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Manthan_Team_Janatantra_Enhancing_the_production_of_Pharmaceutical Manthan_Team_Janatantra_Enhancing_the_production_of_Pharmaceutical Presentation Transcript

  • Manthan Topic: Healing Touch Enhancing the production of Pharmaceutical-Public Sector Units in India to support Free Medical Distribution Scheme. Team Details Team’s Name: Janatantra Nikhil Bhardwaj B.Tech. 4th Year, J.I.E.T. Jodhpur nikhil.03bhardwaj@gmail.com 07737027180 Rishi Kachhawaha B.Tech. 4th Year, J.I.E.T. Jodhpur rishikachhawaha@gmail.com 09660026991 Mallika Bakshi B.Tech. 4th Year, J.I.E.T. Jodhpur mallika.bakshi@gmail.com 09983726978 Akshay Purohit B.Tech. 4th Year, J.I.E.T. Jodhpur akipuro@gmail.com 09982229476 Ajay Walia B.Tech. 4th Year, J.I.E.T. Jodhpur walia.atwork@gmail.com 08107092108 1
  • Government of India aims to distribute free medicines to 1.2 billion Indian citizens by 2017, which will need expenditure of $5.4 billion. A great portion of this expense can be reduced by reviving the Pharmaceutical PSUs- most of which are non-functional and thus a liability on Government. Central Public Sector Undertakings • Karnataka Antibiotics & Pharmaceuticals Limited, Bangalore • Rajasthan Drugs & Pharmaceuticals Limited, Jaipur • Hindustan Antibiotics Limited, Pune • Bengal Chemicals & Pharmaceuticals Limited, Kolkatta • Indian Drugs & Pharmaceuticals Limited, Gurgaon • Bengal Immunity Limited • Smith Stanistreet Pharmaceuticals Limited Joint Sector Undertakings • Orissa Drugs & Chemicals Limited • Maharashtra Antibiotics & Pharmaceuticals Limited • Manipur State Drugs & Pharmaceuticals Limited Wholly Owned Subsidiaries • IDPL (Tamil Nadu)Limited, Chennai • Bihar Drugs & Organic Chemicals Limited, Muzaffarpur Sick Units- No production Production not up to full capacity Full production Government owned drug manufacturing firms in India 2
  • 3 Most of the PSUs are either not working or are working inefficiently, thus generating losses. Out of the 12 Government owned companies: • Four are working efficiently (making profits). • Three are in losses. • Five are declared sick units with no active production*. Reasons: • Lack of efficient policies. • Products are less known among consumers. • Current working model unable to withstand competition. • Lack of commitment of employees. Losses: • No utilization of resources (human and materialistic) • Land acquired by these firms can’t be used for other productive works. • Depreciation of machinery installed. • Salaries to employees without any work. • The medicines produced by these units, if distributed at free medicine centres, can save a huge share of Government’s spending on various free medicine schemes. *Source: Annual Report, Department of Pharmaceuticals, Ministry of Chemicals & Fertilizers. Annual Production v/s Sales from 2008-09 to 2011-12* Total Burden on the Government and exchequer: • Production Losses of firms: Rs. 15-20 Crore annually • Monetary requirements to implement policy: Rs. 5000 Crore annually Hence, overall there is burden on the Government in every aspect.
  • 4 Proposed Model: The Public-Employee Partnership (P.E.P.) for these firms, with initial financial backup from Government of India for 36 months. • In the current working model, the employee gets salary irrespective of the targets achieved by them. Due to this the employee feels no pain for the degrading conditions of the company. • In Public-Employee-Partnership (P.E.P.) Model, all the current employees of these PSUs will be the share-holders of the firm and their salary will be generated from the output given by them. • In suggested model, they are responsible for both the profit and loss. This model will make the employees more responsible and create a positive interest towards the firm. Why P.E.P. Model? • Employees will have direct involvement in decision making and working of the firm. Hypothesis: Employees will become more responsible towards the work. • Safe exit option for Government, without loosing its hold on the company (as major stakeholder will be the Government) Hypothesis: Government wouldn’t have to bare the losses in long run. Why not existing model? • Because many a times revival fund has been provided in the past and with this model nothing worked. Why not Public-Private-Partnership (PPP) Model? • Private firms aren’t interested until there’s a lucrative deal, because of following reasons: •They will have to pay more to the existing employees (as per their existing pay scales) and also to the new employees (so as to maintain equal pay for equal work) •No firm will take such a high risk of rejuvenating a dead firm. Benefit on different ends: • PSUs end: Utilization of existing resources; No more free salaries to employees; Revival of these units. • Free medicine distribution: Availability of good quality drugs at lesser cost; Continuous supply in the shops. • Government End: Lesser burden on exchequer. Direct purchase- no middlemen involved.
