MANAGEMENT OF SMALL SCALE INDUSTRIES EXPORT POTENTIALS OF SMALL SCALE INDUSTRIES
SYBMS
Prof In charge: - Vijay Kapoor
Initiatives By
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Pratik Bhambri #09
Maninder Singh #17
Jay Gupta #21
Anil Jain #23
Pronoy Kapoor #25
Vikas Patil #43
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Tanveer Singh #47
ACKNOWLEDGEMENT
We the students of SY of SY BMS BMS would like to thank Prof: -Vijay Kap Kapo oor for giving us this opportunity to work on this his proj roject and sho show our our inte ntellec lect which not only revolutionized the approa roach toward wards s this his sub subject but also the entire thinking process.
CONTENTS Export
acts an engine of economic growth.
Implication
of the policy on SSI.
Components
of export.
Export
procedure.
Export
marketing assistance to SSI.
Export
incentives to SSI.
Policies. Incentives Export
under Income Tax Act.
Prospects.
Institutional
setup for export incentives.
Importance
and advantages of Export Houses to Small-Scale Industries.
Measures Quality
for Export Promotion.
Control.
EXPORT POTENTIALS OF SMALL-SCALE INDUSTRIES Foreign Trade involves exports and imports. Export trade relates to export of goods and services. All the countries are interested in promoting exports a nd restricting imports to the maximum possible extent. India is one important player in the global trade. We import goods from many countries and also export goods to countries. Revolutionary changes are taking tak ing place in the volume, composition and direction of India's export trade. The liberalization policy of the government since July 1991 has created a most congenial atmosphere for exports. Both exports and imports are almost free from being subject to negative list. Under the liberalized conditions of expanding opportunities, 551 contributions to this sector may be of enormous significance. In the export business, an entrepreneur needs to know the export environment and procedures of not only in India but also of other countries to which the firm's products or services had to be exported. Exports are an important instrument for the creation of employment opportunities in small scale industries, cottage industries and in the agriculture sector as well as in the medium and large-scale industrial sector. In this chapter, we propose to study different aspects of India's export trade with special reference to small-scale industries.
EXPORT ACTS AN ENGINE OF ECONOMIC GROWTH: This statement is true and relevant in case of developing countries like India who can export trade as a tool/vehicle of economic growth and development. Economic development of many countries like Japan, South Korea, Thailand, etc. is basically due to their export potential. Thus, export trade acts as an engine of economic growth. Growing export gives many benefits. Economic growth and generation of massive opportunities within the country are two major benefits of large-scale exports.
Export trade is the driving force of economic development. It facilitates inflow of machinery, technology and funds, promotes new industries/economic activities and provides employment to people through industrial activities. The economic development of many countries is due to their exporting capacity. Growing export trade is responsible for their economic growth and development. In addition, export trade is also useful for promoting employment opportunities within the country. India's foreign trade policy is now treated as an instrument of economic growth with thrust on massive employment generation.
IMPLICATIONS OF THE POLICY ON SSI: A number of measures have been initiated for the growth and expansion of Indian Industry keeping in mind the need for employment generation. The reduction of duty from 15% to 10% under EPCG scheme will enable the exporters to import capital goods. This will improve the quality and productivity of Indian industry: The SSI units have received a boost under this policy. SIL on Export of products pr oducts of SSIs has been increased from 1% 2% as a special incentive for exports of SSI products; additional a dditional 1% SIL on the total value of exports will be given to export houses and all forms of trading houses. Under the Gems and jewellery replenishment scheme, third party export have been allowed so that small exporters are able to sell s ell their products in the international market and can claim REP licenses based on disclaimer certificate from the third party exporters like MMTC. This will increase the export of small-scale industries engaged in Gems and jewellery business. Building up a strong domestic production base is an important aspect of the new policy. This is reflected in the provision aimed at encouraging domestic sourcing of inputs so as to cut the cost involved in importing goods, which may well be supplied at equally competitive rates by the domestic industry. All the above measures will help the Indian industry not only to be globally competitive but it will also help to produce the items which India was importing earlier. The EXIM policy has liberalized the imports. 542 items have been transferred from the restricted list to OGL list and SIL list. 70% of the items are consumer goods. This may affect the Indian industry, especially the SSI units.
COMPONENTS OF EXPORT: The main components of exports of products manufactured in the small-scale sector are: (1) Garments (All types) (2) Processed food
(3) Handicrafts including Gem and jewellery (4) Khadi and Handloom (5) Engineering Goods (6) Computers (7) Projects Exports (8) Consultancy Exports (9) Ancillary Exports and so on.
