Rural Health Mission (NRHM). There are as many real beneficiaries as fictitious names. In some places, bogus names outnumber those of real patients. This inflated list of patients was then sent to the state Family Welfare Department and bills were cleared after every signing authority had taken his/her cut. For every eye operation, the government paid Rs 750 to private hospitals. Each private hospital contracted under NRHM has performed, mostly on paper, 3,000-5,000 eye surgeries every year in Lucknow district alone. The numbers of such eye surgeries performed by private hospitals and clinics are even higher in the other 71 districts of the state. In addition to the surgeries, medicine and other disposables were provided free of cost. The excess medical supplies thus procured by private hospitals for the imaginary patients were then sold in the market.

The Special Task Force (STF) of the UP Police stumbled upon this shocking fact while investigating the murder of former Chief Medical Officer (Family Welfare), Lucknow, BP Singh on 2 April. Before Singh, his predecessor Vinod Arya was gunned down on 27 October 2010 while on a morning walk near his residence. The ballistic report showed that both Arya and Singh were killed by the same gun.

The STF claimed that both murders were masterminded by Dr YS Sachan, who was the deputy CMO. According to the police, the motive was to cover up gross financial irregularities under the NRHM fund utilisation in Lucknow district. Sachan was accordingly booked and sent to jail. On 22 June, he too was killed inside the prison under mysterious circumstances.

The state government first contended that it was a case of suicide but then a few days later conceded that it may have been murder. The Opposition parties alleged that Sachan was eliminated by someone higher in the government as he/she feared that Sachan could have revealed the involvement of senior politicians and bureaucrats in the embezzlement of NRHM funds. Allegedly, Sachan was the crucial link in the chain connecting the funds disbursed at district level and the commission received by the government’s top echelons.

In Zaidpur town, an inquiry revealed that most of the payment disbursed to pregnant women in the past five months was to fictitious people

The fake bills and payment disbursement orders discovered by the STF are now part of the voluminous Health Department records taken into possession by the CBI, which took over the probe into the three deaths and the alleged siphoning of NRHM funds. All four cases were handed over to the CBI by the Allahabad High Court in response to a public interest litigation.

SINCE THE inception of the NRHM scheme in 2005, the UP government has received about Rs 8,570 crore from the Centre. The funds were meant to provide free and quality healthcare to rural masses with special emphasis on women, children and the elderly. Free medical care for pregnant women, immunisation of infants and treatment of those suffering from debilitating diseases like tuberculosis were among the several programmes covered under the scheme. The Centre had identified 18 states, including UP, for the scheme and has given each of them about Rs 5,000-8,000 crore since 2005 to strengthen public health infrastructure. From 2007 to early 2009, the scheme and its funds were directly under UP Chief Minister Mayawati as she also held the family welfare portfolio. However, once the funds were disbursed to different districts, the CMOs had control over them.

Since the CMOs were under the executive control of the then health minister, Anant Kumar Mishra, a Brahmin leader from Farukkabad district, he became very powerful. It was rumoured that Mishra was skimming off the funds and was not sharing the spoils with the powers-that-be. Last July, Mayawati bifurcated the district-level health bureaucracy by creating a new post of CMO (Family Welfare) and the funds were put directly under the control of the newly created post. The CMOwas put under the control of the family welfare minister.

In early 2009, Mayawati transferred the portfolio to one of her most trusted aides, Babu Singh Kushwaha, an SC leader from Banda district. Thus, in effect, NRHM funds both at the secretariat and district level were brought under the control of the CM’s most trusted lieutenant.

In a strongly worded letter addressed to the UP chief secretary on 28 July 2010, the Union health ministry called the de-merger of NRHM from the health ministry as being against the scheme’s basic objective. “This will not be in the interest of the NRHM implementation and goes against the basic principles that it was advocated for. We would urge the state government to re-examine the decision to bifurcate,” wrote the Union health secretary. But Mayawati paid no heed to the Centre’s advice.

