Pharmaceuticals sector: Amid fund crunch, HBL struggles to start production of vaccines, pay staff
A cash crunch at HLL Biotech Ltd (HBL) has left the government enterprise falling short on fulfilling its mandate of making affordable vaccines for the country’s Universal Immunisation Programme. The liquidity crisis, which has resulted in HBL waiting for over Rs 300 crore in additional funds, has also made it difficult for the company to pay its employees since June, The Indian Express has learnt.
This fund crunch also raises questions over HBL’s ability to act as a backup in the event that the country needs extra supply of oxytocin — a lifesaving pregnancy medicine that the Centre has been trying to ban private firms from making in India since 2018.
HBL has been struggling financially as it awaits the execution of a proposed disinvestment of its parent firm HLL Lifecare Ltd (HLL), pending which decisions on its requirement of additional funds have been stalled, as per sources.
In the meantime, the firm’s Integrated Vaccine Complex (IVC), termed a “project of national importance”, has not been able to start production of any drug, including oxytocin, said a source directly aware of the development.
Meanwhile, employees of the firm have alleged that the company was told that the government has found the project to be “non-viable” and that it will no longer be able to pay their salaries after June.
“CEO of HBL had called for a communication meeting with all employees of the company on 23rd June 2019 … During the meeting, CEO detailed to the employees about the lack of funds for HBL Project beyond June 2019. He further stated that the Ministry has lost its confidence on this Project of National Importance declaring the project non-viable referring to the recent cost committee meeting chaired by the Advisor Costs from the Ministry of Finance,” stated the employees in a letter to various government departments dated June 26.
Sources directly aware of the development have confirmed that payments to employees have been impacted as a result of lack of funds, but that the project will not be discarded. An analysis of HBL’s financial requirements is expected once it is demerged from HLL. The firm has communicated to employees that it would not be in a position to pay full salaries starting July, but that “partial” salaries are being paid to those who are still working with it.
The Centre had, earlier this year, nominated HBL as a backup supplier of oxytocin in the event that the Department of Pharmaceuticals (DoP)-owned Karnataka Antibiotics and Pharmaceuticals Ltd (KAPL) is unable to cater to the India’s total requirement.
In an affidavit submitted to the Supreme Court in March, the government said that while KAPL “alone” would be able to produce twice the required amount of oxytocin from April onwards, an empowered committee had decided that HBL shall set up a facility for “simultaneous” manufacturing of the drug using the same distribution network as KAPL to “ensure” its supply chain management.
The court has currently referred the issue to a larger bench and, until its decision, private firms are currently able to manufacture oxytocin here.
Emailed queries sent on Friday and Monday to HBL CEO V Vijayan and the official email address for HBL and HLL on the Ministry of Corporate Affairs about the issue remained unanswered by press time Wednesday. Queries sent to the Health Ministry and finance ministry also did not elicit any response.
The government in April 2012 approved the IVC project under HBL at an estimated cost of Rs 594 crore in order to “strengthen” the public sector institution in vaccine manufacturing. Yet, HBL’s financial statements for FY19 show that it has revised the project’s cost to Rs 904.33 crore so that the facility can be commercially operational by March 2020.
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