EXPORT PROCEDURE: Some of the major steps involved in exporting products are described below:
(1) Registration of of Exporter: A small scale unit wishing to export has to obtain an exporter code number from the Reserve Bank of India. A current account a ccount has to be opened in any one of the commercial bank dealing with foreign exchange. An application for registration submitted in the prescribed form. An Income-tax clearance certificate has to be submitted along with the application form. After these formalities formalities are completed a small small scale unit should register itself with the State Directorate of Industries and only then it can get itself registered with the concerned Export Promotion Council. (2) Selection of Export Market and Buyers:
Since it is not possible for small-scale units to conduct market surveys in the export market the information collected by various agencies like trade representatives abroad, Indian Institute of Foreign Trade etc. on buying habits and preferences in foreign countries is used. A list with the names and addresses of potential buyers is prepared. While choosing the buyer his experience, financial standing, market regulation etc. should be taken into consideration. This status and standing can be verified v erified from the bankers and references given by him.
(3) Receipt of Enquiries: Catalogues, price list, standard contract form etc. may be sent to the potential importers to provide him with an idea of prices terms and conditions of business. Sometimes a pro-forma invoice giving the exact specifications of goods and their cost in sent for obtaining enquiries. (4) Receipt of Indent: An indent or an order is placed once a foreign importer is satisfied with the types of goods and terms and conditions offered. It is advisable to send a
pro-forma invoice giving the exact specifications of the goods and their cost after receipt of indent. Thereafter a letter is sent to the importer acknowledging the indent. Generally the exporters request the importers to send a letter of credit as per the terms and conditions agreed upon earlier.
(5) Preparation of of Goods for Exports: For the manufacture and despatch of export-cargo to the port of shipment the exporters sends a delivery note to his factory. In case the firm does not produce the export items it buys the same from other firm. Pre-shipment and quality control inspection is carried out by the concerned agency and certificate of inspection is obtained. It is then the clearance of export consignment is obtained from the excise authorities on AR-4A form or excise gate-pass. (6) Arranging In Insurance Co Cover: It is necessary for the exporter to obtain an insurance policy to cover the risk of goods being exported. For this purpose purpos e application to the concerned insurance company is made and an Insurance policy obtained. (7) Obtaining Shipping Order:
A shipping order is obtained from the shipping company after the exporter hires space in a ship for carrying the goods to the importer's country. The shipping order instructs the captain of the ship that the goods mentioned in it should be received on board the ship from the shipper. In case of very large consignment a whole ship may be hired. (8) Despatching Goods:
Goods are sent by rail or road to the port of shipment. Generally, a forwarding agent is appointed to take delivery at the port and to arrange for their shipment after completing the customs formalities.
(9) Certificate of Origin: In some foreign countries the customs authorities requires a proof that the goods being exported were actually produced in the exporters country. For this purpose, the exporter obtains a certificate from a Chamber of Commerce. This certificate is sent to the importer. (10)
Consular Inv Invoice:
Custom duty is charged according to the value of goods being imported. The exporter obtains an invoice from the consulate of importing country situated in the exporting country. It is a prescribed form which contains details as to quality, grade and value of goods being exported.
(11) 11) Cus Customs Formal rmaliities ies: The forwarding agent prepares the shipping bill in four copies and presents the same to the custom authorities along with the necessary documents. The shipping bill contains details as to the number, quantity, value and description of the goods being shipped. The cargo is allowed to be carried to the docks only after the shipping bill is stamped by the custom authorities. After the documents are examined the custom house determines the custom duty payable, if any, by the exporter. The forwarding agent deposits the customs duty and obtains custom export pass book. The goods are then brought to the docks where they are checked with the dock-challan to ensure that only the authorized goods are allowed in. Then the goods are delivered either to the dock or to the captain of the ship. (12) (12) Send Sendin ing g Doc Docum umen ents ts to the the Imp Impor orte ter: r: The invoice along with Marine Insurance Policy, Shipping Bill, Certificate of Origin, Consular Invoice, Packing List, Certificate of Inspection, Bill of Lading and Bill of Exchange is sent to the importer's bank. (13) 13) Recei eceivi vin ng Pay Payment ent: The exporter receives payment from the importers bank with the help of letter of credit. The exporter may discount the bill with the banker against a letter of hypothecation if the exporter wants immediate payment for goods exported by him. (14) 14) Clai Claim ming ing Benefi nefits ts:: In order to claim rebate of central excise duty and also for duty drawback the exporter files a claim with the Maritime Collector of Central Excise. He also files a claim for import replenishment, cash assistance and other benefits as per the Government policy and procedures.
