9.1 Export Promotion

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ENTREPRENEURSHIP

SUDHIR BHATNAGAR


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Export Promotion for SSI Units

SESSION I

Chapter 9 Current Trends


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EXPORT ENVIRONMENT

Value of export from small scale industries (SSI) sector

has been continuously rising. From 1,631 crores in 80-81to 75,000 crores in 2003 is quite a significant increase.

It has been seen that entire export of sports goods arefrom SSI sector.

Substantial share of SSI sector in total export of othercommodity groups are:

woolens (95%), ready made garments (90%),

processed tobacco, snuff & bidis (70%),

processed foods (65%), finished leather goods (52%),

basic chemicals, pharmaceuticals & cosmetics (44%),

marine products (44%) etc.


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Categories of Export

There are two categories of export:

Outright Sales Exports Normally most of theexports are made on outright sales basis against afirm price & no return of unsold goods.

Consignment Export: - The importer abroad is atliberty to return unsold goods, although exports

may or may not be against firm price.

Export could be of goods, projects or services. Projectexports include turnkey projects & civil constructioncontracts abroad.

Services consultancy/technical or other services arecategorized as a separate class of export.


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Encouragement by the Government

Foreign Exchange Foreign exchange rules have beentotally liberalized. Exchange is now easily available for

business visits, participating in fairs & exhibitions,remittances & purchase of documents etc.

All exporters except Export Houses are allowed to openoffice overseas &/or have a representative abroad;

condition being that this would lead to the earning offoreign exchange.

Foreign Industry & Technology Agreements The RBI isempowered to grant approval for foreign investment upto 51% of foreign equity in high priority industries &trading companies primarily engaged in exportactivities.

RBI will also automatically approve foreign technologyagreements involving payments in foreign exchange up

to one crore rupees.


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Procedural Simplification Simple procedures both forexports & imports have been introduced. Regionallicensing authorities have been empowered for this

purpose. Number of documents has been reduced & several

documents have been standardized. There is only oneapplication form for seeking export license.

New Markets In tune with new liberalization policy,India has opened new markets by allowing trades withmany more countries, new agreements with CIS(Commonwealth of Independent States) countries & alsoby resumption of rupee trade to a limited extent withRussian Federation.


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ORGANIZATIONAL EXPORT ASSISTANCE

Export marketing is a highly specialized activity whichrequires organizational support at various stages of

operation, including selection of product(s),identification of overseas markets & customers, sellingtechniques & incentives, assistance & facilities grantedagainst export.

Governmental organizations supporting entrepreneurswanting to get into product or service export aregrouped into following categories: -

Policy & Service Support Organizations

Commodity Specialization Organizations Training & Research Organizations

Trading/Service Corporations

Financial Institutions


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Policy & Service Support Organizations

Ministry of Commerce It in coordination with Ministryof Foreign affairs has created a network of commercial

sections in Indian Embassies & High Commissions invarious countries. It has set up Export GrievanceRedressal cells to assist exporters in dealing withgrievances affecting exports.

Ministry of Textile - It is primarily responsible forpolicy formulation, development, regulation & exportpromotion of textile sector including sericulture, jute& handicraft products. There are four advisory boardsunder Ministry of Textile: -

All India Handloom Board

All India Handicraft Board

All India Powerloom Board

Wool Development Board


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Commodity Specialization Institutions

Government has established a number of organizationsfor improving production & promoting exports of

commodities & products which make a considerablecontribution to our foreign exchange.

Specialized institutions are: -

Export Promotion Councils there are 19 EPCs at

present. Main objectives of EPCs are: Registration of exporters & issue of registration-

cum-membership certificate.

Providing a forum & link between the govt. &

members for consideration & implementation ofschemes for export production & marketing.

Collection & dissemination of info on exportopportunities.


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Sponsoring & inviting business delegations, salesteams, study teams for developing exports.

Arranging distribution of raw materials, marketing

assistance or allocation of scarce items for exportproduction.

