MANAGEMENT OF SMALL SCALE

INDUSTRIES

EXPORT POTENTIALS OF SMALL SCALE

INDUSTRIES

SYBMS

Prof In charge: - Vijay Kapoor

 Initiatives By

Pratik Bhambri
#09

Maninder Singh
#17

Jay Gupta
#21

Anil Jain
#23

Pronoy Kapoor
#25

Vikas Patil
#43
 Tanveer Singh
#47

ACKNOWLEDGEMENT

We the students of SYBMS would like

to thank Prof: -Vijay Kapoor for
giving us this opportunity to work on
this project and show our intellect
which not only revolutionized the
approach towards this 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 under Income Tax Act.

Export Prospects.

Institutional setup for export incentives.

 Importance and advantages of Export Houses
to Small-Scale Industries.

Measures for Export Promotion.

Quality 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 and
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 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 of SSIs has been increased from 1% 2% as a special
incentive for exports of SSI products; additional 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 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 Exporter:

A small scale unit wishing to export has to obtain an exporter code number
from the Reserve Bank of India. A current account 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 are completed a 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 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 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 Insurance Cover:

It is necessary for the exporter to obtain an insurance policy to cover the risk
of goods being exported. For this purpose 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 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) Customs Formalities:

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) Sending Documents to the Importer:

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) Receiving Payment:

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) Claiming Benefits:

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 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 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 are
moreover exempted from certain procedural formalities in applying for an
import license.

(4) Participation in International Trade Fair 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 Replenishment (REP) 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 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 Canalised items against REP 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 percentage on the FOB
value of export.

(4) Duty Drawback and Excise Rebate:

The drawback scheme is one under which export products get relief 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 input-
output norms and forward and backward 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 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 countrys 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 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 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 2006-
2007. The term Exim Policy is now replaced by the term Foreign Trade Policy.

HIGHLIGHTS OF THE FOREIGN TRADE POLICY (FTP) 2004-

2009:

The foreign trade policy focus on sectors such 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.

Free trade warehousing zones will be set up with hundred per cent FDI.
 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.

Capital goods imports liberalised.

Special duty-free schemes for farm sector.

Special packages for gems and jewellery, leather and footwear sectors.

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:

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.

EPCG benefit operationalised for retail sector.

Less paperwork for exporters.

Package for modernisation of Tsunami-hit marine sector.

Simplified Aayaat Niryaat Form for exporters, importers.

HIGHLIGHTS OF THE SECOND ANNUAL SUPPLEMENT TO
FOREIGN TRADE POLICY2004-2009 ANNOUNCED ON 7th
APRIL, 2006:

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.

DEPB extended till March 31, 2008, new scheme in next six-months.

New export promotion scheme for high-tech products

Vishesh Krishi and Gram Udyog expanded.

Focus products and focus market schemes enlarged.

New scheme for agri-processing.

Duty-free imports of tools and machinery for handicrafts and gems and
jewellery sector.

Export obligation under EPCG eased.

Streamlining and simplification of procedures to cut transaction cost.

 Benefit [Tax sops] to exporters of coconut oil, soyabean 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) Concession to industrial units in Free Trade Zone:

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 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 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 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 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 non-
traditional 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 assistance
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 market survey.

(ii) Supply names and address of importers.

(iii) Develop trade contacts.

(iv) Help Indian businessmen in establishing contacts with importers.

(v) Give necessary report and information about export controls.

(vi) Settle trade disputes.

(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 Trade
Fairs and Exhibitions, the Trade Fair
Authority came into existence on March 11, 1977. Following are the
objectives:

(i) Assist in the development of new products for expanding and

diversifying Indian exports.
(ii) Set up shops and showrooms in India as well as abroad.
(iii) Promote, organise and also participate in trade fairs and
exhibitions.
(iv) Undertake trading activity related to trade fairs and exhibitions.

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 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 and provide adequate

cover of insurance to exporters, a special 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 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 Small-

Scale Industries

(1) Assistance to small-scale sector in Exporting:

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 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 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 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.