EXPORT MARKETING ASSISTANCE TO SSI: The government has adopted various policy measures and established institutions to assist small industries in export production and marketing.
(1)
Finance for Export:
The Industrial Development Bank of India, State Bank of India and Commercial Bank provide finance for exports on various terms and conditions.
(a) lDBI: They provide direct financial assistance to the exporter in participation with approved commercial bank. Credit is given during the pre-shipment and post shipment stages. (b) STATE BANK OF INDIA: They provide post shipment finance, supply machinery for the manufacture of export goods and give performance guarantee needed by the govt. authorities for issue of import licenses for raw material. (c) ECGC: The export credit guarantee corporation provides financial guarantees on the basis of the export performance on behalf of the exporter. (d) STC: The small industry exporter can obtain export finance from state trading corporation under its export aid to small-scale industry scheme on concessional terms.
(2)
Manufacturing for Exports:
(a) SSIDO: The small industries development organization provides Techno Managerial assistance and extension services as follows: (i) Identifying the potentials of small-scale units and motivating them to undertake production of export worthy items.
(ii) Creating export consciousness among the entrepreneurs (iii) Providing export consultancy services in respect of export procedures, documentation and export incentives. (iv) Organizing training programme in export marketing in various SISI's v) Sponsoring small-scale unit sale-cum-study teams and trade delegations to be sent abroad. (vi) Arranging meetings, seminars and open house discussions in collaboration with the concerned export agencies. (vii) Disseminating export marketing information to export worthy units.
In addition, the Electrical Measuring Instruments Designs Centre has been setup in Mumbai by the SSIDO with aid from the U.N. This centre assist and guide small manufacturer in producing different varieties of electrical measuring instruments both for domestic and export markets. The U.N. tool room centre at Hyderabad also a lso works under SSIDO and has already started rendering similar services to concerned small scale units.
(b) SDI: The State Directorates of Industries looks after export promotion work in small scale sector at the state level. Some of these directorates have setup separate export promotion cells for the purpose. There are State Export Corporations in certain states sta tes and export wings of Small Industries Development Corporation in other states. These corporations and wings undertake promotional activities including arranging and coordinating facilities for export production and marketing for small industrial products in their respective areas. Some of them have set up display window and adopted various publicity measures in different foreign countries with the assistance received from the state govt. Some undertake foreign market research surveys, arrange visits by industrialist to foreign market for creating favourable image of their export products and also for canvassing business. . (c) SISI: The Small Industries Service Institutes render technical assistance and help small scale units in producing goods for export by way of suggesting more useful technical process, better plant layout, saving of materials, more dependable testing apparatus etc. with a view to achieve cost economies & quality improvement. Export marketing courses are conducted at all SISIs. The SISI at Mumbai, Calcutta, Madras and Delhi undertake pre-shipment inspection of export items.
(3) Raw Material:
The import policy provides certain concession in the allotment of imported raw materials to small-scale units for export production. The import accords a grater reference to small-scale units in the matter of supply of imported raw material required by them. In general the large unit exporting 25% or more of their production are entitled to import their raw material required from free currency area to the extent of 1/3 of their full requirement of raw material.The industrial raw material assistance centre of the state trading corporation supply imported raw material to actual users and registered exporters. The small units a re moreover exempted from certain procedural formalities in applying for an import license.
(4) Participation ion in in In International Tr Trade Fa Fair an and Exhibition: The Indian council of Trade fairs and exhibitions facilitates the participation of exporter in the selected trade fairs and exhibitions held in different part of the world. The agencies helping small industry exporter include the SSIDO, STC and NSIC. The SSIDO help small industry exporter of certified competence in exhibiting their products in international trade fairs and exhibition. The trade fair authorities arranges for space and stall stand for each exporter taking part. The authority contributes upto 50% of the total expenditure on participating in exhibition abroad.
(5) The Marketing Development Fund: The government has set up the marketing development fund in order to implement various export promotional efforts of the exporter. The fund is utilised mainly for the development of market of Indian goods in the overseas market. Various schemes of assistance in the field of market studies, research and product development, setting up showrooms, participation in international trade fairs and exhibitions are financed from this fund.
EXPORT INCENTIVES TO SMALL-SCALE INDUSTRIES: Government has taken a number of measures to boost exports and made necessary institutional arrangements to provide export assistance and incentives. It has spelt out clearly the various measures are given below:
(1)
Import Re Replenishment (REP) Li License:
Importers are entitled to get REP to replenish the raw materials and components used in the manufacture of products exported. The policy contains the list of items of import for which REP are to be granted.
