The deal is, however, subject to final approval of the government, given that manufacture of vitamin B2 is reserved for the public sector.

Industry sources indicate that the alliance may eventually cover a 15-year lease arrangement, whereby HAL will lease all its five fermentors to Searle India for a specific fee, estimated around Rs 2.5 crore annually. Each fermentor has a capacity of 90 cubic mts and Searle is expected to manufacture up to 100 TPA of vitamin B2. Though Searle has recently identified manufacture of vitamins as a thrust area, the proposed deal has, however, yet to get the final go-ahead from the RPG group management.

Sources said that Searle was already using HAL's pilot plant at Pune to manufacture the firstphase of its anti-cancer drug which is subsequently converted at the former's Thane facility.

The Rs 224-crore Searle also has a bulk-drugs pilot plant based on fermentation technology at Ankleshwar in Gujarat.Sources said that even if government clearance for manufacture of vitamin B2 did not come through, the proposed partners were keen on going ahead with their vitamin B12 plans.

Other products may also be added subsequently, they said. The RPG group already has access to technology for vitamin manufacture from Italian company, Biofin.

Though the modalities of the arrangement have yet to be worked out, initial indications are that HAL's work force will continue to operate the plants at Pune probably under the technical guidance of its new partner.

Analysts say that the proposed alliance made commercial sense for Searle given that a comparable greenfield facility for manufacturing these vitamins will cost around Rs 150 crore. "Searle will benefit both in terms of costs and saving of time, whilefor HAL it will mean better utilisation of its facilities," an analyst added.

The RPG group company's mega vitamin plans come at a time when it is in parleys with GD Searle & Co, USA about the future of its long-standing licensing arrangement for a basket of products. GD Searle's eight-product licensing arrangement with Searle India expires in December 1998 and these brands account for almost 40 per cent of Searle India's pharmaceuticals' turnover.