Companies & Sectors
Price control for essential medicines: A welcome step in the right direction

This major step will have adverse effect on manufacturers of branded drugs who expect a revenue loss of about Rs1,500 crore but will be beneficial to the aam aadmi in reducing his cost of medications

The recommendation by the Group of Ministers to bring 348 essential medicines under MRP (maximum retail price), on Thursday, is a major step taken to alleviate the suffering of the “aam aadmi” in reducing his costs on medications.


This fixing of MRP for 348 essential drugs “at an average price of all brands in a segment that has more than 1% market share” will bring much-needed relief to the public.


What is even more gratifying to note is that it will be statutory for doctors to recommend generic medicines, along with branded ones, as this will enable the consumer, the patient, to obtain medicines at the most competitive prices.


Such a move, when it is finally approved by the Cabinet, to which the recommendations of the Group of Ministers will be submitted by next week, should be given widest publicity through the media. In fact, it may be even more worthwhile for all drug stores to put up proper notice, in all regional languages, so that public is aware.


These notice or display boards must be made uniform, except for the language part, as it may change from state to another, so that the buyers are aware that they can now have access to generic medicines from these shops.


While prices may come down as a result of this move and more generic shops will be opened, there is the hidden danger that some manufacturers may indulge in higher trade and other forms of discount so that the store keeper is tempted to push up sales of their products.  We must guard against such a possibility. Another much-needed step is to ensure that all drug stores, which prepare and supply prescription drugs, must have qualified pharmacists on duty and must be identifiable.


This major step will have adverse effect on the manufacturers of branded drugs according to the industry sources, who expect a revenue loss of about Rs1,500 crore.  Years ago, it was reported in the US media that for a new drug to be marketed, the overall cost of research, trials and all related work cost the manufacturer something like $800 million, which is why medications are expensive, resulting in high pricing spread over several years of selling!


You may also want to read: Medical prescriptions: Money spinners or drainers? , Get your medicines at 60% discount! , Proposed changes to expand drug price control .


(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US. He can be contacted at [email protected].)



Bakul Gandhi

5 years ago

While it is a welcome step, lot more is required to be done. Hospitals, even charitable, have become more than commercials and loot all around. The charges are very high. One has to go through lot of tests regularly. It is to be done in hospital only. Same is the case for prescribed medicines. You have to get only from the hospital's medical store. Here medicine is very costly. Again, there is no way to check misuse.If it is like diapers, wardboy will show more use. Same diaper is rerouted. If it is medicine,RMO/Nurse may do it.

Banks reject Kingfisher Airlines’ loan demand; SBI Caps to make revival plan

This is the third time that SBI Caps has been asked to prepare a rejig exercise for the airline. In 2010, it had made a debt recast plan for the airline and in November that year, its Rs6,500 crore worth loan was recast

Mumbai: Turning down a request for a Rs200 crore working loan by Kingfisher Airlines, the State Bank of India (SBI)-led lenders consortium on Thursday asked SBI Capitals to chalk out a fresh revival plan for the cash-strapped airline in the next two to three weeks, reports PTI.


Kingfisher chairman Vijay Mallya made a presentation in a meeting with lenders at the Bangalore headquarters on Thursday, the first such meeting after the government’s policy decision allowing foreign airlines to invest in domestic carriers.


According to lenders, Mr Mallya did not offer any concrete revival plan as he could not commit on equity infusion by promoters.


An official from a public sector bank said the lenders turned down a request from Mr Mallya for an immediate working capital loan of Rs200 crore. Since this January, the airline has not been servicing its Rs7,000 crore bank debt.


The official said that the lenders have asked SBI Capitals to make a new revival plan, the third one, for the airline in the next two to three weeks.


Though the company suggested a second debt restructuring, nothing was finalised, a source said.


When asked whether banks are open to a second corporate debt restructuring (CDR) in two years, the source said that will depend on the SBI Caps proposal.


The meeting comes amidst talks of the airline talking to prospective foreign airlines to offload its stake.


At the last meeting on 3rd September in Mumbai, the bankers had demanded that Mr Mallya himself should make the revival plan and today's meeting is the result of that.


This is the third time that SBI Caps has been asked to prepare a rejig exercise for the airline. In 2010, it had made a debt recast plan for the airline and in November that year, its Rs6,500 crore worth loan was recast. Earlier this month, SBI Caps was asked to make another revival plan.


Mr Mallya also proposed his interest in replacing the already pledged Goa Villa with another property, the source said, adding but the bankers did not take a call on that.


Along with the Goa Villa, the company has pledged the Kingfisher brand worth around Rs4,000 crore and the Kingfisher house in Mumbai with the lenders.


The meeting also comes a day after the country's largest liquor maker by volumes United Spirits, said promoter Mr Mallya was in talks with Diageo to sell his personal stake in the company to the British liquor major.


The lenders and Kingfisher management would meet in the third week of October again.


Meanwhile, industry sources said potential investors in Kingfisher are likely to be private equity players and not airlines.


Banks together have an exposure of nearly Rs7,000 crore in the airline and the loans have all become non-performing assets since January. SBI has an exposure of Rs1,500 crore to Kingfisher Airlines.



nagesh kini

4 years ago

When KFA blatantly goes back on its words to its employees, banks, MIAL and other vendors by throwing round false promises, and not bringing in fresh promoters' equity infusion, with what face does it come out with fresh demands for advances?
The airline ought to be put on the block for an eligible suitor.

SEB reforms still mean little for the thermal power sector

Oversupply in the thermal power sector means we can expect margins and return ratios to trend downwards. Espirito Santo Securities recommends ‘sell’ on shares of BHEL, Thermax and BGR Energy—key power equipment suppliers

In order to revive the SEBs (State Electricity Boards), the government has initiated large-scale reforms in the power sector, including the restructuring of loans taken by the SEBs. But the expected revival in the power sector is not good news for the thermal power sector, as the risk/reward for investment in thermal capacity is still unfavourable, according to an Espirito Santo Securities insight report. Several near-term concerns remain including Coal India’s plans to import coal and not go in for increase in production. (Please refer Table on the agreed penalty levels for Coal India).

As coal is the most important input in the thermal power plant, aggregate coal production for the next decade has been planned for and debated for some time now. It is now clear that any plans implemented towards increased mining of coal within the country would only yield results in the long haul. This is bound to lead to muted order inflow for the next few years for BHEL, Thermax and BGR Energy. As Coal India is freezing capacity for fuel supply, fresh ordering, especially from the private sector, will be elusive in the near term. (Please refer to the Table on the demand-supply gap widening for Coal India).

Consequently, there is an oversupply position in the thermal power sector, in spite of power shortages for the general public in the country. We can expect margins and return ratios to trend downwards, according to Espirito Santo Securities. It is a double whammy for companies now with no visibility of orders on one hand and excess industry capacity on the other. Boiler capacity at 37GW and turbine capacity at 36GW is much higher than industry wide ordering at 25GW, even assuming a revival in orders from FY15 onwards. This oversupply in the industry will keep the long-term profitability of the companies under pressure.


The industry oversupply situation would also mean that every incremental order would be bid for aggressively; leading to downward trends for EBITDA margins and return ratios for the power equipment suppliers. Espirito Santo Securities initiates coverage on BHEL, BGR Energy and Thermax with ‘Sell’ recommendations in the equity market (Please refer Table on the Valuation Snapshot for these three companies in the thermal power sector).


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