However, after the successive murders of CMOs and an avalanche of corruption allegations around the NRHM funds’ utilisation, she brought the scheme back under the health ministry this April. To assuage the growing public anger, both Kushwaha and Mishra were asked to step down as a token measure.

TEHELKA visited more than half-a-dozen villages in and around Lucknow and found that the women, children and men who should have been the beneficiaries of the NRHM funds are living without the most basic health services. The funds meant for them have been siphoned off by the politician-bureaucrat-private contractor nexus.

BINDAWATI, 25, of Makdhumpur Kaithi village delivered her baby on the road while she was on her way to the Primary Health Centre 12 km away. Because she delivered on the road, she was told that she would not be entitled to the Rs 1,400 she would have received under the Janani Kalyan Yojana of the NRHM scheme. This programme looks after the welfare of poor pregnant women in rural areas. Under it, Rs 1,400 is given to women both as an incentive to deliver the baby under the care of a trained midwife and also to give her some money for nutrition. An amount of Rs 700 is also paid to the midwife. Bindawati’s village is only 15 km from Lucknow. And to ferry patients like her to primary or community health centres, a large number of vehicles had been shown as hired, though only on paper.

During its investigation, the STF found that most of the hired vehicles and ambulances actually did not exist. The registration number of some ambulances turned out to be that of trucks or two-wheelers, while in other cases the vehicle numbers were not mentioned in the record books at all. While the poor and needy were made to trek their way to government health centres, an inordinate number of air-conditioned taxis were put at the disposal of top bureaucrats in the health department. In February 2010, one air-conditioned and another non-AC taxi was available every day at the residence of the then principal secretary, medical health and family welfare, Pradeep Shukla. In fact, a total of 15 AC taxis were hired through 2010-11 for other senior officials of the health and family welfare department.

In the Harijan basti of Akhori village, again not more than 20 km from Lucknow, women who delivered babies were paid Rs 700 instead of their full entitlement. When TEHELKA asked them if they were aware that they had been denied their full entitlement, the Dalit women expressed their ignorance. “I was paid Rs 700 in cash by the midwife. But I don’t know under what scheme,” says 35-year-old Geeta. NRHM rules require that the money should be paid through cheques. But this rule was not followed. Instead, cheques were drawn in the bearer’s name so that money could be withdrawn by anyone.

In Zaidpur town, located 40 km from Lucknow, an inquiry by a district account manager revealed that most of the payment disbursed to pregnant women in the past five months was to fictitious people. During a ground verification exercise, the officer found that save two women, the rest did not exist. Of the two existing women, one had delivered the baby a year before the date that was entered in the record books. The other woman had an abortion while on paper she was shown as the mother of a newborn baby.

The officer also found that in March, the total number of deliveries was 625. In contrast, in the next four months only 289 deliveries were recorded. March is the month when government departments try to utilise as much of the allocated budget as possible so that the funds do not relapse. He concluded that the cases were prima facie dubious and the money was perhaps misappropriated.

Since 2008, the state has disbursed Rs 2,100 each ( Rs 1,400 to the pregnant woman and Rs 700 to the midwife) for 1.44 crore deliveries, thus spending nearly Rs 330 crore. However, the actual birth rate of the state is roughly 25 percent of what has been shown under the NRHM scheme.

Last year, Prabhat Kumar Yadav, 30, was operated upon for cataract at Pashupati Netra Chikitsalaya, located outside Akhori village in Lucknow district. Yadav, who runs a small provisional store, had to spend Rs 15,000 on the operation. He borrowed some money from his friends and relatives and the rest from a moneylender. A year later, he has been able to pay back only Rs 2,000. As he does not make more than Rs 8,000-10,000 per year and most of that goes into making ends meet, he says it would take him at least five years to repay the debt. He had no idea that Pashupati Chikitsalaya had received a grant of more than Rs 20 lakh from the government for carrying out free eye operations for the poor.