(a) Deemed Export Benefits: Producer who supplies the inputs to final exporters are a re considered as indirect exporters and become eligible for certain export benefits. Certain supplies which are effective for import substitution are termed as Deemed Exports. They qualify for grant of REP and the discharge of export obligation. However, they are not eligible for other benefits. (b) Import Export Pass Book Scheme: Export house/Trading house and manufacturers- Exporters having good track record are allowed to import duty free raw materials. The new import policy has extended the coverage of this scheme even to all well established manufacturers. (c) Import of Capital Goods: An actual (industrial) user can also use REP license for the import of the capital goods with the approval of DGTD on the recommendation of the sponsoring authority. Import of samples upto Rs. 75,000 and import of tools upto the value of 10% of the value of the license are also permissible against REP license.
(2)
Import of of Ca Canalised it items ag against RE REP Li License:
The holder of REP license is permitted to import canalised items as given in the license.
(3)
Cash Assistance:
The objectives of cash assistance scheme is to enable exporters to meet competition in foreign markets by overcoming price disparities due to decrease in the value of the rupee. It is given as a s a percentage on the FOB value of export.
(4)
Duty Drawback and Excise Rebate:
The drawback scheme is one under which export products get relief r elief of incidence of customs and excise duties paid on raw materials and components used at various stages of production. Drawback is defined as rebate of duty chargeable on any imported or excisable material used in the manufacture of goods exported from India. No duty drawback is paid on claims where there are negative export earnings.
(5)
100% Export Oriented Units:
These units are exempted from Import licensing formalities. They may import capital goods, raw materials, components, consumables and spares under the Open General License on the condition that their entire production is exported and operated are under customs bounded factory.
(6)
Duty Exemption Scheme:
This scheme permits the import of raw materials, Components, consumables and spares meant for export production duty free. It covers six categories viz., advance license, blanket advance license and advance customs clearance permits. This scheme which was limited to only a few stage operation can be undertaken jointly by two different manufacturing units as long as inputoutput norms and forward and backward ba ckward link-ages are established. It provides benefits to indirect exporter. The license holder of this scheme is also eligible to REP license.
(7)
Exemption from Excise Duty:
Finished products are exempted from payment of excise duty when they are exported out of India. Exemption can be obtained either by way of rebate of duty on goods exported or by export under bond. Under the first system the manufacturer
has to pay the duty initially which will be .refunded subsequently s ubsequently on the export of relevant goods. Under the next system, the manufacturer can export the goods without prior payment of duty but chargeable on the goods exported.
(8)
TAX INCENTIVES FOR EXPORTS:
Government has introduced a number of measures for increasing exports including exemptions/ concessions from and reduction in rates of direct and indirect taxes. Exemptions have also been given for export of services besides export of goods and merchandise. Units in free Trade Zone and 100% EOU have been given special status.
POLICIES EXPORT IMPORT POLICY 1997-2002: Objectives: The principle objective of Export Import Policy 1997-2002 are as under: (1) To Provide customers with good quality products at the reasonable prices. (2) To enhance the technological strength and efficiency of Indian agriculture, Industry and services. (3) Improve competitiveness and generate new employment opportunities and encourage the attainment of internationally accepted standards of quality. (4) To accelerate the country’s transition to a globally oriented vibrant economy and to derive maximum benefits from expanding global market opportunities. (5) To stimulate sustained economic growth by providing access to essential raw materials, intermediates, components consumables and capital goods required for increasing the production.
EXIM POLICY 2002-07 AND 551: RURAL CRAFTS GET ELITE ACCESS: The Union government has embarked on a programme "SPECIAL FOCUS ON COTTAGE SECTOR AND HANDICRATS". including a host of relaxation for entitlement to benefits under various export promotion schemes. Access to the market access initiative (MAl) scheme and easing of eligibility conditions for availing the Export Promotion Capital Goods (EPCG) scheme
and benefits of export house status have been provided to the cottage sector and handicrafts under the programme. Handicrafts units will also be entitled to duty free imports of specified items such as embellishments upto 3 percent of F.O.B. value of their exports. The central government has also made a provision of Rs. 5 crore for promotion of cottage sector exports coming under Khadi Village Industries Commission (KVIC). Relaxation in eligibility criteria for entitlement to benefits under various schemes offered to the unit in these sectors include grant of export house status on achieving a lower average export performance of Rs. 5 crore. In comparison an average export performance level of Rs. 10 crore is applicable to other units.Further under the EPCG scheme these small scale units will not be required to maintain average level of exports. In addition, union commerce and Industry Minister Murosali Maran announced that the government is also embarking on a programme progra mme of identifying places that house a very high propensity for export possibilities.To begin with, places like Khurja (in UP), famous forits pottery will be undertaken for an in depth study and potential special characteristics for developing an export market. The package announced for the sector is expected to increase its competitiveness.
