Financial Daily from THE HINDU group of publications
Thursday, May 26, 2005
Cabinet panel to study KSDPL revival package
Kochi , May 25
THE State Cabinet Sub-Committee is to consider a revival package for the State-owned Kerala State Drugs and Pharmaceuticals Ltd (KSDPL) at Kalavoor near Alappuzha, submitted by an expert committee constituted by the employees and officers of the PSU.
Dr Thomas Issac, the local MLA and economist who has been instrumental in preparing the revival package, told Business Line: "It is a viable proposal and if the Government Health Department, which buys drugs worth Rs 100 crore a year, places part of its orders with the company, it could be run profitably."
The response of the Ministers and officials has been positive, he said, adding that the Health Minister had agreed to look into it positively during his discussions with him.
The proposal envisages the unit restarting operations with a one-time minimal Government support through loan and advance of Rs 12 crore.
This includes Rs 5 crore to finance past defaulted payment towards banks, creditors, and KSEB, statutory dues, and part of unpaid wages to workmen. "The wages arrears alone come to Rs 1.5 crore," he said.
The Health Department, he added, may provide Rs 4 crore as an advance towards supply of drugs.
Besides, Rs 3 crore may be granted as loan at eight per cent interest in 2006-07 for essential investments for installing good manufacturing practices (GMP), which is vital for the growth and survival of the unit.
It is expected that the unit will get regular orders for the supply of drugs falling under its production plan from the Health Department for a minimum offtake of 70 per cent of the annual production at rates applicable under competitive bidding.
In order to commence operations, apart from obtaining an order for 70 per cent of sales to the Health Department, the following support from the Government is also needed: conversion of Government loan of Rs 23.42 crore as equity; waiving of interest on the above loan (Rs 18.92 crore); immediate funding of Rs 5 crore from the Government for restarting of operations. This amount may be treated as a loan, which will be paid back at eight per cent interest per annum, he added.
The State Health Department procures large quantities of drugs falling under KSDPL's manufacturing range every year, based on competitive tendering.
Of this, the company could be given order equivalent to 70 per cent of its projected sales during the initial years as goodwill gesture to turn around the unit.
Upon revival, KSDPL would be committed to supply the product in time and regularly. To facilitate the revival process, the Department may extend an advance of Rs 4 crore towards supply of medicine for 2005-06.
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