About Finance & Budget

A Financial implications

The scheme was launched during the 11th plan period in November, 2008 and was formally approved at an estimated cost of Rs. 24.25 crores in the SFC meeting held on 01.02.10. But, only Rs. 6.72 crores could be released in the 11th plan period. The proposed outlay under the 12th Plan period for this scheme is Rs. 200 crores. The Planning Commission has approved Rs. 4.50 crores as working capital to BBPI in the year 2012-13 as a stop gap arrangement until a revised Jan Aushadhi Business Plan is approved. However, in the year 2012-13, Rs. 1.66 crores only could be released to BPPI as working capital.

A.1 Component-wise Expenditure

Going by the major components of the scheme, the requirement of funds has been worked out as under;

a. One time Financial Assistance for Opening Store.

The new Business Plan for Jan Aushadhi envisages participation of a broader set of entities who will be involved in running new stores. Hence, a differential pattern of subsidy/ grant-in-aid has been proposed under the scheme as detailed below.

i. The present pattern of financial assistance to NGOs/ institutions/ cooperative societies, identified by the State Government will continue. On receipt of a complete application with necessary particulars as mentioned in Para 7.1 above, a one-time assistance of Rs. 2.00 lakh as establishment cost and Rs. 50,000 as a one-time start-up cost would be released from BPPI directly to the NGOs.

ii. In case of any other entity, such as reputed NGO/ charitable society/ Self Help group and individuals, preferably a pharmacist/ doctor/ registered medical practitioner, financial assistance as incentive linked to sale of medicines at the rate of 10% of the monthly sales amount subject to a ceiling of Rs. 10,000 per month for a period of first 12 months will be provided. In case of stores being opened in North Eastern States and other difficult areas i.e. Naxal affected area, tribal areas etc., the rate of incentive would be 15% of monthly sale amount subject to a ceiling of Rs. 15,000 per month. Before, considering any application for such assistance, a specific recommendation to this effect from the district level authorities such as District Collector would be required.

iii. Priority would be given to those NGOs/ individuals, who wish to open stores without availing any financial assistance under the scheme.

The financial assistance would be directly released to the entities from BPPI on receipt of requisite information/ documents. With the given pattern of assistance, it may be difficult to work out exact requirement of funds. However, it is proposed to keep a provision of Rs. 45.00 crores under this component for the remaining four years. The requirement of funds for opening 500, 750, 1000 and 750 in the next 4 years would be Rs. 7.50 crore, 11.25 crores, 15.00 crores and 11.25 crores respectively.

b. Working Capital

One of the major constraints in establishing a supply chain to ensure availability of drugs at the store was lack of working capital. For the first time, the Planning Commission has consented to utilize Rs. 4.50 crores in the year 2012-13 as working capital.

It is proposed to extend 40 % advance to CPSUs against the firm order placed by BPPI and 40% payment on delivery of drugs to super stockiest by CPSUs. This, in turn, would assist CPSUs in mobilizing required working capital to keep the operations going and ensure supply of reserved products in time.

As far as procurement from private suppliers is concerned, no advance payments would be made. Moreover, BPPI has to maintain minimum working capital for keeping the supply chain vibrant and running. It is expected that a minimum of 3000 stores would be functional by the end of 12th plan period and the minimum sale of drugs at a store per month should ideally be minimum Rs. 5.00 lakhs (Annexure-III) to break even. This level of operation would result in a minimum turnover of Rs. 150.00 crores. Therefore, to maintain a supply chain for such a huge set up, the working capital required has conservatively been estimated to be Rs. 65.00 crores.

c. Media Campaign

Creating awareness about the use of generic drugs is a key component of this scheme. It is proposed to create a facility on the internet as well as through SMS so that people can easily find out low priced generics substitutes that are equivalent in efficacy to branded drugs. Location of nearest generic store should also be indicated on search through internet or SMS. The facilities thus created would have greater credibility and acceptance among masses, as these would be maintained under the scheme sponsored by the Government of India.

It is also essential to dispel the myth that only expensive branded medicines are more effective and safe. Hence, it is proposed that a publicity campaign through print and other media is launched under this scheme. Some reputed NGOs / Institutions etc. may also be engaged in publicity campaign. Services of wide network of Self Help Groups may also be availed in taking this campaign to the masses.

It is proposed to keep a provision for Rs. 12.00 crores for media campaign.

c. IT system & Capacity Building

To ensure success of new business plan, capacity building efforts are critical especially in public procurement, supply chain, pharmaceutical quality assurance systems. There is also a need to set up and strengthen an IT system which will connect BPPI with JASs, stockiest and suppliers. Skill development of stakeholders (managers, pharmacists, accountants) and hand-holding for a certain period would be required. As an incentive, it is proposed to provide the required hardware along with necessary software at each store under the scheme. It is proposed to set aside Rs. 20.52 crores over a period of four years for this purpose (Annexure-IV).

d. Administrative Expenses

Presently, the monthly expenditure on administrative matters is Rs. 3.50 lakhs on salary and sundry establishment matters. With increase in number of stores and coverage area, more personnel would be required. All these personnel would be mostly hired form the open market on a contract basis. It is also proposed to outsource services to other agencies, wherever possible. The administrative expenses would go up to Rs. 6.30 crores (annexure-V).

SUMMARY OF EXPENDITURE


The details of expenditure are as under:
1 One time financial assistance for opening of New 3000 JASs during 12th Plan Rs. 45.00 cr.
2 Working capital Rs. 65.00 cr.
3 IT system and Capacity building Rs. 20.52 cr.
4 Media campaign Rs. 12.00 cr.
5 Administrative expenses Rs. 6.30 cr.

A.2 Phasing of Expenditure during 12th Plan

With the modifications, as proposed in the new business plan, it is expected that the Scheme will take off in the year 2013-14 and by the end of the financial year, a minimum of 500 new stores will be opened. As approval of the Scheme may take some time, a moderate target has been proposed in the first year. Moreover, consolidation of existing supply chain and procurement system will also require some gestation period. Operationalization of IT based system and capacity building will also require huge efforts in the first year. Hence, increased allocation has been proposed under this head. Media campaign also has to be in commensuration with the efforts being made in building up supply chain etc. Accordingly, provision for media campaign has been made. The projections for opening of minimum number of stores in the years 2014-15, 2015-16 and 2016-17 are 750, 1000 and 750 respectively.

Year-wise Phasing of Expenditure (Rs. in crores)

S.NO. Item 2013-14 2014-15 2015-16 2016-17 Total
1 Opening of New JASs 7.50 11.25 15 11.25 45.00
2 Working capital 7.49 16.50 24.51 16.50 65.00
3 IT system and Capacity building 5.31 5.46 5.50 4.25 20.52
4 Media campaign 3.50 3.50 3.00 2.00 2.00
5 Administrative expenses 1.20 1.50 1.80 1.80 6.30
Total 25.00 38.21 49.81 35.80 148.82