The impasse is due to differences over the question of settling the employee liabilities as also the retention of the existing workforce.

Mony K. Mathew

Thiruvananthapuram, Nov 24

THE move by the Central public sector Hindustan Latex Ltd, leading manufacturer of family healthcare products in the country, to take over the State-owned Kerala State Drugs and Pharmaceuticals Ltd (KSDP) appears to have lost steam.

Even after more than a year since Hindustan Latex made the proposal, the memorandum of understanding (MoU) it was supposed to sign with the State Government and KSDP has remained in the draft form.

The erstwhile Enterprise Reforms Committee had recommended restructuring of KSDP, which has been making losses since 1995. The Hindustan Latex proposal came up at a time when the Government was exploring ways to prevent the closure of the company.

The impasse, according to sources in the Industries Department, is due to differences over the question of settling the employee liabilities as also the retention of the existing workforce.

Hindustan Latex had expressed interest to take over the production facilities of KSDP without any encumbrances. According to the draft MoU, Hindustan Latex will be free to engage services of any of the employees of KSDP on such terms and conditions as may be decided by the former.

Also, Hindustan Latex can wind up any business that are not viable and add new business, which are viable within the KSDP premises.

The draft MoU also says that the employees, who have not opted for voluntary retirement scheme, will be brought under the Social Security Net Programme (SSNP) of the State Government and their terminal benefits paid by KSDP or the Government before Hindustan Latex takes over the production facilities.

It may be recalled that the Government had taken a decision way back in 1995 to hand over the loss-making Vitamin A division of KSDP to the Hyderabad-based Indian Immunologicals Ltd, a subsidiary of National Dairy Development Board. Subsequently, the Government had released Rs 8.15 crore for one-time settlement of dues to financial institutions, implementation of VRS and settlement of other pressing liabilities.

However, the proposal did not materialise owing to differences with the trade unions on the policy of separating Vitamin A division from KSDP. A public interest litigation was also filed challenging the valuations.

As per the performance review by Bureau of Public Enterprises, the accumulated loss of KSDP stood at Rs 64 crore as at the end of 2003-04. The net worth eroded further and was negative at Rs 56.07 crore. The company has implemented SSNP for 163 employees utilising Rs 6.63 crore provided by the Government.

(This article was published in the Business Line print edition dated November 25, 2005)
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