To Understand the Prospects of Begampur Handloom Cluster in the
Export Market As Well As International Trade Fairs
Under the Guidance ofMr. Dibyendu Bikas Datta
SUBMITTED BYAnkita Dhandharia| Bhavya Singh| Lipi| Savita Rani|
Tanya JainMFM: 2013-15Department of Fashion ManagementNational
Institute of Technology, Kolkata
AcknowledgementWe as a team would like to give our biggest
thanks to National Institute of Fashion Technology, Kolkata for
taking such a huge initiative in trying to help and improve the
handloom clusters of India and for having us as a part of it.The
entire FMS Department, NIFT, Kolkata has been very supportive
throughout. We would like extend our gratitude towards our
respected faculty members Mr.Dibyendu Bikash Dutta, Ms. Bharti
Moitra and Dr. Anannya Deb Roy for accompanying us for our visit
and helping throughout.
We would like to give our sincere thanks to Prof. Dr. Sandip
Mukherjee who guided us throughout the tenure of the project. A
special thanks to our mentor Associate Professor Mr. Dibyendu
Bikash Dutta who was a constant source of support.
Mr. Vikas, Mr. Tapas Das and all the other owners and managers
of the various units who took out valuable time to familiarize us
with the city and the artisans involved with the craft, we give
them our heartiest thanks.
We would like to thank the various master artisans and craftsmen
for giving us an insight into their lives and providing us with the
valuable information.
Last but not the least, the humble people of Begampur has been
very warm and welcoming
DeclarationTo include plagiarism and ethical issues statements
and is a formal requirement. We declare the following:
1) That the material contained in this dissertation is the end
result of our own work and that the due acknowledgement has been
given in the bibliography and all references to ALL sources be
printed, electronic or personal have been mentioned. 2) We agree to
our dissertation being submitted to a plagiarism detection
services, where it will be stored in a database and compared
against work submitted from this or any other school or from other
institutions using the service.
We declare that ethical issues have been considered, evaluated
and appropriately addressed in this research.
Course: MFMName: Ankita Dhandharia| Bhavya Singh| Lipi| Savita
Rani| Tanya Jain
Department: FMS (2013-15)Centre: NIFT, Kolkata
Table of Content
RESEARCH OBJECTIVES:Primary Objective:To understand the
prospects of Begampur Cluster in the export market as well as
International Trade Fairs.Secondary Objectives: To understand the
internal & external business environment and identify the
strength, weaknesses, opportunities and threats of the clusters
visited. To suggest the strategies and ways to enter international
market. To identify the various Legal procedures, formalities
regarding handicraft exports in India.
RESEARCH METHDOLOGYSources of Data: Primary Sources: Primary
data may be obtained from individuals, from families
representatives, or from organisations. Secondary Sources:
Secondary sources of data should first be considered, which refer
to those that are already gathered and available data (in contrast
with primary data). There may be internal sources within the client
firm. Externally, these sources may include books or periodicals,
published reports, data services, and computer data banks.Secondary
data for the study has been collected from the following sources.i.
Begampore Handloom Weaving Clusterii. Weavers Service Centre,
Kolkataiii. Tantuja Bhavan, Kolkataiv. Biswa Bangla (Manjusha
Bhavan 5th floor), Kolkatav. Craft Council of India, ICCR Kamala
Hochimin Saranivi. Utsav Fashion, Kolkatavii. Craft Council of West
Bengal
Our research makes use of both secondary and primary data; we
use secondary data for gathering information about the retail
scenario in India, and primary data to gather information about
sample frames characteristics.Method of Data Collection:Once the
decision in favour or of primary data is taken, one has to decide
the mode of connection. The two methods available are observational
methods and survey method.Observation: This method suggests that
data are collected through ones observation. Another aspect of this
method of is that it is not reactive as data are collected
unobtrusively without the direct participation of the respondent.
This is a major advantage as the behaviour can be recorded without
relying on reports from the respondent.Surveys: In marketing
research, field surveys are commonly used to collect to data from
the respondents. Survey can be1. Personal interview2. Telephonic
interview3. By mail4. By InternetIn our study, the method of data
collection is survey methods through Internet, through the use of
questionnaires.Research Tool:The questionnaire is structured and
non-disguised in nature-a structured questionnaire is a formal list
of questions framed so as to get the facts. The interviewer asks
the questions strictly in accordance with a pre arranged order and
where the object of enquiry is revealed to the respondent.Type of
questions1. Open ended2. Close endedi. Dichotomousii. Multiple
choiceIn our study, close ended multiple choice questions were used
where the respondent is offered two or more choices, the marketing
researcher exhausts all the possible choices and the respondent has
to indicate which one is applicable in his case.Rank order
scale-this is another type of comparative scaling technique in
which respondents are presented with several items simultaneously
and asked to rank them in the order of priority. This scale was
used for of conjoint analysis. Graphical Analysis is through use of
pie charts, bar diagrams etc.
LITERATURE REVIEW:(Ramswamy, 2013) In his research studied the
present situation of handloom industry with the special focus on
the Thenzawl cluster in Mizoram and also on the women weavers. This
cluster has become a model of entrepreneurship for underprivileged
tribal women. The researchers undertook the mapping of Thenzawl
handloom cluster and observed that of the 205 micro handloom
enterprises operating there interestingly, 98 per cent of the
entrepreneurs were women. We highlight the impact of micro handloom
enterprises on livelihood in terms of the extent of dependence of
entrepreneur households on handloom enterprises, the proportion of
small weavers (on the basis of looms owned) and income earned from
the enterprises in the cluster. The article also offers suggestions
to initiate cluster development activities in the cluster to enable
it to sustain their initiative and grow.(Chowdhury, 1989) in his
paper studies about the character and consequence of the response
forged by a predominantly rural industry, the handlooms, in
Bangladesh a country with massive poverty and considerable
underdevelopment of public initiative to the forces of economic
liberalisation and a certain degree of investment reprioritisation
favouring rural development and infrastructure. The study found out
that the profitability of handlooms has risen because the labour
productivity has gone up. Producers returns have also improved due
to a more flexible and independent marketing regime, as also to
widespread availability of yarn trade credit that is mutually
advantageous to the traders and weavers. (Mathur, 2006) in his
article studies the growth of Maheshwari Sarees, produced in
Maheshwar, Madhya Pradesh. The centre had stated with a production
centre with 12 women and 6 looms in 1978 and has grown into
phenomenon. The society today boasts of 120 functional looms with
an equal number of weavers. All this has been made possible due to
sustained efforts on multiple fronts of the weaving trade. These
efforts can be classified into three broad domains: streamlining
production, making the trade attractive for the weavers, and most
importantly, engaging with markets and associated forces. (Roy,
1999) in his paper studies the powerlooms in Tamil Nadu. The
powerloom industry has done exceptionally well in India, in the
long run and especially during an export boom after trade
liberalisation in the late 1980s. Its growth illustrates several
intuitions of recent international literature and small firm
dynamics. Using the example of an export oriented weaving region,
the paper describes the origin and presents the conditions of the
industry, its major handicaps, how it tries to address its
handicaps and what kind of policy initiatives may be needed to deal
with them. The paper also suggests that some recent changes in
organisation and technology in the industry can be seen as attempts
to deal wit these weaknesses.Krugman, (1991): New economic
geography: Clusters as collocation decisions of firms due to
increasing returns to scale, lower costs of moving goods across
space, etc.
Rosenfeld (2005): clusters are simply geographic concentrations
of interrelated companies and institutions of sufficient scale to
generate externalities.
Cortright (2006): An industry cluster is a group of firms and
related economic actors and institutions, that are located near one
another and that draw productive advantage from their mutual
proximity and connections.
Glaeser and Gottlieb (2009): People cluster incites to be close
to something. At their heart, agglomeration economies are simply
reductions in transport costs for goods, people, and ideas
(p.1005).
Marshall (1890): Clusters as external economies created by labor
market pooling and the benefits of moving people across firms,
supplier specialization, knowledge spillovers.
Porter (1998): Geographic concentrations of interconnected
companies and institutions in a particular field, linked by
commonalities and complementarities. Clusters include: linked
industries and other entities (suppliers), distribution channels
and customers (demand), related institutions (research
organization, universities, training entities, etc)
Saxenian (1994): Clusters as social and institutional phenomena:
technological change, organizations, social networks, and other
non-market relationship in which markets are embedded: organization
within and between businesses, relationship among firms.
Hill and Brennan (2000, p. 67-8): We define a competitive
industrial cluster as a geographic concentration of competitive
firms or establishments in the same industry that either have close
buy-sell relationships with other industries in the region, or
share a specialized labor pool that provides firms with a
competitive advantage over the same industry in other places.
Chowdhury, N. (1989). Bangladesh's Handloom Economy in
Transition : A Case of Unequal Growth, Structural Adjustment and
Economic Mobility Amid Laissez-Faire Markets : A Synthesis. The
Bangladesh Development Studies , 1-22.Mathur, N. (2006). Maheswari
Handloom Weavers. Ecconomic and Political Weekly ,
3382-3384.Ramswamy, R. (2013). Women Weavers in Mizoram: Sustaining
Livelihood through Cluster Development. Indian Journal of Gender
Studies , 435-452.Roy, T. (2002). Acceptance of Innovations in
Early Twentieth-Century Indian Weaving. The Economic History Review
, 507-532.Roy, T. (1999). Growth and Recession in small scale
industry: A study of Tamil Nadu Powerlooms . Economic and Political
weekly , 3137-3143.Roy, T. (1999). Growth and recession in Small
scale Industry: A study of Tamil Nadu Pwerlooms. Economic and
Poltical Weekly , 3137-3143. Krugman, P. (1991). Increasing returns
and economic geography. Journal of Political Economy,99(3),483-99.
