The request comes a few weeks after the government turned down the Board´s recommendation to privatize the drugs manufacturing company and decided to run it on its own.
Based on this decision, the Ministry of Finance (MoF) had earlier asked the management of Nepal Drugs to submit a business plan to the Board to expedite the process of resuming operation of the company which closed down around three years ago after failing to comply with the standards set by the Department of Drugs Administration.[break]
But prior to beginning operation of Nepal Drugs, the Board has suggested that the government first design a severance package to retrench 150 of the total of 280 employees, who cannot be employed even if life is injected into the company.
Nepal Drugs will not be able to use these employees as they do not have the required academic qualification to meet the standard set by the World Health Organization´s Good Manufacturing Practice (GMP).
The GMP, an internationally recognized production and testing system to assure quality, has been adopted by over 50 percent of the country´s pharmaceutical companies. And the drugs market regulator has been consistently pushing other companies to adopt the system, which, among others, requires every employee of a pharmaceutical company to be at least high school (Grade 10) graduate - a condition that 150 employees of Nepal Drugs do not meet.
“Since these workers have no choice but to leave the company, it is better if the government first reduces its financial burden by extending them suitable layoff package,” Dr Laxmi Bhakta Silpakar, a director of Public Enterprises Management Board, told Republica.
It is estimated that the government may need to fork out tens of millions of rupees to lay off 150 staff members. But considering the government´s monthly spending of Rs 5 million on the company to cover salary and administrative costs, many say it would be sensible to retrench the workforce now to save taxpayers´ money.
“Once this work is done, the government can embark on its plan to resume operation of the company,” Silpakar said.
Nepal Drugs, which used to be a profit making venture until 2000/2001, had started generating losses due to political meddling, inefficient management and inability to compete with private pharmaceutical companies, among others. By the fiscal year 2010/11, the company had generated an accumulated loss of Rs 528.96 million.
However, a business plan submitted by the company in August 2011, states it can generate annual revenue of Rs 1 billion by manufacturing 100 different brands of medicine if the government injects a capital of Rs 520 million into it. The proposal, however, has drawn criticism as the company had generated the highest revenue of only Rs 128.4 million in fiscal year 1998/99, when there was very little competition in the drugs market.
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