Revival plan for 3 sick drug PSUs

The chemicals and fertilisers ministry is putting in place a comprehensive revival strategy for pharma public sector units that would involve a mix of cash infusion, loan waivers and a preference in government's bulk procurement programme.

In addition, "these PSUs would be given a preference in issuance of a 'compulsory licence' in case of medical emergency, provided they have the capability to deliver scarce drugs," said an official in the department of chemicals and petrochemicals.

The three PSUs which are a part of these revival plans are Hindustan Antibiotics Ltd (HAL), Indian Drugs & Pharmaceuticals Ltd (IDPL) and Bengal Chemicals & Pharmaceuticals Ltd (BCPL).

While HAL will receive a cash infusion of Rs 137 crore, the total relief will be about Rs 500 crore. This includes waivers on old loans and bankers' interests of about Rs 270 crore. The proposal has been approved by the Cabinet.

For IDPL, the ministry's expert committee has recommended a loan and interest waiver amounting to Rs 1900 crore. There will no cash infusion.

IDPL, which went in the red in 1992 and has only three of its five units operational, will raise about Rs 200-300 crore from sale of its assets. The Kolkata-based BCPL has prepared a package and put it before the Board for Reconstruction of PSUs. "Once accepted, it would go to the Cabinet," said the official.

"PSUs are strategically required...they act as a buffer in times of medical emergency like the Mumbai floods and Gujarat earthquakes," said a ministry official. Buying supplies from government units can be faster as buying them from private players involves rounds of bargaining, which are time-consuming.

The ministry will also consider these PSUs first if a "compulsory licence" had to be issued.

"The drugs of the PSUs would be sourced on a priority basis in the government's bulk procurement programme. Firstly, it lessens the burden on exchequer and secondly, it will provide them some revenue source. Revival cannot stop at cash infusions or loan waivers....they will require some consistent sales to survive," explained the official.

The bulk procurement programme of the central government is worth Rs 20,000 crore and that of state governments is about Rs 1500 crore. The turnover of the PSUs stands at roughly at Rs 120-140 crore currently and the ministry is hoping that with its support, the turnover would at least touch Rs 250-300 crore overtime.

Besides this, the prices of drugs produced by PSUs are also expected to provide some basis for cost studies conducted by National Pharmaceutical Pricing Authority (NPPA) which fixes the price ceilings for 74 bulk drugs currently.