Thousands of small and medium (SME) pharma formulation manufacturers in the country are staring at the prospects of closure as a disastrous consequence of implementation of barcoding on pharma exports by the Union commerce ministry from July this year.

According to the exporters, the ministry's notification dated April 1, 2015 on track & trace system for export of pharmaceuticals will have disastrous consequences as 50 per cent of pharma exports equivalent to approximately US$ 5 billion will be adversely affected, besides affecting around one million jobs directly or indirectly.

The notification, issued by the DGFT, requires, printing of 14 digits Global Trade Item Number (GTIN) along with batch number, expiry date and a unique serial number of the primary pack in human readable form and 2D barcode on secondary and tertiary packs (in 1D or 2D barcode) form.

The manufacturers have to maintain the data in the parent-child relationship for all three level of packaging i.e. primary, secondary and tertiary and their movement in its supply chain. With effect from 01.07.2015, all drugs with manufacturing date on or after 01.04.2015 can be exported only if both the tertiary and secondary packaging carry bar coding as applicable and the relevant data as prescribed by DGFT is uploaded on the central portal.

According to exporters, all these necessitate complete automation in the packing process. It will mean purchase of expensive printing machinery, scanning machinery, collators/auto compilers at outer carton level and at shipper levels -- all linked to computers. It will also call for extension of packing lines which can be possible only if the exporters extend the packing halls, even by breaking the walls. That too for every packing line. In case of multiple clients for small contract manufacturers, multiple computers/packages will be required, linked to printers. It will also require qualified staff to pack and to upload the data in computers/servers.

Going by conservative estimate, the investment cost for full automation of each packing line is around Rs.50 lakh. Assuming 10 packing lines in each factory, the investment cost per factory is Rs.5 crore and in addition there will be recurring operation cost, 30 per cent more wastage and slowing down of process by 50 per cent. This will lead to many fold increase in packaging cost, eventually increasing the final cost of the product. So even if only 2000 companies wish to implement, an investment of Rs.10,000 crore is needed, against which no tangible benefit is visible to those units. On the contrary, manufacturers have to absorb the additional cost as it is not a requirement of foreign buyer and he will not support any price increase, exporters said.

Further full automation as entailed above will lead to retrenchment of all unskilled and semi-skilled workers on packing lines. Assuming 12 workers per line, for 2000 units each with 10 lines, there will be a job loss of 2,40,000 people. In addition several units may close down leading to increase in NPA for banks. Assuming an outstanding loan of Rs.10 crore per unit and 2000 units close down, there will be an NPA of Rs.20,000 crore and job loss of another 5,00,000 people.

Besides, there will be a cascading effect on other supporting small manufacturers like API supplier, foil supplier, bottle supplier, etc, exporters said.

Demanding to withdraw the DGFT notification, exporters questioned the futility of barcode implementation in the absence of any benefit to the manufacturers. No additional security will accrue to the manufacturers by this track and trace system, and on the other hand, it will increase the cost of Indian exporters which will benefit competitors like China, Pakistan and Bangladesh. Quality image of products will not improve as barcode by itself cannot improve or assure quality, exporters said.