Rosenfeld, S. (2005). Industry Clusters: Business Choice, Policy
Outcome, or Branding Strategy? Carrboro, NC. Regional Technology
Strategies. Cortright, J. (2006). Making sense of clusters:
regional competitiveness and economic development. Discussion paper
Brookings Institution Metropolitan Policy Program. Glaeser, E. and
Gottlieb, J. (2009). The Wealth of Cities: Agglomeration economies
and spatial equilibrium in the United States. Journal of Economic
Literature, 47(4), 983-1028. Saxenian, A. (1994). Regional
advantage: Culture and competition in Silicon Valley and Route 128.
Cambridge and London: Harvard University Press. Hill, E. and
Brennan, J.F. (2000). A methodology for identifying the drivers of
industrial clusters: the foundation of regional competitive
advantage. Economic Development Quarterly, 14,65- 96. Porter, M.
(1998). Competitive Advantage. Creating and sustaining superior
performance. New York: Free Press.
INTRODUCTION TO HANDLOOM INDUSTRY AND CLUSTERS:Indian
Handicrafts Industry & ExportsThe story of Indian handicrafts
dates back to one of the oldest civilizations of the world.
Representing beauty, dignity, form and style, handicrafts from
India are objects dart. The sheer versatility of the various
materials used to create handcrafted gift items make them truly
unique. Materials range from wood, stone, metal, grass, papier
mache and glass, to cane bamboo, textiles, clay, terracotta and
ceramic - everything goes into the creation of a
masterpiece.Significant GrowthToday, handicrafts and handcrafted
gift items manufactured and exported from India are much sought
after and have established an unsurpassable reputation in the
international market. In 201213, Indian handicrafts exports stood
at US$ 3.3 billion, registering a growth of approximately 22 per
cent over the previous year. Exports of Indian handicrafts have
grown at a rate of around 7 per cent since 200102.In line with the
12th Plan objective to achieve faster, more inclusive and
sustainable growth, the strategy under the 12th Plan for the
Handicrafts sector aims at creating world class globally
competitive environment, providing sustainable livelihood
opportunities to the artisans and thereby resulting in balanced
socio-economic development and inclusive growth.Projections for
HandicraftsThe exports of handicrafts is expected to reach INR
28368 cr (approx US$ 6177 million) in case an average growth of 18%
per annum is maintained during the 12th Five Year Plan period. The
Compounded Annual Growth Rate (CAGR) during the period 2012-13 till
2016-17 is 18%.The interventions will have a cascading effect on
the production and sales in domestic markets. Assuming that 40% of
the production for Handicrafts is consumed in domestic market and
60% is exported. The current employment as in 2010-11 is 6.7
million; however, the number of individuals to be employed with
sector by 2016-17 is estimated to be 12.29 million. The CAGR during
the period 2012-13 till 2016-17 is assumed @10 %.EmploymentIndian
Handicrafts industry is considered as the second highest employment
providing industry after agriculture. The employment increased from
65.72 lakh in 2005-06 to 76.17 lakh in 2010-11.Out of 74.17 lakh,
24.7% are SC, 2.3% are ST and 47.4% are female i.e. around 17.92
lakh are SC, 3.10 lakh are ST and 35.15 lakh are
females.Production:Production in the handloom sector recorded a
figure of 6952 million sqr. meters in the year 2012-13. During
2013-14 production in the handloom sector is reported to be 7116
million sqr. Meters
Export Scenario:The exports of handicrafts (other than hand
knotted carpets) was merelyRs. 387.00croresduring the year of
establishment of the Council i.e. 1986-87 rose to level of
17970.12Croresin year 2012-13.
Key Markets and Export DestinationsToday, owing to the increase
in the manufacture and export of handicrafts, Indian handicrafts
have reached every part of the world. Some of the major export
destinations for Indian handicrafts include the following:
Indian handicrafts are exported across geographies with the top
10 markets being the US, the UK, the UAE, Germany, France, LAC,
Italy, the Netherlands, Canada and AustraliaGrowth in Handicraft
Export with respect to Total Exports
Indian Handicrafts & Gifts Fair which today had become a
show window of Indian handicrafts among all the leading
overseasbuyersneeds no introduction the show is being organized
since 1994. The participation trend is:
DEFINITION OF CLUSTERA cluster is defined as a concentration of
enterprises producing same or similar products or strategic
services and is situated within a contiguous geographical area
spanning over a few villages, a town or a city and its surrounding
areas in a district and face common opportunities and threats.
Accordingly, we have not considered activities which are of daily
use services and/or where scope for joint action or passive
cooperation is minimal or where the product grouping is too wide
for common threats/opportunities to emerge. Clusters may be broadly
divided into the following broad categories:Industrial cluster:
Having at least 100 enterprises and/or a minimum turnover of Rs.100
million. Units in these clusters are functioning from factory
premises with hired workers. Such clusters have a mix of micro,
small, medium, few large and at times all micro units.
Micro-enterprise clusters: Such clusters are all micro units and
are mostly done by household based units by mostly utilising home
based workers. These include artisanal (handicrafts and handloom)
and other micro enterprise clusters. A handloom cluster has a
minimum of about 500 looms and that of handicrafts and other
microenterprise clusters is estimated to have around 50 units. A
business or industrial cluster is a geographic concentration of
interconnected businesses, suppliers, and associated institutions
in a particular field. Clusters are considered to increase the
productivity with which companies can compete, nationally and
globally. Clusters are groups of inter-related industries that
drive wealth creation in a region, primarily through export of
goods and services. The use of clusters as a descriptive tool for
regional economic relationships provides a richer, more meaningful
representation of local industry drivers and regional dynamics than
do traditional methods. An industry cluster is different from the
classic definition of industry sectors because it represents the
entire value chain of a broadly defined industry from suppliers to
end products, including supporting services and specialized
infrastructure. Cluster industries are geographically concentrated
and inter-connected by the flow of goods and services, which is
stronger than the flow linking them to the rest of the economy.
Clusters include both high and low-value added employment. Clusters
differ from one another depending upon their location, their
history of emergence, the nature and organisation of their
production, and their markets. A broad distinction may be set
between clusters on a high or low road to growth, respectively
between clusters where commercial dynamism is promoted through
investments in efficiency enhancement and innovation, or clusters
where firms adopt strategies based on cost reductions, notably in
labor, resulting in the stagnation of productivity and growth. The
high road to growth is current in developed countries, where the
national regulatory framework and certain formal regulation, often
devised at the cluster level, prevent from unfair business
practices. Low road strategies prevail in developing countries,
some clusters show a combination of the high and low roads to
growth, but none is on an entirely high road. "Clusters are
geographic concentrations of interconnected companies and
institutions in a particular field. Clusters encompass an array of
linked industries and other entities important to competition. They
include, for example, suppliers of specialized inputs such as
components, machinery, and services, and providers of specialized
infrastructure. Clusters also often extend downstream to channels
and customers and laterally to manufacturers of complementary
products and to companies in industries related by skills,
technologies, or common inputs. Finally, many clusters include
governmental and other institutions--such as universities,
standards-setting agencies, think tanks, vocational training
providers, and trade associations." (Porter, M.E. (1998). "Clusters
and the New Economics of Competition," Harvard Business Review,
November-December, 1998.)Increasingly, the competitiveness of
metropolitan regions relies on the development of industrial
clusters, or geographic concentrations of businesses and
institutions in related economic sectors. The physical proximity of
the players encourages interaction and promotes the exchange of
ideas and expertise.A look at successful economies also highlights
the importance of developing innovative industrial clusters
characterized by a high level of interaction among firms, thus
enabling them, as a group, to learn about changing economic
conditions, adapt to them and benefit from them. The interactive
nature of clusters stimulates innovation and economic
learning.Clusters stimulate regional competitiveness in three
ways:i. by increasing business productivityii. by boosting their
innovation capacity, which underpins future productivity gainsiii.
by stimulating the formation of new businesses, which expand and
strengthen the clusterFirms that are part of a cluster are expected
to operate more efficiently when sourcing inputs; accessing
information, technology and institutions; coordinating with related
firms; and measuring their performance against other firms so as to
improve.
CLUSTER SCENERIO: WEST BENGAL Administrative Set Up:As usual in
order to ensure that Power looms do not encroach upon the area of
production by handlooms, there is one post of Deputy Director
(Enforcement) under the control of Director of Textiles, Handloom,
Spinning Mills, Silk weaving and Handloom based Handicraft Division
who with the help of this subordinate inspectors and staff is
responsible for enforcing the Provisions of the Handloom
(Reservation of articles for production) Act, 1985 in the
State.