FIRST REVISION TO EXIM POLICY 2002-07: The first revision to EXIM policy was announced y Shri Arun Jaitley on 31st March, 2003. The new policy for 2003-04 showers a host of incentives for exporting communi:: prepares solid ground for accelerated growth in exports. In the new policy, imports, curbs are lifted and the services exports gets boost.
Features of Revised Exim Policy 2003-04: (1) Removal of quantitative restrictions on imports and exports. (2) Special attention to export of services and agro exports. (3) Liberalisation of EPCG scheme. (4) Special attention to high growth sectors. (5) Encouragement to Electronic hardware and software. (6) Improved incentives for SEZs. (7) Codification of SEZ. (8) Development of export clusters. (9) Liberal treatment to oil-marketing companies. (10) EOU norms relaxed.
MINI EXIM POLICY: (ANNOUNCED ON 28-1-04)
The second revision to the policy was given on 28th January, 2004 due to Lok Sabha Elections. The government announced Mini Exim Policy.
Important features of Mini Exim Policy: (1) Free import of gold ann silver. (2) Deemed export facility for items having zero custom duty: (3) Duty free import of fuel. (4) Benefits to duty free imports to heritage hotels. (5) EPCG scheme made more flexible. (6) Ceiling on export of gifts hiked to Rs. 5 lacs a year. (7) Digital signatures and electronic fund transfer facility. (8) Removal of quantitative restrictions. (9) Gold card scheme for credit worthy exporters.
FOREIGN TRADE POLICY 2004-2009: The Exim Policy 2002-2007 was replaced by a new Foreign Trade Policy (FTP) for 2004-2009 in September 2004. This sudden change and the introduction of new policy was due to the formation of new UPA government under the leadership of Dr. Manmohan Singh. The first annual supplement to the five year's FTP 2004-2009 2004-2009 was announced on April 9, 2005 and the second annual supplement was announced on 7th April 2006. This second supplement is the current foreign trade policy for the year 20062007. The term Exim Policy is now replaced by the term Foreign Trade Policy.
HIGHLIGHTS OF THE FOREIGN TRADE POLICY (FTP) ( FTP) 20042009: The foreign trade policy focus on sectors such s uch as services and agro-based industries which are labour-intensive with capacity to generate large-scale employment opportunities. •
Setting up of export promotion council for services.
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Free trade warehousing zones will be set up with hundred per cent FDI.
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Merchandise and service exports to reach$300billion by 2009. Biotechnology parks would be set up and the popular DEPB scheme will be given continuation till a suitable alternative is introduced. Introduction of the export promotion schemes - Target Plus, Vishesh Krishi Upaj Yojana and Served from India.
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Capital goods imports liberalised.
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Special duty-free schemes for farm sector.
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Special packages for gems and jewellery, leather and footwear sectors.
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No service tax on exports, no age bar on imports of secondhand capital goods. Threshold limit for towns of export excellence is lowered.
HIGHLIGHTS OF THE FIRST ANNUAL SUPPLEMENT TO FOREIGN TRADE POLICY 2004-2009: •
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Key theme is employment generation, shops for agri-export, marine, dairy, retail auto component sectors. Inter State Trade Council set up to boost exports. Duty entitlement passbook scheme rates issue and tax notices under section 80 HHC to be taken up by P.M.O. Export obligation reduced in agriculture, manufacturing and small-scale industries.
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EPCG benefit operationalised for retail sector.
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Less paperwork for exporters.
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Package for modernisation of Tsunami-hit marine sector.
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Simplified Aayaat Niryaat Form for exporters, importers.
HIGHLIGHTS OF THE SECOND ANNUAL SUPPLEMENT TO FOREIGN TRADE POLICY2004-2009 ANNOUNCED ON 7th APRIL, 2006: • •
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Incentives for employment generation. ExtensionofVishesh Krishi Upaj Yojana. Export booster dose to gems and jewellery sector. Treating refuelling for long distances flights as exports. Clubbing of advance licensing and duty-free replenishment certificate scheme. Making India a hub for auto parts. Removal of incidence of service tax and fringe benefits tax. Goodbye to the target plus scheme. Incentives to service sector companies. Old export promotion schemes given extension. Provision for reduction in transaction cost.
