Tuesday, February 19, 2008

Finmin opposes Indian Drugs and Pharmaceuticals revival plan

NEW DELHI: The finance ministry has opposed the chemicals and fertilisers ministry’s proposal to spend Rs 4,500 crore of taxpayer’s money to revive the Indian Drugs and Pharmaceuticals (IDPL), an anaemic state-owned company with massive real estate holdings.

The finance ministry has instead suggested that it would be more desirable if the amount is used to set up new sophisticated manufacturing plants. This amount would be sufficient to set up about 20 manufacturing units at a cost of more than Rs 200 crore per company, the finance ministry has said. The revival plan was earlier approved by the Board for Reconstruction of Public Sector Enterprises (BRPSE) and a group of ministers is now looking into it.

The finance ministry is of the view that earlier attempts to revive PSUs by infusion of fresh funds have not been successful. Revival of sick PSUs is a politically-sensitive issue and is often not based on sound economics.

The finance ministry is opposed to the plan as merely pumping public money into an archaic structure without a holistic approach will not turn around the company in a competitive environment. Bringing a strategic partner looks a little difficult as a possible private partner may be more interested in the real estate assets of the company than running the drug maker.

The real estate assets of the company at prime locations in Muzaffarpur, Chennai, Bhubaneshwar, Gurgaon, Hyderabad and Rishikesh are estimated to be worth more than the turnover of India’s about Rs 33,000-crore pharma industry. There could be very few buyers like DLF or Reliance, which could afford to buy such property.

If the land is sold, the taxpayer could look forward to malls and other facilities coming up there instead of a drug-manufacturing plant. One idea mooted by industry experts is to let the profit-making joint ventures of the company such as Karnataka Antibiotics & Pharmaceuticals (KAPL) or the Rajasthan Drugs and Pharmaceuticals (RDPL) to manage the loss-making parent company. They said a think-tank should be formed to explore innovative solutions by leveraging the company’s real estate strength.

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