Details of Handloom Cluster Development Projects as on
31/3/2013
BEGAMPUR CLUSTERDetails of Begampur Cluster:
Begampur is a census town in Hooghly district in the state of
West Bengal, India. It is under Chanditala police station in
Srirampore subdivision.Weavers are permanent inhabitants of
Begampur village and are experts in weaving Mathapaar Sarees which
are plane woven with colored borders using 60s and 80s cotton yarn
and also plane cotton sarees with dobby border designs. The product
is traditionally known as Begampuri Saree and used as one of the
regular domestic items in Bengal and the other parts of the
country.Begampur Handloom Cluster came into existence obviously to
infuse interest and to boost the morale among the weavers. It is
also aimed to increase their income by engaging them in this
tradition and transform their skill into producing diversified
items using Jacquard and Dobby devices and multi treadle technique
etc. for making new and intricate designs in demand. By this way
new marketing avenues for their products will be explored.It was
strongly felt that a need has come to complement the traditional
practices and methodologies with contemporary knowledge so that the
cluster is well equipped to play a pivotal role in economic
development of the area.In the view of the above, Weavers' Service
Centre, Kolkata, the implementing agency of the cluster, imparts
technology training for diversified products and provides need
based inputs in the area of marketing, technology, institutional
tie-ups and capacity buildings in different enterprise related
sectors.GenderWomen play important role in handloom weaving. They
help and support men, in various ways. Their labour cost gets
masked in wages which a weaver receives. GeographyBegampur is
located at 22.74N 88.24E. It has an average elevation of 15metres
(49feet).DemographicsAs of 2001 India census, Begampur had a
population of 9545. Males constitute 51% of the population and
females 49%. Begampur has an average literacy rate of 75%, higher
than the national average of 59.5%; with 53% of the literates being
male and 47% being female. 9% of the population is under 6 years of
age.EconomicsShantipur, Dhaniakhali, Begampur, and Farasdanga are
the main cotton weaving centres in West Bengal which are involved
in the weaving of fine-textured saris and dhotis. The saris of
Begampur have deep and bright colours. Begampur also produces the
gorgeous Mathapaar saris.TransportBegampur is 23 kilometres (14mi)
from Howrah on the Howrah-Bardhaman chord line and is part of the
Kolkata Suburban Railway system.Handloom products of Bengal have a
rich tradition. The heritage of our master weavers and artisans are
now blended with new technological designs and threads to produce
wide variety of products. As an economic trade & industrial
activity, the handlooms occupy a place second only to agriculture
in providing livelihood to the people. The Government of West
Bengal has given emphasis for the Handloom & Textiles Sector
with announcement of new textile policy and setting up of
Commissionerate of Textiles for development, infrastructure support
and also improves attraction for investment.
Skill DifferencesAt a fundamental level, the skill differences
across weavers are not significant. However, weavers develop an
orientation based on the nature of work they do. Thus, a weaver
working on a high-end product cultivates an eye for errors and
acquires patience and precision. The trade, in its own context,
highlights these traits and tends, sometimes, to present these as
basic differences in skill. The work culture of the community is
satisfactory in this cluster. These weavers may be induced to put
in their labour for longer hours than scheduled, if they are
offered higher wages. In that case, the productivity of this
cluster is sure to go up.Traditional Continuity in This Occupation:
Arguments against the above changeover are cited below: Alternative
occupational opportunities are rather remote for weavers.
Alternative occupations which are generally performed by unskilled
labors do not ensure better income security. Alternative
occupations deprive a weaver of the convenience of working from his
home. Alter occupations entail strenuous physical labour under
harsh conditions and also loss of dignity. The only alternative
occupation for weavers who desire a change over may be field
agriculture. But Begampur district being a flood prone area is open
to risk and danger as well as uncertainty in income. Career span of
the weaversIt depends on the health and mainly eye sight of the
weavers. It has been observed that a weaver remains active as well
as productive in this trade for a span of 18 48 years. His
productivity, efficiency and necessarily his capacity to earn also
falls down gradually.General view of the cluster weaversWeavers
blame the market for their fate, since their wages is not at all
satisfactory. Power looms are affecting the handlooms. No other
option but to shift to other work.Govt. support requires
strengthening the marketing. As for example, State Apex Body
platform for marketing should be strengthened. Govt. should make
efforts for general condition of weavers.Representative committee /
association in the cluster:A committee namely Begampur Handloom
Cluster Development Society is existing in Begampur district
Handloom Cluster. It was formed, mainly with the representatives of
weavers. Main object of formation of such committee is to protect
the traditional handlooms in respect of globalize competitive
market. Apart from this, the intention of the committee is to
ensure better co-ordination with the concerned Govt. (both Central
/ State) department for availing maximum benefits for the
development of this sector as well as weaving community.SUPPORT
ORGANISATIONSIn this cluster, underneath agencies / institutions
plays a key role for supporting the environment.Govt. agencies
relate with handlooms Primary / Dist. Level Co-op. Societies
Financial Institutions like Bank, etc. Local district based
administration.1.Government agencies related with handloomsThere is
one office for handloom cluster under the Directorate of Handloom
& Textiles, Govt. of West Bengal. Office of the Begampur
Handloom Cluster Development Handloom Society, Begampur Weavers
Service Centre, Ministry of Textiles, Govt. of India based at
Kolkata National Handloom Dev. Corpn. Ltd. Under administrative
control of Ministry of Textiles, Govt. of India, having Regional
Office at Kolkata National Institute of Fashion Technology based at
Kolkata Textile Committee at Kolkata
Function and Activities of Office of the Begampur Handloom
Cluster Development Handloom Society, BegampurMainly these two
offices are headed by the Handloom Development Officer. These
offices are mainly responsible for registration of Co-operative
societies and monitoring the activities of the weavers co-operative
societies.It also routed the different Central / State Government
schemes for the benefits of handloom weavers and assists for
implementation of different developmental schemes of Govt. through
registered co-operative Societies of handloom. These include
design, development, market development assistance, insurance and
pension scheme for weavers, different health package scheme,
support for export etc. It also helps to organize sale cum
exhibitions on handloom products before local festivals like Durga
Puja Bengali New Year etc. Function and activities of WSC
Kolkata:The weavers are facilitated with filed/campus training from
time to time where they are provided with latest information of
dyeing techniques and weaving. Apart from that they also arrange
exhibitions, seminars, workshops, focusing on new and improved
design, equipment and processing techniques. They assist in
implementing various govt. schemes in handloom sector & also
give assistance and interaction with State Govt. handloom
agencies.
Activities of N.H.D.C. Ltd: NHDC Ltd was set up in the year 1983
with the motive to cater raw material like standard quality of
yarn, dyes & chemicals to the weavers under schemes provided by
the Govt. of India from time to time. The Corporations motive is to
regulate the yarn supply, so that the raw material is available to
the weavers at reasonable price and standard quality is maintained.
Apart from the commercial activities, developmental work related
with the handloom such as:
Eco-care dyeing & processing To Disseminate Appropriate
Technology Exhibition. Orientation Programmes on H.R.D. Organizing
the Silk Feb/Special Exhibition on handloom Products. Activities of
N.I.F.T. NIFT Kolkata started in the year 1995 with the objectives
apart from imparting education on various fashion design course
throughout India, also to assist other Govt. agencies in
implementing various schemes for the upliftment of skills of
artisans, craft persons and raise their standard of life and strive
for overall development of fellow countrymen involved in handloom,
handicrafts and other sector.
Services rendered by NIFT Kolkata towards development of the
handloom weavers in West Bengal. : 1. Assisting in setting up
Computer Aided Design (CAD) centre and also conducting CAT training
workshop at NIFT campus from time to time. 2. Develop colour
forecast and trends for the weavers for the European market and
helping them in their execution. 3. Depute students of the weaving
societies as a diploma project trainee for the upliftment of the
weavers. 4. Participate in different DEPM seminars with different
weavers societies and present papers on colour and trends. 5.
Developing various vegetable colours for exportable products. 6.
Participated in the Tex-Style India Fair at Pragati Maidan, New
Delhi since year 2000 and helped many weavers organization to
execute their stall display. 7. Working on establishing a Common
Facility Centre (CFC) for the weavers.
Textile Committee Kolkata An Autonomous statutory body
established under the Act of Parliament (TC Act 1963) under the
administrative control of the Ministry of Textiles, Govt. of India.
Functions: Unique organization with facilities for quality
appraisal, assistance to exporters, textile testing, I.S.O.
consultancy, market research and R&D related to textile
industry. STRUCTURE OF THE CLUSTER Here, handloom sector consists
of a set of handloom weavers and intermediaries. There are
distinctive patterns, though the lines among various typologies are
not sharp and change.There is only 1 Master weaver, 17 weavers and
2 supervisors in this cluster. Customers belong to two different
categories. First category being certain societies which comprise
of 10-14 members, one of them being Karsarai Society. These
societies get the orders from institutions like Tantuja, Craft
Council of India etc. Second category being the local markets like
Bada Bazar, Khengrapatti, and other small markets in and around
West Bengal.
Role of MahajansHere a handloom weaver is a job worker -
receiving dyed yarn and design from the Mahajans, handing over a
woven product and receiving wages. They form 95% of the now active
weaver population at Begampur.A Mahajan is the medium between the
weavers and the customers. He provides the raw materials such as
yarns and threads for weaving as well as specific design if
requested by the buyer. It is the Mahajan who provides wages to the
weavers.