HIGHLIGHTS OF THE THIRD ANNUAL SUPPLEMENT TO FOREIGN TRADE POLICY2004-2009 ANNOUNCED ON 19th APRIL, 2007: •
Exports exempted from service tax.
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DEPB extended till March 31, 2008, new scheme in next six-months.
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New export promotion scheme for high-tech products
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Vishesh Krishi and Gram Udyog expanded.
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Focus products and focus market schemes enlarged.
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New scheme for agri-processing.
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Duty-free imports of tools and machinery for handicrafts and gems and jewellery sector.
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Export obligation under EPCG eased.
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Streamlining and simplification of procedures to cut transaction cost.
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Benefit [Tax sops] to exporters of coconut oil, soyabean s oyabean oil, potato flakes, meals and cardamom. Raft of incentives for farms, handloom and handicrafts sector. Benefit of duty exemption, DEPB extended to special economic zone developers.
INCENTIVES UNDER INCOME TAX ACT (1) Concession to newly established 100% EOU: Section 10 B provides for exemption from tax for a consecutive period of 5 years within a period of 8 years to newly established industrial units in Free Trade Zones. (2) Con Concessi ession on to indus ndusttrial ial unit units s in Free ree Trad rade Zone: ne: Section 10 A of the Income Tax Act provides for a complete tax holiday for 5 years falling at any-time within a period of eight years of commencement of production to new units established in specialised Free Trade Zone. (3) Section 80 HHB: Provides for a deduction of 50% of profits and gains earned by a resident Indian company or a non corporate tax payer from the business of execution of a project under a contract entered into by him or any other person with a foreign government subject to certain conditions. (4)
Section 80 HHD:
Provides for deduction in respect of earnings in convertible foreign exchange. It is available to an approved hotel or an approved tour operator or a travel agent.
(5) Section 80 HHC: Provides for deduction in respect of export turnover. It is available to an Indian company or a person (other than a company) resident in India for exports out of India and sale s ale proceeds of which are receivable in convertible foreign exchange. (6) Section 80 HEE: Provides for deduction for export of computer software. It is available to an Indian company or person resident in India who is involved in the business of computer software exports or its transmission or providing beneficial services from India to a place outside India. (7) Section 35B: Provides for the deduction in respect of expenditures incurred by the domestic companies and also non-corporate taxpayer residents in India for promoting sales outside India. Indian companies are exempted from tax on their income consisting of dividends received from any foreign company in consideration of supply s upply of any technical know-how or technical service and also royalty fees etc. The whole of such amount received is exempted while computing taxable income. (8) Incentives under sales tax laws: Section 5 of Central Sales Tax Act enables a registered dealer to claim the exemption from sales of such goods in course of exports out of territory The exporter can buy goods from the dealers/manufacturer for the purpose of export trade without paying any sales s ales tax to the selling dealer. Special incentive schemes have been formulated and implemented by Government to boost exports. Among these the most important is the international Price Reimbursement Scheme. This scheme is designed to make good the difference arising from the high cost of domestic steel, pig iron and aluminium vis-a-vis the international price for these products.
EXPORT PROSPECTS The Government has reserved 827 items for production in small-scale sectors. So there will be greater Industrial Production in the small-scale sectors as a result of which there will be more avenues of employment. The small-scale sector in India produces a wide range of products from simple consumer goods to sophisticated products like hearing aids, electronic components, tape recorder, TV sets.
With the lower level of labour cost, India enjoys an advantage in in exporting both Traditional and Non- Traditional labour intensive product. There is a favourable climate for 551 export in foreign markets because frequent wage hikes and Pollution Hazards in Industrialised country tend to favour imports from developing countries particularly import of 551 products. Substantial increase in exports were observed in case of readymade garments, canned and processed fish, leather sandals and chappals, food products, hosiery and marine products etc. The value of exports reached a record high figure of Rs. 69,797 crores. A very significant feature of export from small-scale sector is their share in nontraditional exports. The share of exports from the small-scale sector represents about 39 per cent of total exports. To conclude we can say that the growth of SSIs in terms of number and output is comparatively much higher in reserved items than unreserved items. The policy of reservation has therefore positively helped the growth of this sector. Despite such positive evidence in favour of reserved items, the Union Budget of 1997-98 dereserved 14 items manufactured by 551 sector. All these 14 items were among the successful category of 551 items manufactured. The Ministry of 551 has identified 108 items for de-reservation, among them 30 items are in the category of 'Textile Products' including hosiery which is a sector poised for rapid growth. According to the Union Budget 2006-07, the Ministry of 551 has identified 180 items for dereservation.
