Cabinet Panel To Discuss New Package For Idpls Revival

A Cabinet sub-committee is set to discuss a fresh package worth Rs 234 crore for the revival of Indian Drugs and Pharmaceuticals Ltd (IDPL) later this week. The new package involves purchase support from government hospitals worth Rs 200 crore every year.

The sub-committee is headed by finance minister P Chidambaram. The other members are chemicals and fertiliser minister M Arunachalam, labour minister Veerendra Kumar and agriculture minister Chaturanan Mishra.

Both the workers union and the financial institutions seem to have favoured purchase support from the government as this contract would act like a lifeline to help nurse IDPL back to health. At present, government hospitals purchase drugs from the small scale sector.

 

As per the funding pattern, Rs 111 crore has been earmarked for working capital, Rs 71 crore for voluntary retirement scheme, Rs 24 crore as equity, Rs 18 crore to be compensated as cash losses and Rs 10 crore as interest free loan.

On its part, IDPL is expected to generate funds worth Rs 144 crore from sale of land and Rs 622 crore from profits over a period of 10 years. The total liabilities to be repaid in 10 years would be Rs 120 crore from sale of land, Rs 560 crore from profits and Rs 10 crore from government funds. A sum of Rs 72 crore would come from depreciation for upgradation of technology. Earlier, an Industrial Development Bank of India (IDBI) report based on the recommendations of a financial institution, had said that the company has lost its commercial and financial viability.

The government had earlier rejected all the four options forwarded to it by the employees union, financial institutions and IDBI.

The options included winding up of IDPL by offering voluntary retirement scheme (VRS) to workers at a one-time cost of Rs 156 crore, winding up of the company with the workers receiving retrenchment allowance, implementation of the Industrial Development Bank of Indias report which seeks to more than halve the workforce and pumping in around Rs 710 crore, hiving off IDPL units into separate companies or merging them with certain profitable PSUs.

As per the IDBI report, IDPL would have to shed workforce from the existing 7,600 to 2,400.

To turn around the company, the consultants had suggested fresh infusion of funds worth Rs 710 crore.

These include, Rs 104 crore as capital expenditure at the Rishikesh unit, Rs 6 crore as capital expenditure at the Hyderabad unit, Rs 14 crore as capital expenditure at formulations, Rs 3 crore as marketing infrastructure, Rs 117 crore as working capital, Rs 156 crore towards cost of VRS for 5,200 employees and Rs 310 crore against cash losses during implementation of the plan. According to the IDBI report, even after the implementation of the scheme, the company would make a gross profit of only Rs 68 crore in its optimum year which is 2002-03. Hence, it was not in a position to prepare an acceptable and viable rehabilitation scheme.

Another option before the Cabinet was the merger of all the IDPL units with profitable PSUs like Hindustan Organic Ltd or Hindustan Insecticides Ltd. Two of the five units of IDPL IDPL, Tamil Nadu, and Bihar Drugs and Pharmaceuticals Ltd have already been hived off as subsidiaries.

At present, IDPL has a workforce of 7,200. The one-time pharmaceutical giant has never made a profit since its inception in 1949 despite being one of the first drug companies in India.