Working for the Mahajan is a common phenomenon here. The Mahajan
supplies the raw materials; for example, the yarn supplied is
already dyed and sized.The Mahajan specifies the designs, and also
does the marketing once the product is woven. Typically, the entire
family works continuously on the looms. For instance, Neelam Des
family consists of his wife and a son aged 12. Except the child all
of them weave. Their family income is approximately Rs. 8000 per
month.PRODUCT MIXMathapaar Sarees:Weavers are permanent inhabitants
of Begampur village and are experts in weaving Mathapar Sarees
which are plane woven with colored borders using 60s and 80s cotton
yarn and also plane cotton sarees with dobby border designs. The
product is traditionally known as Begampuri Saree and used as one
of the regular domestic items in Bengal and the other parts of the
country. One kind is with naksha (zari borders with mostly temple
motifs) and the other kind is without naksha.
MARKET FOR THE PRODUCTS:
Domestic:
Mathapaar sarees with different varieties like Naksapaar, Butik
etc. which has been described as one of the most highly prized
products of Indian Textiles tradition. This cluster is pioneer in
production of this type of heritage handloom products in West
Bengal. The price of cotton based Nakshapaar saree varies from
Rs.300 400 per piece. That is why, these types of sarees have long
established or traditional brand equity towards middle class
segment in the domestic market. On the other hand, this type of
saree are used to secure a large share of the price cake when it is
sold through retail outlets like Traders Assembly at Kolkata or
outside the State. But weaving community in this case does not
enjoy the share of it. Above all, the sarees of this cluster has
not been able to explore the neighbouring State market in a
significant mannerInternational:
BUSINESS ANALYSIS1. SWOT ANALYSIS:STRENGTH: i. The traditional
strength of the industry is its brand equity. The unique design and
craftsmanship produced in Mathapaar sarees by the weavers in this
cluster are the real strength. ii. The localization of weaver
force, designers, loom fabricators, dyers and traders the group of
competencies and resources are easily available inside the cluster.
iii. Ample scope for product diversification by developing new
designs through skilled artisans. iv. Possibilities of creating new
product range besides the existing range of sarees for export
market. Since dress material, home furnishing, stoles, scarves,
dupattas etc. have already got good response in export market
through merchant exporters. WEAKNESS: i. Presently in absence of
marketing platform of State Apex body, it is fully dependent on
trader group. ii. Lack of alternative marketing efforts of the SMEs
group is also a major drawback of this cluster. iii. Monotonous
quality of design also leads to deterioration of the quality of
final product which ultimately impeding the progress of the
cluster. iv. Infrastructural facility e.g., improve road condition,
rural electrification, adequate railway communication as well as
road transport are far below the expectation. v. Declining trend of
clusters main product i.e. handloom sarees. Products are relatively
costly because of the use of costly raw material i.e. higher counts
of cotton hank yarn and silk yarn. vi. Linkages with the support
institutions are better than in other cluster areas in West Bengal.
OPPORTUNITIES: i. Ample scope for product diversification through
modification of looms as well as development of latest design. ii.
Through exposure visit, the designer and dyers should be made to
interact with relevant service institutions/ exporters and thus
they will be able to develop new technologiesand initiatives
towards development of the cluster. iii. The website for cluster
product catalogues can be created by a local service provider which
can promote the market in outside the State and abroad also. iv.
Geographical Indication registration is considered to be the most
appropriate tool I.P.R. protection for the traditional knowledge of
the weaving community It can be implemented in this cluster. v.
Market linkage programmes may promote linkages between large volume
buyers e.g., buying house, large companies like ITC Ltd. vi.
Interventions may also pull up the supply issues such as improving
quality, transportation, packaging, infrastructure etc. vii.
Infrastructure facilitating direct support to infrastructure
development, advocacy to influence Govt. support etc. THREAT: i.
Emergence of power looms for product items like Lungi, Napkin
(Gamcha) etc. ii. Decline in demand of sarees. iii. Increase in
demand of low cost power loom product. iv. Competition from nearby
cluster inside as well as outside State. v. Absence of occupational
alternatives and legal frameworkleads to deterioration of the
standard quality of the cluster product.
2. PEST ANALYSIS:i. Political: West Bengal as a state is known
for its rich and varied textile and handloom industry. The state
has been doing a lot to promote this industry. The Textile policy
of the Government of West Bengal aims at doubling the share of West
Bengals textiles industry from the current 5.2% to at least 10% in
next ten years i.e. by 2022-23 in Indias textiles industry.The
state government is taking a lot of steps to promote this industry:
Providing a better and more conducive business environment for
textile sector with special focus on spinning mills, yarn
procurement, handloom, power loom, hosiery and garment sector.
Simplifying the business regulatory environment in the state.
Developing web-enabled common application gateway Progressively
making clearances by the state authorities web-enabled. Introducing
timelines defined in respect of all clearances. Enhancing the
quality of human resource through training and skill development
packages. Promoting pooling of common services and functions
(common facility center) under cluster approach for the benefit of
smaller players Strengthening participation of and support to SHGs
and cooperatives in the production and marketing in textile sector.
To meet the above goals the Government has set up many institutions
like: West Bengal State Spinning Mills Federation (SPINFED) West
Bengal Silk Development Corporation Ltd. (RESHAMSHREE) State Design
Facilitation Centre (SDFC) for Handloom sector in partnership with
private sector. The government also plans to provide subsidy for
availability of electricity, water etc.
Though the government has been taking so many initiatives but
there has been very little done for the Begampur district
specifically. And the cluster isnt able to function to the full of
the capacity to the very little subsidy that has been set aside for
the cluster. The cluster has hardly been given any assistance as
compared to other clusters like Srirampur and Phulia. And there are
hardly any supporting institutions for Begampur.ii. Economic: The
economic conditions of the Begampur cluster is economically not
that advanced as the main occupation of the people there is weaving
and the wages that are paid are no sufficient to meet their ends
meet. The majority of weavers in this cluster earn a maximum of Rs
5,000 pm which is not enough to sustain an entire family. There is
no financial aid and support available for the weavers either from
neither the clusters nor the state government. This also as a
factor for the people to leave this profession as seen by the
trends.
iii. Social: The living standard of people is modest. Most of
them live in Pucca Houses and semi-pucca houses. The children of
most of the weavers attend schools and the weavers have received
basic level of education.
iv. Technology: The weavers initially used the annual looms that
have been used for years now. But gradually they have started using
power looms. The use of Power looms lets them produce the same
saree in the less time and less cost. Though this technology would
prove beneficial in the longer run the high initial cost acts as
hindrance for the wide usage of this. There are very few power
looms in the cluster owing to this.
3. GROWTH ANSALYSIS THROUGH ANSOFF MODEL:Every business owner
wants togrow their business but it is often difficult todetermine
the best way forward.Here is a straightforward description of four
different growth strategies and an explanation ofhow to determine
which is best for your business.
This model was suggested by Igor Ansoff in 1958. He suggested
that business owners ability to grow their businesses comes down to
how they market new or existing products in new or existing
markets. 1. He suggested the following Matrix as a framework for
identifying corporate growth opportunities.1. Two dimensions
determine the scope of options, namely 1. Products 1.
Markets.Increasing Risk
ProductMarketExisting ProductNew Product
Existing MarketMarket PenetrationProduct DevelopmentIncreasing
Risk
New MarketMarket Development
Diversification
Ansoff Matrix1. Market Penetration selling more of the same
things to more of the same customers1. Market Development selling
more of the same things to different customers1. Product
Development selling new products or services tothe same customers1.
Diversification selling new products or services to different
customers.Using Ansoffs matrix, business owners can evaluate each
of the growth strategies in turn to assess which is likely to
result in the best possible return.i. Market Penetration Strategy:
Aim of the strategy: To maintain or increase share of the current
market with current products To secure dominance of a growth market
or restructure a mature market by driving out competition Market
penetration involves an increase in sales of existing products to
existing markets - selling more of the same to the same people But
it is difficult to achieve growth through increased market
penetration if the market is saturated In a stagnating market
increase in sales is only possible by grabbing market share from
rivals. Hence competition will be intense in such markets Risks are
low but the prospects of success are low unless there is strong
growth in the marketApplicability of Market Penetration The market
is not saturated There is growth in the market Competitors share of
the market is falling Increased volumes lead to economies of scale
There is scope for selling more to existing customersii. Market
development This involvesa. Selling the same product to different
peopleb. Entering new markets or segments with existing products c.
Gaining new customers, new segments, new marketsd. Entering
overseas markets Market development will require changes to
marketing strategy e.g. new distribution channels, different
pricing policy, now promotional strategy to attract different types
of customers Applicability of market Development Strategy Market
development is used when a. New channels of distribution reliable,
inexpensive, good qualityb. Firm is successful at what it doesc.
Untapped/unsaturated marketsd. Excess production capacitye. Basic
industry rapidly becoming global Market development involves
moderate risk - there is a lack of familiarity with customers but
at least the product is familiariii. Product development This is
the development of new products for the existing market New
products come in the form of:a. New products to replace current
productsb. New innovative productsc. Product improvementsd. Product
line extensionse. New products to complement existing productsf.
Products at a different quality level to existing productsiv.
Diversification Diversification in the Ansoff Matrix means: New
products sold to new markets New products for new customers It is a
risky strategy because it involves two unknowns Therefore new
products and new markets should be selected which offer the
prospect for growth which the existing product market mix does not.
