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Manthan Topic: Healing Touch
Enhancing the production of Pharmaceutical-Public Sector
Units in India to support Free Medical Distribution Scheme.
Team’s Name: Janatantra
Nikhil Bhardwaj B.Tech. 4th Year, J.I.E.T. Jodhpur email@example.com 07737027180
Rishi Kachhawaha B.Tech. 4th Year, J.I.E.T. Jodhpur firstname.lastname@example.org 09660026991
Mallika Bakshi B.Tech. 4th Year, J.I.E.T. Jodhpur email@example.com 09983726978
Akshay Purohit B.Tech. 4th Year, J.I.E.T. Jodhpur firstname.lastname@example.org 09982229476
Ajay Walia B.Tech. 4th Year, J.I.E.T. Jodhpur email@example.com 08107092108
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
up to full
Government owned drug manufacturing firms in India
Most of the PSUs are either not working or are working inefficiently, thus
Out of the 12 Government owned
• Four are working efficiently (making profits).
• Three are in losses.
• Five are declared sick units with no active production*.
• Lack of efficient policies.
• Products are less known among consumers.
• Current working model unable to withstand
• Lack of commitment of employees.
• No utilization of resources (human and materialistic)
• Land acquired by these firms can’t be used for other
• 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
*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
• Monetary requirements to implement policy:
Rs. 5000 Crore annually
Hence, overall there is burden on the Government in
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
• 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
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
Why not Public-Private-Partnership (PPP)
• 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
• Free medicine distribution: Availability of good
quality drugs at lesser cost; Continuous supply in
• Government End: Lesser burden on exchequer.
Direct purchase- no middlemen involved.
Implementation, Back-up and Exit 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
•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.
•Financial Support from Government of India for salaries, purchase of raw materials and other expenses
for the first 36 months from date of implementation.
• 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.
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.
Why(s) and How(s)?
Why the P.E.P. model can
Realization of role of employees in the
company: Interest of the employees invoked in
the decision making and working of the
Government can get the medicines at lesser
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
The medicines will be purchased from these
Continuous Production → Continuous Supply.
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
• Benefits : If plans succeeds they will save money ; if fails they can disperse
the resources and extract money out of the assets.
• 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.
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
• Availability of free medicines
• Better health care services
Transfer of shares and
decision making powers
to the employees.
& backup from
for 36 months
Direct Supply to
Sell in the Open
Amount to be
* 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.
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.
• Expenses in purchasing raw stuffs.
•The solution can be considered impactful only if these firms
• Contribute to the 20% savings in the Free-Medicine Distribution
• Generate profits after meeting out all their expenses.
• Work efficiently without any social, political and economical
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
•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
•Opportunity for the firms to recover the
•High financial risk involved in reviving the
•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.
Challenges and Mitigation Factors :
CHALLENGES MITIGATION FACTOR
Social Challenge: Unwillingness of employees to
• 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
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
• 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.
• Department of Pharmaceuticals : Annual Report
• Pharmaceuticals Distribution System in India
• Free drug distribution policy of government of India