Calcutta HC strikes down Centre’s decision to sell stake in Bengal Chemicals
Kolkata: The Calcutta high court on Tuesday passed a verdict striking down the union government’s decision to sell its stake in Bengal Chemicals and Pharmaceuticals Ltd, one of India’s oldest drug makers founded in 1901 and taken over by the Centre 20 years ago. The verdict, if carried on appeal, may have implications for other state-owned pharmaceutical companies, which are being restructured.
Judge Debangsu Basak held that providing affordable healthcare was one of the key responsibilities of the state under the Constitution of India, and that Bengal Chemicals should not have been classified as a low-priority enterprise in the first place. A previous attempt to sell the company was also nixed by the same court, Basak noted in his judgement.
Based on the recommendations of the Niti Aayog, the Centre had decided to sell Bengal Chemicals’ surplus land to pay off the company’s outstanding liabilities, and then transfer ownership in the firm. A workers’ union moved the Calcutta high court last year after the company invited bids to sell surplus land at a factory in the suburbs of Kolkata.
A standing parliamentary committee of the 16th Lok Sabha had taken exception to the Centre’s decision to close down and sell state-owned drug makers. “The main objective of setting up pharma PSUs (public sector undertakings) was not to earn profits, but to encourage indigenous production of bulk and life saving drugs... to support various health programmes of the government,” the panel had said in its recommendation on the matter.
The committee also said that the government should provide financial support to Bengal Chemicals to restart production of snake venom antiserum, citing that some 200,000 people in India suffered from snake bites every year, and that the country did not have adequate production facility for snake venom antiserum. The panel said it is of the view that the government was “not taking the matter seriously”.
The Centre had argued that the five state-owned drug makers had combined revenue of Rs500-550 crore in the past three years, accounting for less than 5% of the sales of Indian pharmaceutical industry.
These enterprises were no longer of “strategic value” because they did not produce anything that isn’t already on the market, the Centre had said, adding that it had asked Bengal Chemicals to restart production of snake venom antiserum if it could support it from its own cash flow after the ministry of finance declined to provide financial support for the project.
The Niti Aayog had identified companies to be sold or mothballed on the basis of their “nature of activity” and not on the basis of profitability, judge Basak said in his verdict. He also noted that courts have at times declined to interfere in policy matters relating to economic issues such as at the time of strategic sale of the government’s shares in Bharat Aluminium Co. Ltd.
“However, courts can interfere where there is a clear violation of statute or constitutional provision,” he ruled, while acknowledging the government’s “large latitude in making policies”. The judge held that classifying Bengal Chemicals as a “low priority” enterprise was incorrect in view of Article 21 of the Constitution, which says that “health is part of right to life”.
P.M. Chandraiah, managing director of Bengal Chemicals, declined to comment on the verdict. “We respect the verdict, and await the Centre’s decision for the future,” he added. The company, he said, had recently paid off an outstanding bank loan of Rs28 crore and that it now owes Rs200-215 crore to the Centre. In the current financial year, he expects Bengal Chemicals to turn in an operating profit of Rs8-10 crore.