Krishna Teja

EXPORT DEVELOPMENT FINANCE
Summer Internship Project Report On

EXPORT DEVELOPMENT FINANCE FOR SMEs BY NSIC
At
By
KRISHNA TEJA NUKALA (REG.NO.1020217) MBA - Finance, 2010-2012 Under the guidance of
Faculty Guide Dr. Satinder Duggal Faculty/Mentor CUIM
Company Guide Mr. M.V.Soma Sekhar GM (Technical) NSIC
CHRIST UNIVERSITY INSTITUTE OF MANAGEMENT BANGALORE-560074

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DECLARATION
I, Krishna Teja Nukala, hereby declare that the project report titled Export Development Finance at National Small Industries Corporation (NSIC), Hyderabad submitted for the partial fulfilment of the requirement for the award of the MBA (Finance) is my original project work and has been carried out under the guidance of Dr. Satinder Duggal, Christ University, Bangalore.
Place: Date:
Krishna Teja Nukala Reg.no.1020217 CUIM, Kengeri Campus
CERTIFICATE
This is to certify that this internship report on Export Development Finance at NSIC Hyderabad is a bona fide work of Mr. Krishna Teja Nukala under my guidance and support. This report is a part of MBA (Finance) and content and the work done is genuine with respect to the information covered and thought expressed.
Dr. Satinder Duggal CUIM Kengeri
Dr. S.Jeevananda Co-ordinator CUIM Kengeri
Place: Date:
Place: Date:
ACKNOWLEDGEMENT
Theoretical knowledge without practical application is incomplete. The exposure to practical world gives a new dimension to whatever has been grasped till time and it also gives a chance to understand that where the learned knowledge can be applied. I feel great pleasure in thanking the management of Christ University Institute of Management and NSIC, who gave me an opportunity to work on this project that helped to get an insight of the actual world outside and understand its implications I extend my sincere thanks to my mentor Dr. Satinder Duggal who helped me at each and every step of my project and guided me with his valuable suggestions so as to bring about and present my project in its best form. I am also thankful to all my colleagues and guides at NSIC without whose contribution this project would have been a failure altogether. Words are never sufficient to express gratitude but here my words are just a medium to express what I feel.
KRISHNA TEJA NUKALA
EXECUTIVE SUMMARY
Small and Medium Enterprise (SMEs) constitute over 90% of total enterprises in most of the economies and are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports. In India too, the SMEs play a vital role in the overall industrial economy of the country. Having realized the need to preserve, protect and promote SMEs, the Indian government is formulating policies and designing/implementing support measures in the eld of credit, technological up gradation, marketing, entrepreneurship development etc. and undertaking effective advocacy for these purposes. Finance is one of the critical inputs for the promotion and development of the micro and small enterprises. Recognizing the importance of easy and adequate availability of credit in sustainable growth of the SME sector, the Government has been announcing various policy measures. Faced with increased competition on account of globalization, SMEs are beginning to move from a reliance on bank credit to a variety of other specialized nancial services and options. Hence, govt. organizations like the NSIC were established as an aid for the SME sector. Financial and marketing schemes are being formulated by the NSIC so as to cater to the needs of the SMEs. Thus many SMEs got registered with it to avail these services. On the other hand, there are lot more such enterprises unaware of NSIC. In order to empower them, NSIC is conducting campaigns and trade fairs. Especially, exporting of their products and the documentation involved is taken care of by the NSIC for the registered companies. So, the customer perspective of the NSIC schemes is studied so as to analyse and improvise these schemes. At the same time, more focus is given to the idea of getting a census, registering the SMEs and maintaining a database for the same so as to have an updated knowledge about the financial needs of this sector.
INDEX
CHAPTERS
1
TITLE
INTRODUCTION PROBLEM STATEMENT & METHODOLOGY OF THE STUDY COMPANY PROFILE OVERVIEW OF EXPORT FINANCING DATA INTERPRETATION FINADINGS, RECOMMENDATIONS & CONCLUSION BIBLOGRAPHY
S.NO
7-9
10-12
13-28
29-47
48-62
63-66
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ANNEXURE
68-72
CHAPTER 1
INTRODUCTION
INDUSTRY PROFILE:
Small and Medium Enterprises (SMEs) are the growth engines of the Indian economy due to their ability to create jobs, foster entrepreneurship, and to provide depth to the industrial base of the economy. As per findings of the third census on SSI, the total SSI sector (registered and unregistered units) in India comprised 1,05,21,190 units, out of which over 44 lakh (42.26 per cent) were SSIs and the remaining 61 lakh (57.74 per cent) were SSSBEs.
About 55.0 per cent of total SSI units were located in rural India. The number of ancillary units among SSIs at 1.32 lakh constituted 2.98 per cent of the total number of SSIs. Tiny units with original investment in plant & machinery up to Rs.25 lakh numbering 44.26 lakh formed a dominating 99.5 per cent of the total number of SSIs.
About 10.11% of the SSI units were women enterprises. The third census also revealed that about 44.0 per cent of the units were in the services sector, followed by 40.0 per cent of the units in manufacturing and allied activities sector and 16.0 per cent of units in repairing and maintenance sector. Thus, services sector emerged as the dominant component in the total SSI Sector. As per the third census report, total output of the registered units in the year 2001-02 was estimated to be Rs. 70,861.73 crore.
The SSI sector employed 2,49,32,763 persons during the reference period. There were 50,606 exporting units accounting for exports to the tune of Rs.14,19,956 lakh.
With the opening up of the Indian economy due to liberalization and globalization, this vital sector of the economy is facing huge challenges and competition from of the domestic as well as multi-national corporations.
INTRODUCTION TO THE TOPIC:

Export finance has been acquiring the vital dimensions in the modern business portfolio as it is expanded into multinational segments and inducing the manufacturers and export oriented units to expand the scope of operations into diversified international markets conditions. It requires financial aid from bankers, and to meet the customized demands of international buyers. It has been observed that Indian govt. and its supporting institutions like NSIC, EXIM bank and other financial institutions have been extending export finance especially considering small scale exported as the target group. At this juncture it is considered essential to perceive the following objectives by incarnating a project titled EXPORT DEVELOPMENT FINANCE.
CHAPTER 2
PROBLEM STATEMENT & METHODOLOGY OF THE STUDY
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PROBLEM STATEMENT:
The inadequate reach of NSIC and its financing schemes into the SME sector and the inability of such enterprises in meeting the required criteria to avail these services.
OBJECTIVES OF THE PROJECT:

The main objectives of the project are, 1. To study the reach of NSIC and its schemes in the SME sector. 2. To obtain the overview of export financing pattern in India. 3. To understand international legal consideration with respect to export development finance.
4. To understand the documentation process to be met at the time of availing the export
finance.
SCOPE OF THE PROJECT:

The scope of this project is to understand the performance of export development finance scheme of NSIC in serving the SME sector.
METHODOLOGY OF STUDY:
1. The primary data was collected through personal contacts with officials of NSIC and SSI entrepreneurs. 2. The secondary data regarding SSI, bill financing was collected from journals, research reports prepared by ministry of SSI etc.
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SAMPLE SIZE:
30 companies were selected based on the categorical division in the database of the NSIC, and a questionnaire is prepared so as to analyze the reach and utilization of these schemes.
LIMITATIONS OF PROJECT:
1. Interpretations are drawn only on the premise of information provided by NSIC. 2. This project is not extended to compare the export finance schemes of NSIC with those of other institutions.
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CHAPTER 3
COMPANY PROFILE
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COMPANY PROFILE:
National Small Industries Corporation Ltd. was established in 1955 by the Government of India with a view to promote, aid and foster the growth of Small Industries in the country. NSIC continues to remain at the forefront of industrial development throughout the country, with its various programs and projects, to assist the small scale sector in the country. Recent Transitions of industrial climate and liberalization of the total economic environment within the country and international arena has witnessed tremendous changes in the domestic as well as international markets. These sudden changes have thrown up as many opportunities as challenges to the Small Scale Enterprises in the country. Over a period of four decades of this transition, growth and development of small scale sector, it has proved its strength within the country and abroad dynamically, showing its progressive attitude towards modernization, up gradation of technology, quality consciousness, strengthening linkages with large and medium scale enterprises and boosting exports of products from Small Enterprises. The Small Scale Sector continues to remain an important instrument for enterprise building, dispersal of industries for even regional economic development and employment generation. NSIC has been successfully able to play its assigned role in this endeavor. Due to changed industrial scenario and gradual globalization of the economy, small scale sector has to face stiff competition as the insulated and protected market conditions are no more going to be available to it. To enable the Small Scale sector to meet this challenge, NSIC has already initiated various steps so that SSIs can play their due role, even during polarization of various economic forces.
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QUALITY POLICY:
