Pharma PSUs likely to sign MoU with LMA for sale of surplus land

The sale of land of the four sick pharma PSUs has not seen much progress since 2016. Government sources indicated that the PSUs would sign a memorandum of understanding (MoU) with the land management agency and go ahead with the sale process. In contrast to the earlier decision of selling the land to government entities, now the Cabinet has approved sale to private entities as well. 

The PSUs thus are hopeful that the sale process could now be expedited. 

In December 2016, the government had identified four pharma PSUs — Indian Drugs and Pharmaceuticals (IDPL), Rajasthan Drugs and Pharmaceuticals (RDPL), Hindustan Antibiotics (HAL) and Bengal Chemicals and Pharmaceuticals (BCPL) — for sale of surplus land and eventual closure or strategic sale. IDPL and RDPL are to be shut down after meeting their liabilities while HAL and BCPL would be taken up for strategic sale. 

A government source said Karnataka Antibiotics (KAPL), another drug PSU, has been identified for disinvestment. 

Despite the Cabinet nod, the efforts to sell the surplus land did not make any progress. “Multiple tenders were floated but the government did not find any buyers. The December 2016 decision was to sell the land to government enitities. In July 2019, this was revised to allow sale to private entities as well. Now, the sale would be easier,” a senior government officer said. 

“We have been asked to sign an MoU with the land management agency and also the auctioneer MSTC for the same. A letter was sent to them, and an MoU would be signed soon,” the official said. The land management agency could be another PSE like the NBCC India. 

HAL, for example, has land of 263 acres. Of this, around 87.7 acres have been identified for sale at Pimpri in the outskirts of Pune. “The land has been encroached upon and has turned into a slum,” a source to the development said.  The proceeds from the land sale would go on to meet the company’s liabilities of Rs 820 crore. 

On top of this, it has also been decided to offer voluntary retirement schemes (VRS) to around 500 employees of the Pune-based PSU. It has 750 employees. HAL has been making losses since 1972 as its main product penicilin, a bulk drug, is mostly imported from China. 

“The VRS severance package is Rs 145 crore and this would come as a loan from the government,” a senior government official said. After land sale and strategic sale, the government dues could be met. 

IDPL, on the other hand, has prime land of over 800 acres in Rishikesh. The four pharma PSUs combined have land holding of over 2,300 acres of which around 1,600 acres have been identified for sale, a source said. 

“The total liabilities of the pharma PSUs is over Rs 20,000 crore. IDPL has the maximum liability of Rs 10,000 crore, followed by BCPL at over Rs 8,500 crore,” a senior official said.