When TEHELKA confronted Dr Ashok Singh, who owns the private hospital, with the fact that villagers living in the vicinity have not received the facility of free eye surgery, he retorted that most of the beneficiaries were actually from Hardoi district, 70 km away. It strains credulity that the needy and poor living within half a kilometre radius from the hospital were not provided free surgery and instead those living in far-flung areas were transported there, operated upon and then shipped back to their respective villages. In its report, the STF has indicted the hospital for faking the names of patients and generating bogus bills.

Not far from Yadav’s home lives Motilal with his wife Shyama and five kids. Shyama’s eyes have been watering and hurting for many months. She finds it tough to cook and tend to the livestock. Motilal’s annual income is just Rs 15,000 and he can’t afford to take Shyama to a city hospital. Like other villagers, he too took his wife to Pashupati Chikitsalaya and paid Rs 100 for each visit. But the medication has not helped.

TEHELKA surveyed three villages in the vicinity of the hospital — Bijepur, Akhori and Bikhapurva. None of the villagers interviewed had knowledge that the hospital was registered under the District Blindness Control Society and was supposed to provide free treatment to the poor under the NRHM scheme.

TEHELKA investigated five more NGOs in Lucknow that have been paid a total of Rs 50 lakh last year under the blindness eradication programme and found that all were involved in gross irregularities. An NGO by the name of Sant Asudaram Ashram, which has been operating an eye hospital in Alambagh, Lucknow, for the past 17 years, figures in the STF report for inflating the number of beneficiaries and raising bogus bills. TEHELKA was given access to the STF report. Brahma Netra Chikitsalaya, another NGO operating from Ashiana locality in Lucknow, said that no list was maintained of patients operated upon for cataract and glaucoma under the NRHM scheme. As per rules, every NGO availing government funds is mandated to keep a record of the beneficiaries. Brahma Netra Chikitsalaya also figures in the list of embezzlers in the STF report.

Lucknow-based NGOs Shiv Shanti Ashram in Shringar Nagar, Harsukhlal Ram Kripa Devi Trust in Naka Hindola and Jan Kalyan Netra Chikitsalaya in Indira Nagar have also been charged with fudging records.

NOW CONSIDER the following allegations: In 2010, the UP government spent Rs 32 crore on the purchase of First Referral Unit (FRU) kits. Tenders were invited and a few firms bid at the rate of Rs 60,000- 70,000 per kit. However, the lowest bidders were declared ineligible and the tender went to a Delhi-based firm that supplied these kits at Rs 5.89 lakh per unit. In the same year, Rs 119 crore was spent in the name of publicising different NRHM schemes. The contract went to a local news channel that is believed to be aligned with the ruling party. Under the contract, glow signboards were supposed to be put up in villages to spread awareness about NRHM schemes and facilities. TEHELKA did not find a single signboard in any of the villages visited. Rs 150 crore was spent on printing immunisation charts, patient slips, etc. But something as simple as an immunisation card that should not cost more than 60 paisa per piece was purchased at Rs 18 per card.

Moreover, a total of Rs 143 crore was spent for buying modular Operation Theatres for 40 district hospitals. While the market rate for modular OTs is Rs 30 lakh, the UP government bought them at a cost of Rs 70 lakh per unit.

Again in 2010, Rs 200 crore was spent on appointing doctors on a contractual basis for implementing certain NRHM programmes. However, the appointments were largely done on paper. The name and registration number of doctors were taken and they were appointed on 11-month contracts. The salary for the first two months was paid, while the remaining nine months’ salary was pocketed by the bureaucrat-politician nexus.

These allegations have been filed in the form of an affidavit by social activist Sachidanand before a Bench of the Allahabad High Court handling NRHM-related litigation. The petitioner demanded a CBI probe into the NRHM funds’ utilisation in all the 71 districts of the state. The high court, however, has restricted the CBI probe to Lucknow district.

“The state government has not contested or denied our claims till date,” says Akhilesh Kalra, the petitioner’s lawyer. “Only a CBI investigation into the NRHM funds spent across the entire state would bring out the massive and systematic loot of public money by the ruling party.”