We shall endeavour to achieve total customer satisfaction at all times. We shall continuously upgrade our service quality, communication facilities and skill sets to meets customer requirements efficiently. We shall constantly adapt, innovate and refine our processes in line with global business trends to maintain credibility and leadership in our fields. We commit ourselves for effective and prompt service on the basis of fair play, transparency and sincere endeavour for the promotion and growth to small-scale industries. We shall strive to achieve operational efficiency by attaining better productivity and profitability. We shall abide by statutory and legal regulations while carrying out our activities.
QUALITY OBJECTIVES:
To achieve reduction in cost of operations for attaining better productivity. To achieve reduction in service delivery time. To design and launch new assistance programmers in keeping with emerging market trends and the needs of customers. To keep pace with the changes in business environment and continuously upgrade the professional skills of all employees for development of customer centred business. To provide congenial work environment for effective contribution by every employee in all aspects of our services to the customers. To maintain safe, clean and hygienic work environment.
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The Corporation provides integrated Technology, Marketing, Infomediary Service and Financial support to Small Scale Sector.
MARKETING SERVICES:
NSIC provides diversified marketing support to SSIs through various marketing assistance schemes for reaching multidimensional and multi-location markets in India and abroad. NSIC acts as a nodal agency to bring SS'Is closer to various Government purchasing agencies, the largest buyer of various types of products and services, with the intention of creating confidence in the purchasing agencies about SMEs and their capability to supply goods and services of requisite quality, competitive prices and adherence to agreed delivery schedules. Tender Marketing: The Corporation participates in bulk global tender enquiries and local tenders of Central & State Government and Public Sector Enterprises on behalf of small scale units. It is aimed to assist SSIs with ability to manufacture quality products but which lack brand equity & credibility or have limited financial capabilities. Under this scheme, the Corporation has identified large number of items for which it actively participates in tenders of these Departments and Enterprises. On receipt of the orders, Corporation farms out these orders to the units on whose behalf it has quoted. This assistance has enabled a large number of small units to compete for the orders, which are normally out of reach of the individual units because of the bulk requirement. Consortia Marketing: A SSI unit in its individual capacity faces problem very often to procure & execute large orders, which inhibits and restricts the growth of SSIs. NSIC, accordingly adopted Consortia Approach and built groups/consortia of units manufacturing same products, thereby easing out marketing problem of SSIs. The Corporation explores market and secures orders for bulk quantities. These orders are then farmed out to small units in tune with their production capacity. Testing facilities are also provided to enable units to improve and maintain the quality of their products conforming to the standard specifications.
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Government Stores Purchase Programme: The Government is the single largest buyer of a variety of goods. With a view to increase the share of purchases from the small scale sector, the Government Stores Purchase Programme was launched in 1955-56. NSIC registers SSI units under Single Point Registration scheme for participation Government Purchases.
TECHNOLOGY SERVICES:
NSIC provides technical support to SSIs through 'NSIC Technical Services Centres' and a number of extension and sub centres spread across the country. The range of technical services provided through these centres include training in Hi-Tech as well as conventional trades, testing, common facilities, toolkits, energy audit, environment management etc. In addition to this access to latest information in connection with technology up gradation and its transfer is provided to SSIs through the 'Technology Transfer Centre' at New Delhi. Various Technical Services Centres in India along with their area of specialization are as follows: NTSC, OKHLA: Machine Tools, Design & Testing, Rural Technology and Computer Applications
NTSC, HOWRAH: Plastic Machinery and Instrumentation
NTSC, RAJKOT: Diesel Engine Development & Testing, Energy Conservation, Energy Audit, Sheet Metal and Wood Working Machinery NTSC, CHENNAI: Leather and Footwear
NTSC, HYDERABAD: Electronics and Computer Application