One problem is to identify real life examples of firms developing
new products for genuinely new groups of customers Diversification
can be sub-divided into related and unrelatedDiversification may be
a. Related diversification Horizontal diversification: when new
products are introduced to current markets Vertical
diversification: when an organisation decides to move into its
suppliers or customers business to secure supply or to firm up the
use of products in end products Concentric diversification: when
new products closely related to current products are introduced
into new marketsb. Unrelated Diversificationi. Growth in products
and markets that are completely newii. Development beyond the
present industry into products and markets which bear little
relation to the present product market mixiii. No commonality with
existing products and marketsiv. It is also known as conglomerate
diversification: When completely new, technologically unrelated
products are introduced into the new markets.v. As it represents a
departure from existing products and markets it does represent
considerable riskAnalysis of Ansoffs Matrix and Risk EvaluationThe
greater the degree of newness the greater the risk. Hence:1. Market
penetration - little risk involved1. Market development - moderate
risk1. Product development - moderate risk1. Diversification - high
risk because both product and market are new and unknownConclusion:
For the growth of these clusters we suggest the market development
strategy by extending the current products into international
markets, which is an Ethnocentric approach guided by domestic
market extension concept: Domestic strategies, techniques, and
personnel are perceived as superior because of the following
reasons:1. These craftsmen have their core strengths in their
current Products.2. Domestic market has become highly competitive
as the products are homogeneous with less degree of
Differentiation.3. Domestic market is reaching saturation.4. New
markets are emerging such as China, Latin America and South Africa
and demand for Indian hand- printed Textiles in increasing in
Foreign markets.5. NRIs can be prospective customers.6. New
Channels of Distribution are available:E- Commerce7. New Channels
for Promotion Internet ads pay per click Websites own & others
International Trade fairs Social networking sites8. Comparatively
Low investment in comparison to other strategies.9. Suitable for
these micro and small Level entrepreneurs and craftsmen who cannot
afford investment in expensive R& D for new product
development.10. After opening up of FDI, Domestic Industry is
getting globalised gradually.
Export Procedures, Documentation and Legalities
I. Reasons for Entering International or Global markets Growth
Access to new markets Higher margins in international market than
in domestic market. Can be a good source of utilization of Excess
Capacity. Survival Against competitors with lower costs and
increased competition in Domestic markets. After Opening up of FDI
many Global Players are entering Domestic market. Push and pull
factors Domestic market is highly Competitive and reaching
saturation. Domestic Industry is highly fragmented. Indian
Government is promoting Exports through various schemes and liberal
EXIM policies to earn more foreign exchange in order to reduce
fiscal deficit. Demand for hand printed textiles in increasing in
the international markets. Demand for Organic Eco Friendly Products
are Increasing in Global markets. New emerging markets after MFA
such as South Africa, Latin America and China.
II. Stages in entering International Market
I. No Direct Foreign MarketingII. Infrequent Foreign Marketing
Export operationsIII. Regular Foreign Marketing Export operations,
Direct investment sales operations, Direct investment Production
operationsIV. International Marketing Fully committed and involved
in international marketing through production and service
operationsV. Global Marketing Companies treat the world as one
market
III. Documents requiredIn India, several documents have been
prescribed to ensure compliance of Export Trade Control Foreign
Exchange Regulations Quality Control & Pre-shipment Inspection
Central Excise, etc.Proper documentation enables the importers to
get the contracted goods and the exporters to get the payment &
export incentivesTrade documents may be broadly categorized into 3
heads1. Commercial documents2. Legal or Regulatory documents3.
Incentive and Assistance Claim documents
Commercial Documents1. Commercial Invoice 2. Packing list3.
Insurance Certificate/Policy4. Bill of Exchange5. Shipment
Advice
6. Certificate of Origin7. Pre Shipment Inspection
Certificate
Legal Documents as per requirement of GOI Export License if
necessary Ar4/Ar5 Form Pre-shipment Inspection Certificate Export
Declaration form GR/PP/VPP/COD/Softex Form Shipping Bill -
customsExport Process and documents requiredPrerequisitesStep 1:
Registration with Income Tax Authorities for PANGoods exported out
of the country are eligible for exemption from both Value Added Tax
and Central Sales Tax. So, to get the benefit of tax exemption it
is important for an exporter to get registered with the Tax
Authorities.a)An applicant will fill Form 49A online and submit the
form.
(b)If there are any errors, rectify them and re-submit the
form.
(c)A confirmation screen with all the data filled by the
applicant will be displayed.
(d)The applicant may either edit or confirm the same.
(e)On confirmation, an acknowledgement will be displayed. The
acknowledgement will contain a unique 15-digit acknowledgement
number.
(f)The applicant is requested to save and print this
acknowledgement.
(g)'Individual' applicants should affix two recent colour
photographs with white background (size 3.5 cm x 2.5 cm) in the
space provided in the acknowledgement. The photographs should not
be stapled or clipped to the acknowledgement. The clarity of image
on PAN card will depend on the quality and clarity of photograph
affixed on the acknowledgement.
(h)Signature / Left Thumb Impression should only bewithin the
boxprovided in the acknowledgement. The signature should not be on
the photograph affixed on right side of the form. In case of
applicants other than 'Individuals', the authorized signatory shall
sign the acknowledgement and affix the appropriate seal or
stamp.The signature should not be on photograph. If there is any
mark on photograph such that it hinders the clear visibility of the
face of the applicant, the application will not be accepted.
Signature / Left hand thumb impression should be provided across
the photo affixed on the left side of the form in such a manner
that portion of signature/impression is on photo as well as on
acknowledgement.
(i)Thumb impression, if used, should be attested by a Magistrate
or a Notary Public or a Gazetted Officer under official seal and
stamp.
(j)If communication Address is within India
(a). The fee for processing PAN application is96.00(85.00 +
12.36% service tax).
(b). Payment can be made either by
- Demand Draft
- Cheque
- Credit Card / Debit Card
- Net Banking
Step 2: Obtain TANTAN or Tax Deduction and Collection Account
Number is a 10 digit alpha numeric number required to be obtained
by all persons who are responsible for deducting or collecting tax.
Under Section 203A of the Income Tax Act, 1961, it is mandatory to
quote Tax Deduction Account Number (TAN) allotted by the Income Tax
Department (ITD) on all TDS returns.It is compulsory to quote TAN
in TDS/TCS return (including any e-TDS/TCS return), any TDS/TCS
payment challan and TDS/TCS certificates.AN is allotted by the
Income Tax Department on the basis of the application submitted to
TIN Facilitation Centres managed by NSDL. NSDL will intimate the
TAN which will be required to be mentioned in all future
correspondence relating to TDS/TCS.
Application Procedure
(a)An applicant will fill Form 49B online and submit the
form.
(b)If there are any errors, rectify them and re-submit the
form.
(c)A confirmation screen with all the data filled by the
applicant will be displayed.
(d)The applicant may either edit or confirm the same.
Acknowledgment
(a)On confirmation, an acknowledgment screen will be displayed.
The acknowledgment consists of:
*A unique 14-digit acknowledgment number
*Status of applicant
*Name of applicant
*Contact details (address, e-mail and telephone number)
*Payment details
*Space for signature
(b)Applicant shall save and print this acknowledgment.
(c)Signature / Left thumb impression should only be within the
box provided in the acknowledgment. In case of applicants other
than 'Individuals', the authorised signatory shall sign the
acknowledgment and affix the appropriate seal or stamp.
(d)Left hand Thumb impression, if used, should be attested by a
Magistrate or a Notary Public or Gazetted Officer, under official
seal and stamp.
Payment
(a)The fee for processing TAN application is62.00 (55.00
application charge + 12.36% Service Tax).
(b)Payment can be made by
-demand draftor
-chequeor
-credit card / debit cardor
-net banking
(c)Demand draft / cheque shall be in favor of'NSDL - TIN'.
(d)Name of the applicant and the acknowledgment number should be
mentioned on the reverse of the demand draft / cheque.
(e)Demand draft shall be payable at Mumbai.
(f)Applicants making payment by cheque shall deposit a local
cheque (drawn on any bank) with any HDFC Bank branch across the
country (except Dahej). The applicant shall mentionTANNSDLon the
deposit slip.
Submission of Documents
(a)The acknowledgment duly signed, along with demand draft, if
any, shall be sent to NSDL at
NSDL e-Governance Infrastructure Limited,
5thfloor, Mantri Sterling,
Plot No. 341, Survey No. 997/8,
Model Colony,
Near Deep Bungalow Chowk,
Pune 411016
(b)Superscribe the envelope with 'APPLICATION FOR TAN -
Acknowledgment Number' (e.g.'APPLICATION TAN -
88301020000244').
(c)Your acknowledgment and demand draft, if any, should reach
NSDL within 15 days from the date of online application.
(d)Application will be processed only on receipt of duly signed
acknowledgment and realisation of payment.