INSTITUTIONAL SETUP FOR EXPORT INCENTIVES Government has setup a number of institutions for helping business units in order to promote exports and for formulating policies and programmes in a systematic manner. Various institutions are explained below:
Ministry of Commerce: Indian government is primarily concerned with the formulation of trade policies and programmes. Government has various departments to look after different aspects of export trade. Government is also responsible for all problems relating to export ass istance such as cash assistance, free trade zones, guidance to Indian entrepreneurs who have set up ventures abroad, export credit etc. Several advisory committees are functioning under Ministry of Commerce.
Director of Exhibitions: Following important functions are carried by the Director: (1) To run showrooms in foreign countries.
(2) To setup trade centres in selected markets out of India. (3) To arrange Indian exhibitions abroad. (4) To run showrooms in foreign country.
Directors of Commercial Intelligence: This department is concerned with commercial publicity, it publishes directories of foreign imports of Indian products in different volumes and each volume is devoted to a single country. Commercial publicity is done through various media, publications etc.
Trade Representatives of India Abroad: Trade representatives assist the Ministry of Commerce in the formation of programmes and policies. They provide the following types of assistances: (i) Conducting Conducting market market survey. (ii) Supply names and address of importers. importers. (iii) Develop trade contacts. (iv) (iv)
Help Help Indian Indian busi busines nessme smen n in estab establis lishin hing g contac contacts ts with with impor importer ters. s.
(v) Give necessary report and information information about export controls. (vi) (vi)
Sett Settlle trad trade e disp disput ute es. (vii)Get information about rules and regulations for import levied by a
foreign country.
Trade Fair Authority of India:
After unifying three organisations, viz. Directorate of Exhibitions and Commercial Publicity, Trade Fair Organisation and the Indian Council of Tra de Fairs and Exhibitions, the Trade Fair Authority came into existence on March 11, 1977. Following are the objectives: (i) Assist Assist in the developmen developmentt of new products products for expanding expanding and diversifying Indian exports. (ii) Set up shops and showrooms in in India as well as abroad. (iii) (iii) Promot Promote, e, organ organise ise and also also parti particip cipate ate in trade trade fairs fairs and and exhibitions. (iv) (iv) Undert Undertake ake tradi trading ng activ activity ity rela related ted to trade trade fair fairs s and exhi exhibit bition ions. s. Trade fair authority brings out four journals which are Udyog Vyapar Patrika, Journal of Industry and Trade, Indian Export Service Bulletin and Economic and Commercial News. Journal provides information about special articles of foreign trade of India, information on country's economy, government trade policies, etc.
Indian Institute of Foreign Trade (IIFT): Government of India has set up this institute with trade, industry, universities and educational and research institutions. It is an autonomous body registered under the Societies Registration Act. Their main activities are: (1)Organise research in problems of foreign trade. (2)Undertake research on raw material for packaging industry. (3)Organise training programmes on packaging technology and to train personnel in modem techniques techniques of international trade. (4)Disseminate information gathered during research and service. (5)Undertake area surveys, market survey and commodity survey. (6) Keeping Indian abreast with the international development in field of packaging.
Export Promotion Councils (EPCs): There are 22 EPCs at present in India. They examine various aspects of export promotion such as price, marketing, quality, packaging, transport etc. and provide incentive assistance to its members. They are non-profit seeking organisations. Following assistance are provided by EPCs: (1)Sponsor foreign tours. (2)Develop trade contracts. (3) Participate in trade fairs and exhibitions abroad. (4) Administrative special export promotion schemes. (5) Settle trade disputes. (6) Arrange market survey. (7) Assist quality control. (8) Publish report and information related to foreign trade.
Trade Development Authority (TDA): This institution has been setup by government of India to offer packaging assistance tq exporters in a coordinated and integrated manner. It also collects information relating to export, export markets, takes up market research, provides assistance in export finance and implements export orders.
Commodity Boards (CBs): The Commodity Boards have been set up to help the exporters in the export of traditional items. Commodity Boards are even set-up under the administration of Ministry of Commerce. They perform the following functions: (1) Undertaking promotional activities. (2) Providing intensive assistance to exporters. (3) Participation in fairs and exhibitions abroad. (4) Advising government on matters of government policies such as signing trade agreements, fixing quotas etc.