Allocation of export quotas for items like textiles

Fixation of floor price (minimum export price)

Arranging buyer seller meets Foreign publicity through schemes.

Commodity Boards These also work on lines ofExport Promotion Councils.

Development Authorities There are twodevelopment authorities: -

Marine Products Export Dev Authority.

Agriculture Products Export Dev Authority


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Training & Research Institutions

Indian Institute of Foreign Trade (IIFT) based inDelhi, it primarily provides training in export

marketing techniques. In addition to long term PostGraduate Courses, it conducts short duration coursesfrom 2-3 to 15-21 days.

Indian Institute of Packaging Based at Mumbai, it

conducts programs on packaging technology &provides technical advice on problems faced byindustry & trades as well as facilities for testing &evaluation of packages & packaging material.

National Institute of Fashion Technology Situated at

Delhi, it conducts professional courses for ApparelMerchandizing & Marketing, Fashion Designing &Garment Manufacturing Technology. It also providesconsultancy services.


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Trading & Service Corporations

The State Trading Corporation Ltd. (STC) was primarilyestablished to conduct foreign trade in an organized &

collective basis with trading companies in EasternEurope & erstwhile USSR.

However, with liberalization in foreign trade, itsfunction has also changed. Now STC & several regional &

foreign offices have a special scheme for businessassociates & exporters to extend them with financial &marketing assistance to sell abroad.

Some of such companies are:

Minerals & metal Trading Corporation Ltd. (MMTC) Mica Trading Corporation (MITCO)

Spice Trading Corporation Ltd.

Tea Trading Corporation of India Ltd.


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Project & Equipment Corporation of India Ltd.

Central cottage Industries Corporation of India Ltd.

The Handicraft & Handlooms Export Corporation ofIndia Ltd.

National textile Corporation (NTC)

Cotton Corporation of India (CCI)

National Handloom Development Corporation.


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Financial Institutions

Reserve Bank of India It is the apex body to authorize,extend & regulate export credits & transactions for

export promotion by providing re-lending facilities &authorizing other banks to offer credit.

All activities start only after registration with RBI &getting an Exporters Code Number.

EXIM Bank The EXIM bank of India is for projectfinancing & provides direct financing & coordinates theworking of institution engaged in financingexport/import of goods & services.

Its lending emphasizes on deferred export credit formedium & long terms.

Export Credit Guarantee Corporation Ltd. Thisinstitution provides insurance cover to Indian exportersagainst risks involved in export on credit terms.


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Export Processing Zones

These are set up primarily to provide internationallycompetitive duty free environment for export related

production at low cost. This enables products or services to be competitive

both quality wise & price wise in international arena.

There are seven EPZs in the country:

Kandla (1965) - Gujarat Santacruz (1974) - Mumbai (SEEPZ)

Falta (1984) - West Bengal

Noida - Uttar Pradesh

Kochi - Kerala

Chennai - Tamilnadu

Vishakhapatnam - Andhra Pradesh


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Factors Effecting SSI Export

Technological Constraints The technology used by IndianSSI units are not the latest ones. Thereby the products of

SSI do not compare well in international markets. There has not been much focus on research &

development on high technology as regards production insmall scale units.

Majority of small scale units produce for domestic market& do not want to invest on higher technology. Efforts bythe govt. have also been lacking in this regard.

Size Content The small size of production units limittheir production primarily for domestic use only.

Small scale units operating on small scale do not want toventure into big investment options & take the risk ofuncertainty & remain content with consumption indomestic market where they are assured of demand.


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Inability to take on Promotional Activities Due to lackof resources required for competing in world marketwith multinational, many small scale units prefer to

sell their products to trading agencies rather thanexplore their worth in international markets.

Moreover, it is difficult for a small entrepreneur to setup his own marketing & distribution channels in

foreign land where big players have establishedthemselves well.

This issue has been appreciated by the govt. &measures are being instituted to support exportactivities by small scale entrepreneurs.


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Documents

9.1 Export Promotion