Prabhat Kumar Yadav, 30 
The provision store owner had to borrow Rs 15,000 for an operation at the Pashupati Netra Chikatsalaya to treat his cataract. The hospital has received more than Rs 20 lakh from the government to conduct free eye operations for the poor
Geeta, 35
The resident of Akhori village was paid Rs 700 by the midwife after giving birth instead of the Rs 1,400 that she is entitled to. “I was paid in cash. But I don’t know under what scheme,” she says. NRHM rules require that the money be paid through cheques
Subhadra Chaurasia, 75 
She developed cataract in her right eye and visibility in her left eye has also faded. She can’t dream of having an eye operation, something that would cost more than Rs 15,000. But if you go by official records, she has already been operated upon
Prakash Rawat, 41 
The resident of Sohawa Ka Kher village is a tuberculosis patient. He used to take medicine in fits and starts but has not been cured yet. He has six children and is struggling to fend for them. He is not aware of the benefits he is entitled to under NRHM
Hiralal, 60
He lost his vision in one eye because of an injury. He gets Rs 300 every month under the old age pension scheme but it’s not enough to afford an eye treatment. Hiralal was not aware of the benefits he was entitled to under the NRHM scheme
Sadhana, 19 
The resident of Sohawa Ka Kher village was born with an eye problem. She belongs to the Scheduled Caste community and has 12 siblings. Her father is a manual labourer and is not aware of the blindness eradication programme under the NRHM scheme

And one of the most favoured agencies that got a bulk of civil construction contracts was the UP Processing and Construction Cooperative Federation (PACCFED), which is controlled by the Cooperative Department of the government. In the years 2009-10 and 2010-11, it got contracts worth 563.48 crore. When the deals were awarded, Kushwaha was the minister of both the family welfare and cooperative departments. One could argue that Kushwaha channeled funds from one of his ministries to another, without observing any transparency and financial monitoring. Shockingly, most of the contracts were awarded without signing formal agreements.The petitioner has supported his allegations with credible documents. He has attached several government notifications and project implementation procedures in support of his argument that almost every existing rule and procedure was flouted to disburse funds to favoured corporations and vendors by sidestepping mandatory checks and balances. For instance, instead of transferring the NRHM funds into the accounts operated by Director General (Family Welfare) along with the Financial Controller, the money was transferred directly to the work agencies. Thus, the oversight of both the DG and Financial Controller was done away with, in gross violation of established procedures.

PACCFED defaulted on almost all the deadlines set for completion of repair and construction work of community health centres, drug warehouses, sub-centres and district hospitals. As there were no written agreements, it’s hard to fathom a justifiable price for the work and how and where the money was spent.


Loose Change

Rs 32 cr 
The amount spent on First Referral Unit kits. Some firms bid at the rate of Rs 60,000-70,000 per kit. The tender went to a firm that supplied kits at Rs 5.89 lakh per unit

Rs 143 cr 
The amount spent on modular Operation Theatres. While the market rate for modular OTs is Rs 30 lakh, the state bought them at a cost of Rs 70 lakh per unit

Rs 330 cr
The amount the state has disbursed for the 1.44 crore deliveries since 2008. The actual birth rate is roughly 25 percent of what has been shown under NRHM

Rs 150 cr 
The amount spent on printing immunisation cards, patient slips, etc. A card that should not cost more than 60 paise per piece was purchased at Rs 18 per card


Another co-operative body that got the bulk of the contracts for supplying medicine and equipment under NRHM is the UP Small Industries Corporation (UPSIC). UPSIC was also controlled by Kushwaha. The funds were transferred to UPSIC directly without the approval of the Director General (Health and Family Welfare). Not only that, UPSIC released 75 percent of the funds to different vendors as advance payment for their services.

“We have information that the vendors, soon after receiving the money, withdrew huge amounts of cash transferred to their accounts even before any contracted work could begin. All this goes to show the well-oiled racket of embezzlement,” alleges lawyer Kalra.