Export Credit Guarantee Corporation (ECGC): In order to remedy the prevailing high-risk situation s ituation and provide adequate cover of insurance to exporters, a special s pecial institution known as Export Credit Guarantee Corporation (ECGq was established in India in 1964. ECGC plays a dual role in promoting exports viz. (a) It issues suitable insurance policy to the exporters against possible risks of export business; and (b) It provides financial guarantees to banks and exporters against deferred credit terms.
State Export Export Trade Corporation: Export Trade Corporations directly undertake programme of export promotion. These are set up by state governments. In states where there are no such Corporations, State Industrial Development Corporations take up the taste of export promotion.
Advisory Bodies: Except the above mentioned institutional arrangement, advisory bodies have been established in order to advise government on matters relating to export promotion. Economists, government senior officers etc. are concerned with economic development. Examples are Board of Trade, Export Import Advisory Councils, Regional Port Advisory Committee etc.
Export Houses and Trade Houses in India: Export Houses scheme was introduced in 1961. It is a large export organisation. Any exporter or group of exporters can become an export house provided certain criteria is fulfilled. Criteria to get Export House certificate is Average Annual NFE (Net Foreign Exchange) during 3 previous should be at least Rs. 15 crores. Export houses are granted following facilities: (a) Import replenishment (REP) licenses eligible to them as registered exporters.
(b) Import replenishment licenses transferred to them by others. (c) Import of items placed on open general license. (d) Additional licenses as given in import policy.
Importance and advantages of Export Houses to SmallScale Industries (1) Assi Assis stance ance to smal mall-s l-scale ale sect ector in Ex Expo port rtiing: Export Houses assist small-scale and cottage industries in exporting their goods in foreign markets. In order to undertake Export, financial and technical assistance is also provided. (2) Marketing and credit risks: Export Houses undertake marketing and credit risks in export trade transactions. (3) Product development: The small scale industries are supplied information about the market and also assisted in product research and development so that they may produce goods which will be attractive and agreeable to buyers from target ta rget markets abroad. (4) Introduction of new products abroad: The export houses market the product of small manufacturers in foreign markets and also introduce their new and promising products in suitable markets.
(5) Supply of information: They supply valuable information relating to needs and expectation of the foreign buyers market trends abroad, product requirements and so on. (6) Forwarding of goods: Export houses also look after packaging, transportation, documentation and other formalities relating to packing, assembling and forwarding goods to foreign market. (7) Supply of inputs: They supply raw material, machinery and other inputs to the manufacturer so as to enable them to produce quality products.
Star Trading Houses (STH): Concept of Star Trading House was introduced in 1990. Any exporter or group of exporters can become star trading house. For registration as Star Trading House the average annual net foreign exchange earnings should not be less than Rs. 300 crores in preceding 3 years of base bas e period. The STHs can dispose off the imported goods to actual users only. The additional licenses for STHs will be calculated at rate of 15% of the NFE on the total eligible exports made in the preceding licensing year. Licenses are not negotiable.
Measures for Export Promotion Export promotion from small-scale sector has been accorded a high priority in India's Export Promotion Strategy. It includes simplification of export procedures and provides incentives to small scale sector for higher production in order to maximise export earnings. The following schemes have been formulated to help 5SIs in exporting their products: (1) Products of SSI exporters are displayed in international exhibitions and the expenditure incurred is met by the government. (2) In order to acquaint 551 exporters with latest packaging standards, techniques etc. training programmes on packaging for exports are a re organised in various parts of the country in association with the Indian Institute of Packaging. (3) The 5SI-MDA Scheme offers funding for: Individual assistance for participation in overseas fairs, exhibitions and individual overseas study tours, or tours of individuals as member of a trade delegation going abroad.
Quality Control
According to Alford and Beatly "quality control may be defined as that industrial management technique or group of techniques by means of which products of uniform acceptable quality are manufactured." In simple words quality control is the systematic control of various factors that affect the quality of the end product. The quality of the final product will depend on the quality of raw materials used, quality of equipments and degree of skill and proficiency of the workers, etc. Through quality control quality standard is ensured, Quality control detects the causes of variations in the characteristics of the products and indicates necessary adjustments by which these variations are brought down within the tolerance limit.
Importance of Quality Control: (1) Uniformity of the finished products with higher market value. (2) Improvement in the designs of the products and processes to enable production of a given product standard at a lower costs. (3) Reduction in inspection cost. (4) Improvement in the quality level and uniformity of incoming material. (5) Control in rejections, scrap, spoilage and rework.