  • 5 Implementation, Back-up and Exit Plan: Implementation Plan •Revival Fund by Government of India on maintenance of machines to bring them in good condition. •Dilution of shares of Government and transfer of a portion of equity (15-30%) in the name of Company Employees. •Transfer of decision making power: For giving decision making power to the employees, Co-operative structure will be formed for these firms where the decision makers will be the Leaders elected by the employees and Government collectively. Back-up •Financial Support from Government of India for salaries, purchase of raw materials and other expenses for the first 36 months from date of implementation. Exit Plan • If plan fails after 36 months: •Government will withdraw all its financial support and help. •Dispose off all the assets and land. •Relieve the employees from service. ++Additional Options: o For generating some money for the revival funds, the Government can ask the employees to purchase the shares, instead of transferring them for free. o The model of Amul Cooperative can be implemented for structuring the cooperative end for these PSUs.
  • 6 Why(s) and How(s)? Why the P.E.P. model can become successful? Realization of role of employees in the company: Interest of the employees invoked in the decision making and working of the company Government can get the medicines at lesser costs Regular supplies of medicines is ensured. How this can be achieved? By giving them the shares of the firm and connecting them directly with the profit and loss and decision making of the company. This will make them more responsible. The Government has to invest only on maintenance of machines and purchase of raw materials. The required infrastructure and machines are already available, only raw materials are required to start the manufacturing process. The medicines will be purchased from these PSUs. Continuous Production → Continuous Supply.
  • 7 Stakeholders, Infrastructure and other Resources involved: • Key investor in the policy and monitoring body of the plan. • Highest risk involved • Dilution of current holdings in the company for transferring the power to employee unions • Benefits : If plans succeeds they will save money ; if fails they can disperse the resources and extract money out of the assets. Stakeholder1. Government • Workforce of the plan : the success rate of plan depends on them • Employment of more person to enhance productivity and sales • Power transfer to the employees. • Direct involvement in profit and loss of the firm and active participation. Stakeholder 2. Employees of the PSUs • Good qualities medicines can be made available at lesser costs. • Regular availability of medicines can be ensured • Better reach to the consumers. Stakeholder 3. Free Medicine Shops • Availability of free medicines • Better health care services Stakeholder 4. Consumers
  • 8 Work-Flow Diagram: Current Ownership: Government Dilution of shares Transfer of shares and decision making powers to the employees. Formation of Cooperative Society. Manufactured Medicines Initial funding & backup from Government for 36 months Direct Supply to Free Medicine Shops Export to International Market# Sell in the Open Domestic Market. Remaining 20% medicines Manufacturing for Private Firms Amount to be paid by Government* & * Government’s savings: It has the option to purchase medicines at just 40% of MRP. # Nearly 5 PSUs have at least once exported medicines to African and European countries. Foreign Exchange Other sources of Earning
  • 9 Financial Structure and Impact of Solution: •Sources of Income for the firms: • From direct sale of medicines to Government’s Free Medicines Schemes (Major portion of income) • From export of medicines to the International Markets. • From sales in the local market. • By manufacturing products for other private firms. •Expenditures: • Salaries. • Expenses in purchasing raw stuffs. Financial Structure •The solution can be considered impactful only if these firms can: • Contribute to the 20% savings in the Free-Medicine Distribution Schemes. • Generate profits after meeting out all their expenses. • Work efficiently without any social, political and economical disputes. Impact of Solution
  • 10 Advantages and Disadvantages: •Opportunity to turn liabilities into assets. •Revival and management of existing resources; No new setup involved. •Making employees more responsible. •Less costlier than establishing a totally new firm. •No more salaries for free to the employees of the closed units, less burden on Government. •A major cut-down in expenses on free- medical distribution schemes. •Easy exit plan for the Government in case of failure. •Opportunity for the firms to recover the previous losses. Advantages •High financial risk involved in reviving the existing units. •Reluctance of the employees to work. •Failure of the plant would lead to complete disposal of units. •Burden on exchequer during the initial levels of implementation of plan. Disadvantage
  • 11 Challenges and Mitigation Factors : CHALLENGES MITIGATION FACTOR Social Challenge: Unwillingness of employees to work. • Give them key decision making powers. • Portion in profits of the company. Economic Challenge: Huge investments in restarting the production. • Government will provide financial backup for 36 months Why : Because there are currently liabilities but can be turned into assets in future. Political Challenge: Bureaucratic & Political lethargicness at various. • Transparency has to be ensured. Legal Challenges : Employees are relieved in many units through voluntary retirement schemes. • Re-employment of these employers to restart the units. Technological Challenges : Maintenance of depreciated machinery and equipment's. • Maintenance is one time cost. • Purchase of new machinery in cases of totally spoiled machines.
  • 12 Appendix References: • Department of Pharmaceuticals : Annual Report • Pharmaceuticals Distribution System in India • Free drug distribution policy of government of India