Step 3: Obtain TIN No. from NSDLTIN stands for Tax-Payer
Identification Number, is unique number allotted by Commercial tax
department of respective State. Its an eleven digit number to be
mentioned in all VAT transactions and correspondence.TIN number is
used to identify dealers registered under VAT. First two digits of
TIN indicate the issued state code. However, Other 9 digit of TIN
creation may differs by state governments.TIN number registration
is required for Manufacturers, Traders, Exporters and Dealers. When
new registration is undertaken under VAT or Central Sales Tax a new
TIN will be allotted under registration number. The TIN number
should appear on all Quotations/Orders/Invoices by both Sending
Company and Receiving Company.You can apply for this number online
or visit one of the governments many facilitation centres across
the country and submit this form. Visit this link to find the one
closest to you. These are the documents that you will need to apply
for a TIN number 1. ID Proof / Address proof / PAN card of
proprietor with six photographs 2. Address proof of Business
premises 3. 1st Sale / Purchase Invoice, copy of LR/GR &
payment/collection proof with bank statement 4.
Surety/Security/Reference. This may differ slightly from State to
State. After these documents are checked and scrutinized, a unique
TIN number is provided to applicant. For applicants who have
Central Sales Tax number, this can be changed to TIN number on
request by the tax department.
Step4: Application for an Export License, if requiredTo
determine whether a license is needed to export a particular
commercial product or service, an exporter must first classify the
item by identifying what is calledITC (HS) Classifications. Export
license are only issued for the goods mentioned in the Schedule 2
of ITC (HS) Classifications of Export and Import items.As per
Section XI of ITC HS CODE List and India Harmonised System Product
classification codes, Export of Silk and cotton saris and scarves
and dresses is free provided it has 85 % of respective fibre
content.Chapter 50, 52 and 62 gives the requisite details.For all
other products in general a proper application can be submitted to
the Director General of Foreign Trade (DGFT). GUIDELINES FOR
APPLICANTS Please see paragraph 2.50 of HBP v1 1. Two copies of the
application must be submitted unless otherwise mentioned. 2. Each
individual page of the application has to be signed by the
applicant. 3. a. ANF 1 has to be filled in by all applicants. In
case of applications submitted electronically, no hard copies of
ANF1. However in cases where applications are submitted otherwise,
hard copy of ANF1 has to be submitted. b. Only relevant portions of
Application need to be filled in. 4. Application must be
accompanied by documents as per details given below: For Export
Licence for Restricted Items 1. Bank Receipt (in duplicate)/Demand
Draft/EFT details evidencing payment of application fee in terms of
Appendix 21B. 2. Self certified copy of Export OrderAddress of DGFT
Kolkata:Government Of IndiaMINISTRY OF COMMERCE &
INDUSTRYOFFICE OF THE ZONAL JOINT DIRECTOR GENERAL OF FOREIGN
TRADE4, Esplanade East,Kolkata - 700 069.PBX Contact
No.:033-22486831/32/33/34FAX:033-22485892E-Mail:[email protected]/[email protected]
: dgft.gov.in http://dgftkolkata.wb.nic.in/Step 5: Registration
with Director General of Foreign Trade (DGFT) for IEC Number.For
every first time exporter, it is necessary to get registered with
the DGFT (Director General of Foreign Trade), Ministry of Commerce,
Government of India.Prior to 1997, it was necessary for every first
time exporter to obtain IEC number from Reserve Bank of India (RBI)
before engaging in any kind of export operations. But now this job
is being done by DGFT
DGFT provide exporter a unique IEC Number. IEC Number is a ten
digits code required for the purpose of export as well as import.
No exporter is allowed to export his good abroad without IEC
number.
Exemption: If the goods are exported to Nepal, or to Myanmar
through Indo-Myanmar boarder or to China through Gunji, Namgaya,
Shipkila or Nathula ports then it is not necessary to obtain IEC
number provided the CIF value of a single consignment does not
exceed Indian amount of Rs. 25, 000 /-.
Application Procedure:
Application for IEC number can be submitted to the nearest
regional authority of DGFT.Application form which is known as
"Aayaat Niryaat Form - ANF2A" can also be submitted online at the
DGFT web-site: http://dgft.gov.in.
Requirements : An applicant is required to submit
PAN account number. Only one IEC is issued against a single PAN
number. Current Bank Account number and Bankers Certificate. Fee:
An amount of Rs 1000/- is required to submit with the application
fee. Mode of payment: This amount can be submitted in the form of a
Demand Draft or payment through EFT (Electronic Fund Transfer by
Nominated Bank by DGFT.
Step 2: Registration with Export Promotion Council for RCMC
Certificate
Registered under the Indian Company Act, Export Promotion
Councils or EPC is a non-profit organisation for the promotion of
various goods exported from India in international market. EPC
works in close association with the Ministry of Commerce and
Industry, Government of India and act as a platform for interaction
between the exporting community and the government.
So, it becomes important for an exporter to obtain a
registration cum membership certificate (RCMC) from the EPCH
For the Export of handicraft the registration should be done
with EPCH i.e. Export Promotion Council for Handicrafts in India.
Requirements: Prospective members are required to submit their
application as per the prescribed application form. The membership
form can be obtained by paying Rs. 100/- in cash/demand draft drawn
in favour of Export Promotion Council for Handicrafts payable at
New Delhi.
The Amount of membership (April March) fees are as
follows:Entrance fee in the year of enrolment - Rs. 1000/-Annual
Membership fee - Rs. 2500/-Total (during the year of Enrollment) -
Rs 3500/- + Service Tax (12.36%)Every year Membership Fee is due on
1st April and payment is to be made by 30th June. Membership
renewal fee is Rs. 2500/- + Service Tax (12.36%) every year.The
RCMC certificate is valid from 1st April of the licensing year in
which it was issued and shall be valid for five years ending 31st
March of the licensing year, unless otherwise specifiedStep 6: Open
Current account with Bank having Foreign Exchange transaction
facilities
In case the Current bank of the prospective exporter doesnt
facilitate the transactions in Foreign Exchange then a new account
with such bank needs to be opened which facilitates the same. The
same should also be able to discount and negotiate the Documentary
bills and credit in future.
Export Process and Documents required at each Step
Step 1: Get an order and enter into a Sales ContractSales
Contract: A sales contract should include in general the following
things Name and address of the parties Product standard &
specifications & unit value Quantity Inspection Total Value of
contract Terms of Deliveries FOB, CIF, DAF etc Tax, Duties and
Charges Period of shipment, Delivery Part shipment, trans- shipment
Terms of Payment, amount, mode currency Discount & Commissions
License & Permits Packaging, labelling & marking Insurance
terms and requirements Documentary requirements Clauses for delay
in delivery Force Majeure or Excuse for Non Performance of contract
Remedial action Applicable law Arbitration Signature of
partiesTerms of Payment:There are 3 standard ways of payment
methods in the export import trade international trade market:1.
Clean Payment Advance payment Open account2. Collection of Bills3.
Letters of Credit L/C
1.Clean PaymentsIn clean payment method, all shipping documents,
including title documents are handled directly between the trading
partners. The role of banks is limited to clearing amounts as
required. Clean payment method offers a relatively cheap and
uncomplicated method of payment for both importers and
exporters.
There are basically two types of clean payments:1. Cash In
Advance Receive cash from the buyer before shipping In case of HUGE
payments (importer may demand a bank guarantee) Used in case of
uncertain Political or economic environment in buyers country.
Generally used when exporter is in a strong trading position &
exacting product is not available Safest option for an exporter but
not generally used.2. Open Account:
It involves high risk on the part of the Exporter as he ships
the goods without receiving the payment and any acknowledgement. He
also forwards the shipping doc directly to buyer with a cover
letter along with the invoice and awaits the payment.The main
drawback of open account method is that exporter assumes all the
risks while the importer get the advantage over the delay use of
company's cash resources and is also not responsible for the risk
associated with goodsGenerally used in case of highly reputed buyer
and when the exporter is absolutely sanguine of the importer.
1. Documentary BillsThe Payment Collection of Bills also called
Uniform Rules for Collections is published by International Chamber
of Commerce (ICC) under the document number 522 (URC522) and is
followed by more than 90% of the world's banks.In this method of
payment in international trade the exporter entrusts the handling
of commercial and often financial documents to banks and gives the
banks necessary instructions concerning the release of these
documents to the Importer. It is considered to be one of the cost
effective methods of evidencing a transaction for buyers, where
documents are manipulated via the banking system.There are two
methods of collections of bill :Documents Against Payment D/PIn
this case documents are released to the importer only when the
payment has been doneThis is sometimes also referred as Cash
against Documents/Cash on Delivery. In effect D/P means payable at
sight (on demand). The collecting bank hands over the shipping
documents including the document of title (bill of lading) only
when the importer has paid the bill. The drawee is usually expected
to pay within 3 working days of presentation. The attached
instructions to the shipping documents would show "Release
Documents Against Payment"Docuemts Against Acceptance(D/A)In this
case documents are released to the importer only against acceptance
of a draft. Under Documents Against Acceptance, the Exporter allows
credit to Importer, the period of credit is referred to as Usance,
The importer/ drawee is required to accept the bill to make a
signed promise to pay the bill at a set date in the future. When he
has signed the bill in acceptance, he can take the documents and
clear his goods.
The payment date is calculated from the term of the bill, which
is usually a multiple of 30 days and start either from sight or
form the date of shipment, whichever is stated on the bill of
exchange. The attached instruction would show "Release Documents
Against Acceptance".Usance D/P BillsA Usance D/P Bill is an
agreement where the buyer accepts the bill payable at a specified
date in future but does not receive the documents until he has
actually paid for them. The reason is that airmailed documents may
arrive much earlier than the goods shipped by sea.
