Hindustan Latex' move to take over ailing Kerala State Drugs and Pharmaceuticals Ltd is unlikely as some of the terms for take over suggested by the former are unacceptable to the State Government. Now Hindustan Latex is planning to set up its own formulation division either at its unit in Belgaum or at its Thiruvananthapuram facilities, sources told Pharmabiz.

They alleged foul play by the politicians and bureaucrats to handover KSDP to some private sector players and interest to ensure government drug supplies from private players could be the reason for scuttling the efforts to bail out KSDP. The plant remains closed with accumulated losses to the tune of over Rs 60 crore.

One of the takeover terms proposed by Hindustan Latex was an assurance from the state health department to ensure at least 50 per cent buyback of the drugs manufactured at KSDP. The government objected to this and offered price preference of 10 per cent in the drug purchase tendering process. Hindustan Latex sources pointed out 10 per cent price preference for state and central PSUs is already a mandatory obligation on the part of the State Government as per the drug purchasing policy of the state. The proposal included taking up the responsibility of distributing the medicines to the points suggested by the government, said sources.

Further, Hindustan Latex suggested the takeover modalities and the deal should be decided after a due diligence study conducted by any mutually agreeable public sector banks. The government was adamant citing the firm could be handed over only on an assurance to compensate for the losses, and with provision for the VRS. Replying to the question on whether Hindustan Latex dropped its bid to takeover KSDP, the source said the board of Hindustan Latex has appealed the government to reconsider its proposal.

The State Government had decided to handover KSDP to Hindustan Latex, during July last year. An MoU in this regard was signed a week later. However, the State Government did not respond to the takeover proposal for many months, as reported earlier in Pharmabiz. But a few months ago, a response was sent seeking some clarifications and soon after the proposal was objected, said Hindusthan Latex sources.

Sources said Hindustan Latex is planning to set up its own formulation division following the development. The unit would be located either at its bulk drug-manufacturing unit in Belgaum, or at the Hindustan Latex's main plant in Thiruvananthapuram. To start with, the formulation division will manufacture tablets and capsules in the segment of birth control, gynecology and child health. About 16 products have been identified for launch by October, this year. It was early to reveal more details, clarified the source.

With the takeover prospects becoming bleak, the future of remaining 150 odd employees of KSDP has now become a question mark. Employees are not paid for the last 16 months. A few months ago, the government disbursed about half of the Rs 10-crore fund allotted to the employees who applied for VRS. The company had staff strength of 420 employees until a few years ago.

A few years ago, though the government tried to privatize its vitamin plant, the only one of its kind PSU manufacturing unit for Vitamin A in India, there were no takers for it except the NDDB. A RIAB study report to restructure the company had suggested the state health department should take over the formulation division and should sell off surplus assets in land to partly wipe out the debts. But the health department declined the proposal. Then a few private sector players showed interest to take over the company, but backed out due to various reasons.

KSDP, located at Kalavoor near Alappuzha, and once described as the pride of Kerala, was started in 1974 to supply cost effective life saving drugs to the state run hospitals and clinics, thanks to the initiative of the late communist leader A K Gopalan. In 1983, KSDP commenced production and marketing of nutritional Grade Vitamin A from lemon grass oil as the basic raw material. The plant, started in technical collaboration with Hofmann-La-Roche, had an installed capacity to make 30 Mega Million Units (MMU) of Vitamin A and 22 Metric Tonne of Beta Ionone per annum. Until a few years ago, the formulation division was manufacturing tablets, including analgesics, antipyretics, vitamins, antibiotics, anti TB Drugs, anti asthmatic, anti-allergic drugs etc, 15 vitamins and antibiotics in capsules, 30 large and small volume parenterals and steroids, 10 liquid orals, drugs like Kaylon (Chlorhexidine with Cetrimide solution which is one of the pioneer products manufactured in this area) etc.

Lethargy of the officials, coupled with mismanagement and indiscipline of the workers, mainly led to the downfall of KSDP.