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

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

Mr. Muraleedharan directed the Principal Secretary (Health) to initiate a detailed financial inquiry through the Finance Inspection Wing and wrote to Home and Vigilance Minister Ramesh Chennithala seeking a preliminary inquiry by the Vigilance and Anti-Corruption Bureau (VACB).

“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 said in his direction to the Principal Secretary.

In his letter to the Home Minister, Mr. Muraleedharan sought a Vigilance inquiry into the allegations concerning “lack of transparency, accountability and financial propriety” in the functioning of the State-owned institution. He requested that the VACB first conduct a preliminary inquiry and, if the findings warrant, launch a detailed investigation.

Tender norms

In the complaint, Mr. Satheesh alleges that several construction works at Oushadhi were awarded to the Uralungal Labour Contract Co-operative Society (ULCCS) without following prescribed tender procedures.

“Works including renovation of the manufacturing plant, warehouse and administrative building, besides installation of a fire-fighting system and an effluent treatment plant (ETP), were awarded through bid notifications instead of open tenders,” says the complaint.

“The estimates submitted by ULCCS were accepted and work orders issued without any negotiation,” the complaint states.

Although the works were awarded in urgency, several projects remained incomplete long after the stipulated completion period, it alleges.

The complaint further 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 to the organisation.

Nerkazhcha also alleges that ULCCS functioned both as consultant and contractor for the projects.

In addition, eight other construction works—including the main entrance gate, walkways and landscaping—were allegedly entrusted to ULCCS without even issuing bid notifications.

Sales figures

The complaint further alleges that Oushadhi manipulated its sales records for 2024-25 by creating fictitious inventory entries for medicines that had not been manufactured and uploading them into the computerised stock management system to inflate sales figures.

According to the complaint, while Oushadhi usually records monthly sales of around ₹15 crore, sales of ₹46 crore were shown in March 2025 alone. It alleges that a substantial portion of this figure represented non-existent stock.

It also alleges that medicines were supplied to dealers on credit without obtaining the mandatory 30-day post-dated cheques prescribed by the Oushadhi Board, even though 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, it alleges.

The complaint further alleges that the then managing director neither informed the Oushadhi Board nor the State government about the pending receivables.

The complaint also refers to the delay in completing the work of recently inaugurated oil and lehyam manufacturing plant at Oushadhi.

It alleges that the project, which was originally scheduled for completion during 2016-21, suffered prolonged delays and continues to attract audit observation under Part II-A relating to financial irregularities.

MD rejects allegations

Responding to the allegations, Oushadhi managing director P.M. Lathakumari denied any knowledge of financial irregularities. “I do not know anything about any departmental inquiry. We have not received any communication regarding such an inquiry so far,” she told The Hindu.

Rejecting the allegations, ULCCS sources said all works at Oushadhi were awarded after following due procedure with the approval of the Finance department .“Most projects were completed on time. Wherever there were delays, extensions were obtained with due approval. Since the work involved renovating a functioning pharmaceutical plant, construction had to be carried out without disrupting production. The delays neither affected production nor resulted in any additional cost, as the project cost was not revised,” the sources said.

Published - August 08, 2026 08:15 am IST