Kerala orders departmental, Vigilance probes into Oushadhi financial irregularities

The Kerala government has ordered a departmental inquiry into alleged financial irregularities at Oushadhi, the State-run pharmaceutical company under the Department of AYUSH. Health Minister K. Muraleedharan has also sought a Vigilance inquiry into the matter.

The action follows a complaint filed by P.B. Satheesh, director of Nerkazhcha, a Thrissur-based human rights organisation, alleging widespread irregularities in construction contracts, procurement, financial management and accounting practices at the public sector undertaking.

In his direction to the Principal Secretary (Health), Mr. Muraleedharan stated: “The Finance Inspection Wing shall examine whether the applicable financial rules, tender procedures and accounting practices have been duly complied with and submit a comprehensive report containing specific findings and recommendations for further action, if warranted.”

The Minister has also written to Home and Vigilance Minister Ramesh Chennithala, requesting a preliminary inquiry by the Vigilance and Anti-Corruption Bureau (VACB) into the allegations concerning “lack of transparency, accountability and financial propriety” in the functioning of Oushadhi. He asked that the VACB first conduct a preliminary inquiry and, if findings warrant, launch a detailed investigation.

According to the complaint, several construction works at Oushadhi were awarded to the Uralungal Labour Contract Co-operative Society (ULCCS) without following prescribed tender procedures. These include renovation of the manufacturing plant, warehouse and administrative building, installation of a fire-fighting system and an effluent treatment plant. The complaint states that these works were awarded through bid notifications instead of open tenders, and that estimates submitted by ULCCS were accepted without negotiation.

The complaint further alleges that despite the works being classified as urgent, several projects remained incomplete long after the stipulated completion period. It contends that because the works were not awarded through regular tender procedures, Oushadhi would not be eligible to claim compensation for delays, resulting in substantial financial loss. Additionally, Nerkazhcha alleges that ULCCS functioned as both consultant and contractor for the projects. Eight other construction works—including the main entrance gate, walkways and landscaping—were allegedly entrusted to ULCCS without even issuing bid notifications.

The complaint also raises serious concerns about Oushadhi's sales records for 2024-25. It alleges that the company created fictitious inventory entries for medicines that had not been manufactured and uploaded them into the computerised stock management system to inflate sales figures. While Oushadhi usually records monthly sales of around ₹15 crore, the complaint claims sales of ₹46 crore were shown in March 2025 alone, with a substantial portion representing non-existent stock.

It further alleges that medicines were supplied to dealers on credit without obtaining the mandatory 30-day post-dated cheques prescribed by the Oushadhi Board. Such a credit facility was not provided for under the organisation's operating procedures. As a result, outstanding dues of about ₹5.52 crore remain to be recovered from dealers, the complaint claims. It also accuses the then managing director of failing to inform the Oushadhi Board or the State government about these pending receivables.

The complaint additionally refers to delays in completing the oil and lehyam manufacturing plant at Oushadhi, which was recently inaugurated. It alleges that the project, which was originally scheduled for earlier completion, faced undue delays.

Oushadhi, established in 1914, is one of Kerala's oldest public sector enterprises and a leading manufacturer of Ayurvedic medicines. The State government's decision to order a detailed inquiry underscores the seriousness of the allegations. The findings of the Finance Inspection Wing and the VACB will determine whether disciplinary or legal action is warranted.