The buyer is not responsible to pay the bill before its due
date, but he may want to do so, if the ship arrives before that
date. This mode of payments is less usual, but offers more
settlement.
These are still D/P terms so there is no extra risk to the
exporter or his bank. As an alternative the covering scheduled may
simply allow acceptance or payments to be deferred awaiting arrival
of carrying vessel.There are different types of usance D/P bills,
some of which do not require acceptance specially those drawn
payable at a fix period after date or drawn payable at a fixed
date.Bills requiring acceptance are those drawn at a fix period
after sight, which is necessary to establish the maturity date. If
there are problems regarding storage of goods under a usance D/P
bill, the collecting bank should notify the remitting bank without
delay for instructions.However, it should benoted that it is not
necessary for the collecting bank to follow each and every
instructions given by the Remitting Banks.
1. Letter of CreditLetter of Credit L/c also known as
Documentary Credit is a widely used term to make payment secure in
domestic and international trade. The document is issued by a
financial organization at the buyer request. Buyer also provide the
necessary instructions in preparing the document.The International
Chamber of Commerce (ICC) in the Uniform Custom and Practice for
Documentary Credit (UCPDC) defines L/C as:"An arrangement, however
named or described, whereby a bank (the Issuing bank) acting at the
request and on the instructions of a customer (the Applicant) or on
its own behalf :a. Is to make a payment to or to the order third
party ( the beneficiary ) or is to accept bills of exchange
(drafts) drawn by the beneficiary.b. Authorised another bank to
effect such payments or to accept and pay such bills of exchange
(draft).c. Authorised another bank to negotiate against stipulated
documents provided that the terms are complied with.A key principle
underlying letter of credit (L/C) is that banks deal only in
documents and not in goods. The decision to pay under a letter of
credit will be based entirely on whether the documents presented to
the bank appear on their face to be in accordance with the terms
and conditions of the letter of credit.Parties to Letters of Credit
Applicant (Opener):Applicant which is also referred to as account
party is normally a buyer or customer of the goods, who has to make
payment to beneficiary. LC is initiated and issued at his request
and on the basis of his instructions. Issuing Bank (Opening Bank)
:The issuing bank is the one which create a letter of credit and
takes the responsibility to make the payments on receipt of the
documents from the beneficiary or through their banker. Advising
Bank :An Advising Bank provides advice to the beneficiary and takes
the responsibility for sending the documents to the issuing bank
and is normally located in the country of the beneficiary.
Confirming Bank :Confirming bank adds its guarantee to the credit
opened by another bank, thereby undertaking the responsibility of
payment/negotiation acceptance under the credit, in additional to
that of the issuing bank. Negotiating Bank:The Negotiating Bank is
the bank who negotiates the documents submitted to them by the
beneficiary under the credit either advised through them or
restricted to them for negotiation. On negotiation of the documents
they will claim the reimbursement under the credit and makes the
payment to the beneficiary provided the documents submitted are in
accordance with the terms and conditions of the letters of
credit.
Payment Procedure under L/C1. Buyer and Seller agrees on terms
and conditions of the sale2. Buyer instructs its bank to open an
L/C incorporating previously agreed terms of sale3. The buyer's
bank prepares a Letter of Credit (L/C), including all instructions
to the seller's bank concerning the shipment and sends the L/C to
the seller's bank, requesting confirmation4. The seller may request
confirmation from a confirming bank for added security5. The
Seller's bank prepares a letter of confirmation to forward to the
seller along with the L/C6. The seller reviews carefully all
conditions in the L/C, specially shipment schedule in consultation
with his freight forwarder7. The seller arranges the goods and hand
over to freight forwarder for delivery at appropriate port or
airport8. Once goods are loaded/shipped, the forwarder completes
necessary documentation and hand them over to the seller.9. The
seller then presents the documents to his bank, informing full
compliance with terms and conditions of L/C10. The seller's bank
reviews the documents. 11. The documents are airmailed to the
buyer's bank for review and passing necessary documents to buyer.
12. The buyer's bank sends the draft to buyer for
payment/acceptance13. Buyer pays bank/sends acceptance14. The buyer
gets the documents needed to claim the goods. 15. The seller's bank
gets payment and pays seller immediately or at a later dateVarious
Types of L/Cs are:1. Revocable Letter of Credit L/cA revocable
letter of credit may be revoked or modified for any reason, at any
time by the issuing bank without notification. It is rarely used in
international trade and not considered satisfactory for the
exporters but has an advantage over that of the importers and the
issuing bank.2. Irrevocable Letter of Credit L/CIn this case it is
not possible to revoked or amended a credit without the agreement
of the issuing bank, the confirming bank, and the beneficiary.Form
an exporters point of view it is believed to be more beneficial. An
irrevocable letter of credit from the issuing bank insures the
beneficiary that if the required documents are presented and the
terms and conditions are complied with, payment will be made.3.
Confirmed Letter of Credit L/CConfirmed Letter of Credit is a
special type of L/c in which another bank apart from the issuing
bank has added its guarantee. Although,the cost of confirming by
two banks makes it costlier, this type of L/c is more beneficial
for the beneficiary as it doubles the guarantee.
4. Sight Credit and Usance Credit L/CSight credit states that
the payments would be made by the issuing bank at sight, on demand
or on presentation. In case of usance credit, draft are drawn on
the issuing bank or the correspondent bank at specified usance
period. The credit will indicate whether the usance draft are to be
drawn on the issuing bank or in the case of confirmed credit on the
confirming bank.5. Back to Back Letter of Credit L/CBack to Back
Letter of Credit is also termed as Countervailing Credit. A credit
is known as backtoback credit when a L/c is opened with security of
another L/c.A backtoback credit which can also be referred as
credit and countercredit is actually a method of financing both
sides of a transaction in which a middleman buys goods from one
customer and sells them to another.6. Transferable Letter of Credit
L/CA transferable documentary credit is a type of credit under
which the first beneficiary which is usually a middleman may
request the nominated bank to transfer credit in whole or in part
to the second beneficiary.
7. Confirmed & Unconfirmed Letter of Credit(L/C) Under a
Confirmed Letter of Credit, a bank, called the Confirming Bank,
adds its commitment to that of the issuing bank. By adding its
commitment, the Confirming Bank takes the responsibility of claim
under the letter of credit, assuming all terms and conditions of
the letter of credit are met.
No Confirmation from the Advising bank in Exporters Country in
case of Unconfirmed L/C. opened by an issuing bank in which the
advising bank does not add its confirmation to the credit The
promise to pay comes from the issuing bank only, UNLIKE in a
confirmed irrevocable L/C where both issuing & advising bank
promise to pay the beneficiary.
8. With & Without Recourse L/C With Recourse: If the buyer
fails to pay the bank after the specified period, the bank can have
recourse on the exporter.
Without Recourse: The bank has NO recourse on the exporter, IF
the buyer fails to pay the bank after the specified period9.
Anticipatory L/C This credit provides for advance payment, or at
least part payment to the beneficiary against his undertaking to
effect the shipment and submit the bill and/or documents in terms
of credit within the validity Ultimate liability lies with the
applicant (buyer)Red Clause: Since the clause is printed /typed
usually in red ink, its called Red Clause credits. Green Clause:
The Green Clause is an extension of the Red Clause it envisages the
credit given to the exporter to cover the period of storage of
goods at the sea port10. Revolving L/CIn revolving L/C, the amount
involved when utilized is reinstated, without issuing another L/C
and usually under the same terms and conditions. It can be
revocable / irrevocable and may be revolving in relation to time or
value within a given overall period of validity.11. Deferred
payment L/C the exporter supplies plant, machineries, capital
goods, etc. Importer pays in installments over a period ranging
from 1 to 7 years or even more no draft is drawn, payment by the
opening bank is determined in accordance with the terms laid down
in the credit12. Transit L/C It is issued in one country with the
beneficiary in another country but is advised through and usually
confirmed by a bank in London13. Restricted & Unrestricted L/C
If no specific bank is designated to pay, accept or negotiate, the
credit is termed as unrestricted or open or general credits if a
specified bank is designated to pay, accept or negotiate, the
credit is termed as restricted or specialNote: The Best L/C:
CONFIRMED IRREVOCABLE WITHOUT RECOURSE L/C because in this case the
Indian bank has added obligation to pay.
Degree of Risk Involved
Step 2: Arranging FinancePre Shipment FinancePre Shipment
Finance is issued by a financial institution when the seller want
the payment of the goods before shipment. The main objectives
behind preshipment finance or pre export finance is to enable
exporter to: Procure raw materials. Carry out manufacturing
process. Provide a secure warehouse for goods and raw materials.
Process and pack the goods. Ship the goods to the buyers. Meet
other financial cost of the business.Types of Pre Shipment Finance
Packing Credit Advance against Cheques/Draft etc. representing
Advance Payments.Preshipment finance is extended in the following
forms : Packing Credit in Indian Rupee Packing Credit in Foreign
Currency (PCFC)Requirement for Getting Packing CreditPacking credit
facility can be provided to an exporter on production of the
following evidences to the bank:1. Formal application for release
the packing credit with undertaking to the effect that the exporter
would be ship the goods within stipulated due date and submit the
relevant shipping documents to the banks within prescribed time
limit.2. Firm order or irrevocable L/C or original cable / fax /
telex message exchange between the exporter and the buyer.3.
