Nepal | July 03, 2020

Nepal Drugs seeks Rs 150m to resume operation

The Himalayan Times
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Kathmandu, August 28
Nepal Drugs Ltd (NDL), a troubled state-owned pharmaceutical company, has sought a sum of Rs 150 million from the government to resume operation of its factory which has remained almost defunct for the last five-and-a-half years.

Of the amount, NDL has proposed to use Rs 60 million to renovate its building and make it compatible with the Good Manufacturing Practice (GMP) of the World Health Organisation.

“Another Rs 52 million would be spent on buying machinery and the remaining amount would be used to purchase raw materials,” said NDL Chairman Chandan Krishna Shrestha, adding, “A proposal in this regard has been forwarded to the Ministry of Industry.”

Once the factory resumes operation, NDL plans to produce 20 different types of common medicines, such as paracetamol and Jeevan Jal, an oral rehydration solution, worth Rs 120 million per year.

“We hope to generate a profit of around Rs 40 million to Rs 50 million per year from sales of these drugs,” Shrestha said.

NDL had sought the fund from the government to resume its operation after laying off around 56 per cent of staff by launching a voluntary retirement scheme (VRS) worth Rs 285.80 million.

NDL had launched VRS on July 17, and 122 of 219 staff had applied for it. All 122 staff members, who had applied for the VRS, were paid off by July 26.

The value of severance package for each of the departing staff member ranged from a minimum of around Rs 1.4 million to a maximum of around Rs 3.5 million.

With the launch of the VRS, the financial burden on the government has come down by more than half.
Prior to the launch of the VRS, the government was extending around Rs 4.5 million per month just to bear salaries and other expenses of the staff.

“Now we need around Rs 2.1 million per month to pay 97 staff on the payroll,” Shrestha said. “Of this amount, Rs one million to Rs 1.1 million is generated by the company itself per month through vacant space that has been rented.”
Established in September 1972 with a paid-up capital of Rs 6.34 million, Nepal Drugs used to manufacture over 100 drugs worth Rs 130 million till fiscal year 1999-2000.

But the performance of the company eventually started deteriorating due to overstaffing, political interference, trade union-related problems, frequent change of board members and chief executive, and lack of strong leadership, among others.

Soon the company, which was manufacturing drugs worth Rs 130 million per annum, saw annual production falling to around Rs 50 million. Then around five-and-a-half years ago, it had to shut down its operation after the Department of Drugs Administration denied renewing its licence citing the company had failed to meet minimum production standard called GMP of the World Health Organisation.

Since then, the company has only been producing glycerin and distilled water worth around Rs 150,000 per month.

A version of this article appears in print on August 25, 2015 of The Himalayan Times.

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