The decision of the commerce ministry to approve the new export promotion council for pharmaceuticals (Pharmexcil) was taken after bypassing its own model bye-law which prescribes specific guidelines and procedures for the formation of a new EPC in the country.

The byelaw does not permit formation of any EPC for any industry segment which is already under an existing EPC without first forming an Export Promotion Forum (EPF) and then gradually developing that into another council. The pharmaceutical industry, which is currently represented by the Basic Chemicals, Pharmaceuticals & Cosmetics Export Promotion Council (Chemexcil) falls under this category and would not satisfy the mandatory requirement as per the bylaw for a separate council, it is learnt.

According to the Model Bylaw, framed by an expert committee constituted by the Ministry of Commerce and accepted by the government in 2000, direct formation of export promotion councils is allowed only for industry segments that are not represented by any existing councils. If the industry (pharmaceutical sector in this particular case), feels that it is not getting focused attention in the existing EPC (Chemexcil), the model bylaw stipulates that the exporters of the particular segment who are members of the existing EPC (Chemexcil) should resolve to form an EPF. This EPF should have the representation of at least 50 per cent of the member exporters of the existing (Chemexcil) representing at least 75 per cent of the value of exports of that industry. Even after such EPF is approved by the Commerce Ministry, the members of EPF will continue to be with the concerned EPC till such time as the EPF is not converted into an EPC.

The Commerce Ministry is to monitor the performance of the EPF and it will be eligible to be converted into a "full fledged EPC on completion of four years of its registration as EPF". This restriction has been relaxed only for those industry segments which are not represented by any EPCs.

Interestingly, none of the procedures seem to have been followed in the process of setting up a separate EPC for pharmaceuticals. The demand for separate EPC was made by industry bodies like Indian Drugs Manufacturers Association (IDMA) and Bulk Drugs Manufacturers Association (BDMA) and not under the banner of the existing EPC (Chemexcil). The Chemexcil on the other hand is totally opposing the move for a separate council.

The commerce ministry sources, when contacted, preferred to downplay the significance of the issue by stating that "the approval of Pharmexcil is being carried in a proper manner". However they asserted the validity of the model bylaw, by stating that it is of mandatory nature and needs to be followed by the concerned parties. They also said that the stipulation of EPF in the bylaw is meant for industry that doesn't have sufficient corpus. But the argument contradicts with the guidelines as the bylaw prescribes the need for the members of EPF to "agree for a corpus of Rs one crore to register the society and to increase it to Rs 3 crore within four years". It never says that this Rs one crore requirement is only meant for members who are not in a position to raise Rs.3 crore in the first year itself.

Interestingly, the purpose of the committee which framed the model bylaw was to restructure the existing EPCs, rationalization of election procedures to ensure that real exporters have an effective say in the management of the EPCs. The committee had consulted all EPCs, Apex Chambers and senior officers in the Ministry before giving its recommendations. Recently elections to the Chemexcil were held under the supervision of the Union Commerce Ministry as part of this restructuring exercise. The members of the drug exporting community informed pharmabiz that they may approach the court if the ministry goes ahead with the notification of Pharmexcil.

The issue is likely to create a dilemma for the proponents of Pharmexcil who are trying for an early recognition of the council by the commerce ministry.