Licence issued by DGFT if the goods to be exported fall under the
restricted or canalized category. If the item falls under quota
system, proper quota allotment proof needs to be submitted.
EligibilityQuantum of FinanceThe Quantum of Finance is granted
to an exporter against the LC or an expected order. The only
guideline principle is the concept of Need Based Finance. Banks
determine the percentage of margin, depending on factors such as:
The nature of Order. The nature of the commodity. The capability of
exporter to bring in the requisite contribution.Appraisal and
Sanction of Limits1. Before making any an allowance for Credit
facilities banks need to check the different aspects like product
profile, political and economic details about country. Apart from
these things, the bank also looks in to the status report of the
prospective buyer, with whom the exporter proposes to do the
business. To check all these information, banks can seek the help
of institution like ECGC or International consulting agencies like
Dun and Brad street etc.
The Bank extended the packing credit facilities after ensuring
the following"1. The exporter is a regular customer, a bona fide
exporter and has a goods standing in the market.2. Whether the
exporter has the necessary license and quota permit (as mentioned
earlier) or not.3. Whether the country with which the exporter
wants to deal is under the list of Restricted Cover Countries (RCC)
or not.
Disbursement of Packing Credit Advance2. Once the proper
sanctioning of the documents is done, bank ensures whether exporter
has executed the list of documents mentioned earlier or not.
Disbursement is normally allowed when all the documents are
properly executed.
Sometimes an exporter is not able to produce the export order at
time of availing packing credit. So, in these cases, the bank
provide a special packing credit facility and is known as Running
Account Packing.
Before disbursing the bank specifically check for the following
particulars in the submitted documents" Name of buyer Commodity to
be exported Quantity Value (either CIF or FOB) Last date of
shipment / negotiation. Any other terms to be complied withThe
quantum of finance is fixed depending on the FOB value of contract
/LC or the domestic values of goods, whichever is found to be
lower. Normally insurance and freight charged are considered at a
later stage, when the goods are ready to be shipped.
In this case disbursals are made only in stages and if possible
not in cash. The payments are made directly to the supplier by
drafts/bankers/cheques.
The bank decides the duration of packing credit depending upon
the time required by the exporter for processing of goods.
The maximum duration of packing credit period is 180 days,
however bank may provide a further 90 days extension on its own
discretion, without referring to RBI.
Post Shipment FinancePost Shipment Finance is a kind of loan
provided by a financial institution to an exporter or seller
against a shipment that has already been made. This type of export
finance is granted from the date of extending the credit after
shipment of the goods to the realization date of the exporter
proceeds. Exporters dont wait for the importer to deposit the
funds.Basic FeaturesThe features of postshipment finance are:
Purpose of FinancePostshipment finance is meant to finance export
sales receivable after the date of shipment of goods to the date of
realization of exports proceeds. In cases of deemed exports, it is
extended to finance receivable against supplies made to designated
agencies. Basis of FinancePostshipment finances is provided against
evidence of shipment of goods or supplies made to the importer or
seller or any other designated agency.Types of FinancePostshipment
finance can be secured or unsecured. Since the finance is extended
against evidence of export shipment and bank obtains the documents
of title of goods, the finance is normally self liquidating. In
that case it involves advance against undrawn balance, and is
usually unsecured in nature.Further, the finance is mostly a funded
advance. In few cases, such as financing of project exports, the
issue of guarantee (retention money guarantees) is involved and the
financing is not funded in nature.Quantum of FinanceAs a quantum of
finance, postshipment finance can be extended up to 100% of the
invoice value of goods. In special cases, where the domestic value
of the goods increases the value of the exporter order, finance for
a price difference can also be extended and the price difference is
covered by the government. This type of finance is not extended in
case of preshipment stage.Banks can also finance undrawn balance.
In such cases banks are free to stipulate margin requirements as
per their usual lending norm.Period of FinancePostshipment finance
can be off short terms or long term, depending on the payment terms
offered by the exporter to the overseas importer. In case of cash
exports, the maximum period allowed for realization of exports
proceeds is six months from the date of shipment. Concessive rate
of interest is available for a highest period of 180 days, opening
from the date of surrender of documents. Usually, the documents
need to be submitted within 21days from the date of shipment.
Types of Post Shipment FinanceThe post shipment finance can be
classified as :1. Export Bills purchased/discounted.2. Export Bills
negotiated3. Advance against export bills sent on collection
basis.4. Advance against export on consignment basis5. Advance
against undrawn balance on exports6. Advance against claims of Duty
Drawback.
1. Export Bills Purchased/ Discounted.(DP & DA Bills)Export
bills (Non L/C Bills) is used in terms of sale contract/ order may
be discounted or purchased by the banks. It is used in indisputable
international trade transactions and the proper limit has to be
sanctioned to the exporter for purchase of export bill facility.2.
Export Bills Negotiated (Bill under L/C)The risk of payment is less
under the LC, as the issuing bank makes sure the payment. The risk
is further reduced, if a bank guarantees the payments by confirming
the LC. Because of the inborn security available in this method,
banks often become ready to extend the finance against bills under
LC.However, this arises two major risk factors for the banks:1. The
risk of nonperformance by the exporter, when he is unable to meet
his terms and conditions. In this case, the issuing banks do not
honor the letter of credit.
2. The bank also faces the documentary risk where the issuing
bank refuses to honour its commitment. So, it is important for the
negotiating bank, and the lending bank to properly check all the
necessary documents before submission.
3. Advance Against Export Bills Sent on Collection Basis:Bills
can only be sent on collection basis, if the bills drawn under LC
have some discrepancies. Sometimes exporter requests the bill to be
sent on the collection basis, anticipating the strengthening of
foreign currency.Banks may allow advance against these collection
bills to an exporter with a concessional rates of interest
depending upon the transit period in case of DP Bills and transit
period plus usance period in case of usance bill.The transit period
is from the date of acceptance of the export documents at the banks
branch for collection and not from the date of advance.4. Advance
against Export on Consignments Basis:Bank may choose to finance
when the goods are exported on consignment basis at the risk of the
exporter for sale and eventual payment of sale proceeds to him by
the consignee.However, in this case bank instructs the overseas
bank to deliver the document only against trust receipt
/undertaking to deliver the sale proceeds by specified date, which
should be within the prescribed date even if according to the
practice in certain trades a bill for part of the estimated value
is drawn in advance against the exports.In case of export through
approved Indian owned warehouses abroad the times limit for
realization is 15 months.5. Advance against Undrawn Balance:It is a
very common practice in export to leave small part undrawn for
payment after adjustment due to difference in rates, weight,
quality etc. Banks do finance against the undrawn balance, if
undrawn balance is in conformity with the normal level of balance
left undrawn in the particular line of export, subject to a maximum
of 10 percent of the export value. An undertaking is also obtained
from the exporter that he will, within 6 months from due date of
payment or the date of shipment of the goods, whichever is earlier
surrender balance proceeds of the shipment.6. Advance against
Claims of Duty Drawback:Duty Drawback is a type of discount given
to the exporter in his own country. This discount is given only, if
the inhouse cost of production is higher in relation to
international price. This type of financial support helps the
exporter to fight successfully in the international markets.
In such a situation, banks grants advances to exporters at lower
rate of interest for a maximum period of 90 days. These are granted
only if other types of export finance are also extended to the
exporter by the same bank.
After the shipment, the exporters lodge their claims, supported
by the relevant documents to the relevant government authorities.
These claims are processed and eligible amount is disbursed after
making sure that the bank is authorized to receive the claim amount
directly from the concerned government authorities.
Step 3: Arrange the following documents for Shipment after
processing the order
a) Getting Inspection Certificate for the order ProcessedTypes
of Pre-Shipment Inspection I. VOLUNTARY INSPECTIONBy exporter
himself By the buyers representative By the buyers agent in the
exporters country By the inspection agencies in private sector II.
COMPULSORY INSPECTION
Conducted by following agencies of GOIa. Export Inspection
Council(EIC) through its Export Inspection Agencies(EIA) b. Central
Silk Board
EIA provides for PSI under 3 different systems of inspectionI.
Consignment wise inspection Each X consignment is inspected &
tested by a recognised EIA Random selection of sample checked to
determine conformity After inspection, EIA issues PSI certificate
to exporter inspection fee (0.4% of FOB value) (SSI units are
allowed 10% rebate on fee i.e. 0.36%)
II. In-Process Quality Control (IPQC) IPQC Units can inspect
& clear the goods for X EIA issues the certificate of
inspection upon formal request from the Unit Inspection fee is 0.2%
of FOB value
III. Self-Certification Scheme Manufacturing units with proven
record of Quality maintenance can self certify if Director
(Inspection & Q.C.), N.Delhi has inspected and approved the
unit Unit should be well equipped with testing facilities &
required Q.C. systems Fee = 0.1% of FOB subject to a minimum of
Rs.2500 & maximum = 1 Lakh in a year
PSI by Silk Board NO PSI is required in case of SILK GARMENTS,
CARPETS and TEXTILE GOODS PSI is required where inputs have been
imported under Duty Exemption Scheme. Exporter should have RCMC
from Indian Silk Export Promotion Council