The civil construction work, which basically involved repair of existing primary and community health centres and district hospitals or construction of new health facilities, carried out by UPSIC and PACCFED have been found to be of poor quality. During its investigation, the STF visited a few sites in Lucknow and found the construction to be extremely shoddy.

In the wake of a spate of allegations of corruption around NRHM, the Union health ministry constituted a 20-member special inquiry team on 9 May to visit different medical centres and conduct a ground inspection. The team headed by NRHM (Finance) Director Jaya Bhagat visited 11 districts on 13-15 May and submitted a voluminous report making some scathing observations about the way NRHM funds have been misused.

The audit team found gross misappropriation of funds, violation of established procedures, absence of a well-defined chain of command, lack of transparency and accountability in disbursement of funds, absence of monitoring and supervision at all levels.

“An analysis of civil work under NRHM during 2009-11 revealed that massive amounts were transferred for the civil work to project implementation agencies with no open tender system being followed to ensure competitive cost-effective bidding,” the audit team observed.

IF THAT wasn’t enough, in 2010-11, payments amounting to Rs 244.26 crore were made to implementing agencies without even a formal agreement. While allocating further work and transferring funds to these agencies, performance and timely completion of projects were not the criterion. “Further work orders were given to agencies as a matter of course. Poor monitoring of the progress of civil construction and absence of penal action against defaulting firms for delays in completion of works were noticed,” the audit team added.

The team found that the state machinery was quick when it came to awarding contracts and disbursement of money to vendors but showed little interest in checking if the money was being effectively utilised.

For operationalisation of the emergency medical transport services (EMTS), the state procured 779 ambulances from Tata Motors at a cost Rs 56.36 crore. But only 159 vehicles were deployed. As many as 620 ambulances are languishing at the Tata warehouse as the state failed to take delivery. Even the 159 vehicles that were deployed were found to be lying idle during the ground inspection. “The state is currently not in a position to utilise the EMTS vehicles and should not have placed the order without coordinating the other components like support staff and call centres that were necessary for utilisation,” said the report.

The audit team found that the state had contributed only Rs 87 crore for the scheme since 2005, when it should have allocated around Rs 1,600 crore

The team discovered that most of the drugs and consumables procured were of extremely poor quality. Even RO systems installed at primary and community health centres to provide clean drinking water to rural patients were found to be of bad quality. Most of the equipment and medicine was purchased by UPSIC through private vendors at exorbitant rates.

The team also found that since the inception of NRHM in 2005-06, the Centre had remitted Rs 8,570.08 crore to UP. Under the scheme, 85 percent of funds are provided by the Centre while the remaining 15 percent is supposed to be provisioned by the state out of its budget. While the UP government took the Centre’s contribution, it didn’t allocate its own share. The audit team found the state had contributed only Rs 87 crore for the scheme since 2005, when it should have allocated around Rs 1,600 crore over the past five years. In other words, while the Centre’s money was spent and swindled with profligacy, the state was extremely cautious when it came to its own money.

During field visits, the audit team also found that:

• The records at a health centre in Faguiya village, Chandauli district, showed 1,647 deliveries in a year and accordingly money under Janani Suraksha Yojana was paid to the supposed beneficiaries. On the day of the team’s visit, six deliveries were marked in the register. But they couldn’t find a woman or a baby at the centre.

• At a sub-centre in Sonbhadra district, the team found payment under Janani Suraksha Yojana was made against false applications.

• In Unnao district, the team found that paramedics were charging commission from the women who were paid maternity benefits.

• Under the Saloni Swasthya Kishori Yojana, iron, calcium and deworming tablets are supplied to adolescent girls in rural areas. Since 50 percent of young girls in UP suffer from anaemia, properly implemented, the scheme could have made a big difference for rural health. But the audit team found gross irregularities and financial mismanagement in the scheme.

• Another ambitious programme under NRHM is to provide complete immunisation to infants. But the audit team found that the scheme was not being implemented in a proper manner. “There was nothing on record to indicate that 100 percent immunisation was achieved at any district, block or village level,” the team concluded.

The audit team was on the field for only three days. Their findings form just a sample of the massive mismanagement of the NRHM and criminal misappropriation of funds. This, from a three-day preliminary auditing exercise. The mind boggles at the thought of what a full-fledged CBI investigation would lead to.

nhealthy practice Mayawati, former health minister Mishra and former family welfare minister Kushwaha
Unhealthy practice Mayawati, former health minister Mishra and former family welfare minister Kushwaha
Photos: AFP, Pramod Adhikari

The NRHM scam has led to a political furore. On 8 August, the Opposition staged a walkout in the state Assembly demanding Mayawati’s resignation. While raising the issue during Question Hour, Opposition Leader Shivpal Singh Yadav alleged that the scam was to the tune of Rs 5,000 crore and asked for an FIR to be lodged against Mayawati and Kushwaha.

STATE CONGRESS chief Rita Bahuguna has filed half-a-dozen RTI applications seeking details of NRHM funds utilised under different programmes. “We filed an RTI application seeking details of all the beneficiaries under Janani Suraksha Yojana in Lucknow district,” says Capt SJS Makker who heads the RTI cell of the Congress. “We have received over 28,000 pages. A cursory look at these documents would show that records have been fudged. For example, rural women have signed in English against the payment receipts. Also, entries have been made in the same handwriting by paramedics in different villages.” The Congress is planning to verify each and every beneficiary of NRHM funds in rural areas by launching a verification drive.

It is reminiscent of Bihar’s fodder scam. A CBI probe could lead to the unravelling of Mayawati’s impregnable political and financial empire

The Allahabad High Court has summoned all the relevant records, including audit reports pertaining to NRHM from the state government before deciding on the plea to transfer the probe to the CBI. On its part, the state is resisting any such move. The government has claimed before the court that there had been no criminal misappropriation of funds and the financial irregularities were only departmental and procedural in nature.

To demonstrate that it is serious about taking corrective measures, the government has served chargesheets to three Family Welfare department officials for alleged irregularities in awarding contracts to UPSIC. Former director general (Family Welfare) Dr SP Ram, former director (Family Welfare) Dr Usha Narayan and former joint director of Central Medical Store Depot in the Directorate of Family Welfare Dr Rajeev Banswal were named in the chargesheet. In some districts like Etah, lower-level health officials have also been suspended.

But bureaucrats like Sachan were only cogs in the wheel. The mounting evidence clearly points towards a conspiracy at the highest level. It is reminiscent of Bihar’s fodder scam — only the scale and the amount of money involved in NRHM is many times more. A CBI probe could lead to the unravelling of Mayawati’s impregnable political and financial empire.

The disproportionate assets case built by the CBI against her has been in a limbo for many years. Mayawati had sought the quashing of the CBI’s case by filing a writ petition before the Supreme Court in 2008. Since then, there has been an interim stay on the filing of a chargesheet against her. Both the Centre and Mayawati have sought repeated adjournments in the case and as a result, no meaningful hearing has taken place in more than a year. “If both of you are together, then let the matter go,” an SC Bench had commented in exasperation in September 2010, expressing its frustration at the ping-pong game of adjournments played by both sides.

Even in the NRHM-related PIL before the Allahabad High Court, the Centre has taken an ambivalent stand on the plea to initiate a CBI probe. Appearing in the court on behalf of the Centre, Additional Solicitor General Ashok Nigam stated on 4 August that the matter was for the court to decide, thus refusing to take a clear stand. This is in stark contrast to the belligerent stance taken by Rahul Gandhi against Mayawati in the political theatre.

Will the NRHM probe go the way of the Bihar fodder scam and the Taj Corridor scam? Only time will tell. However, one thing is for sure. There won’t be any remedy for the lakhs of poor who either died or became invalid because of lack of access to health facilities. And the taxpayers’ money — your and my money — which was meant for the poor but has been instead pocketed by the politicians and bureaucrats, will never come back.

With inputs from Etmad Khan

Ashish Khetan is Editor, Investigations with Tehelka.



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