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NTSEC, ALIGARH: Lock & Brass Hardware
NTSEC, RAJPURA: Domestic Electrical Appliances
NTSEC, GUWAHATI: Training on Sheet Metal, Leather Wear, Energy Audit & Enterprise Building.
INFOMEDIARY SERVICES:
Information today is becoming almost as vital as the air we breathe. We need it every minute of our working lives. And with the increase in competition and melting away of international boundaries, the demand for information is reaching new heights. Keeping in mind the information needs of small industries NSIC has launched its Infomediary Services. A one-stop, one-window bouquet of aids that will provide information on business, technology and finance, and also exhibit the core competence of Indian SMEs in terms of price and quality-internationally, as well as domestically. NSICs Infomediary Services use a professionally managed HR base and modern technology for dissemination of vital information-websites, sector-specific newsletters (both print and electronic), and e-mails. Potential beneficiaries would be entrepreneurs-both existing and aspiring-R&D labs, SMEs seeking business collaboration and co-production opportunities, joint ventures, exporters and importers, and those looking for technology transfer. Salient Features: Sector based focus Information on Trade and tender leads & events Virtual Catalogue shows Internet-related support Banner display on NSICs Website
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Access to a wide range of technologies from India and abroad Access to national and international business leads, JV opportunities and trade information Comprehensive information on Government policies, rules and regulations, schemes and incentives Access to industrial databases, members directory and importers/exports directories Access to NSICs Business Centre with facilities such as conference hall, fax, telephone, photocopy and A/V aids etc. Access to a wide range of assistance for participation in business delegations, exhibitions/fairs Availability of a wide range of escort services, e.g., product design, credit and support rating, developing catalogues and product literature, energy and environment audit, introduction of information technology (IT) solution in Business operations.
Skill up gradation Training, mentoring services, common facility at NSIC Technical Services Centre(s), banners display on websites and market studies.
Access to Infomediary services is through Premium and Basic memberships. For details on membership benefits and online registration visit www.nsicindia.com.
EXPORT SERVICES:
NSIC is a recognized Export House. NSIC is involved in exporting product and projects of Small Scale Industries of India to other countries. The major areas of operation are: Export of Indian products like handicrafts, leather items, hand tools etc. Supply of Small Industry Projects on turnkey basis. Export of IT solutions from India. Export of Relief supplies from India to UN and other International Agencies.
Product NSIC is associated with the exports of Small Scale Industries products to other countries.
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Project NSIC undertakes export of industrial projects under its scheme associated with the exports of Small Scale Industries products to other countries on turnkey basis. NSIC provides a package of services for setting up of Industrial Projects to other countries.
IT Export NSIC operates on behalf of a consortium of Software Companies and bids for large tenders and projects worldwide for Software Exports. This enables NSIC to offer comprehensive solution to the customer on a high productive and cost effective basis. UN Supply The United Nations, including its various agencies, like UNICEF, WHO, UNFPA, WFP, UNOPS, UNDP, UNHCR, etc., represents an international market of about US$ 3 billion for suppliers of virtually all type of goods and services.
EXHIBITION SERVICES:
NSIC organises and participates in domestic and specialised product & technology related & international exhibitions to help SSIs in marketing their products and projects in both national and international arenas. These exhibitions facilitate: Marketing of products and projects of SSIs Closer interaction between technology seekers and offerers Development of mutual contact to discuss all issues involving technology transfer, technical collaboration etc. Techmart NSIC has so far organised nine International Technology Fair - 'Techmart' coinciding with India International Trade Fair at the Hall of States, Pragati Maidan, New Delhi. 'Techmart' is a centre stage for those associated with the small sector and interested in keeping abreast with the latest technological developments in the Indian small sector. It assisted small enterprises to market their products and services and help large companies and buyers to identify SMEs in becoming their ancillaries, partners in joint ventures and sub contracting.
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FINANCIAL SERVICES:
Financial Services Division of NSIC provides assistance to the small enterprises. The main features of the financial services offered are: Financial assistance for the production and marketing activities under one roof with speed and efficiency. Prompt clearance of the proposals with minimum processing time and without cumbersome paper work. On the spot assistance in preparing the proposals and completion of document formalities Attractive interest rates and service charges with liberal terms of margin, level of assistance and repayment schedules. Working Capital finance for meeting emergent needs of small enterprises and export oriented units for export development
Hire Purchase Scheme The Hire Purchase Scheme is aimed at promoting the development of small scale industrial sector in the country. This scheme is in operation for the last 40 years. NSIC has supplied 66,907 machines of the value of Rs. 422.80 crores to 28,956 units upto 1997-98. Hire-Purchase scheme is available on attractive terms to Technocrats, Women Entrepreneurs, Backward Areas, SC/ST category Entrepreneurs. Equipment Leasing Scheme The Equipment Leasing Scheme is aimed at Expansion, Modernisation, and Diversification & Technological Up gradation of existing & financially viable Small Scale Industries (SSIs), Ancillary Units & Enterprises. This scheme is in operation for the last 40 years. NSIC has supplied 1597 machines of the value of Rs. 6670.48 crores to 1003 units up to March, 2000.
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Bill Financing Scheme The Large and Medium Scale Units generally buy products, sub-assemblies etc. from the SSI sector on a deferred payment basis which results in shortage of funds for the SSI units. Accordingly NSIC has evolved a scheme of financing sale bills of the SSI's i.e; Bill Financing Scheme. Under this scheme bills drawn by small scale units for the supplies made to the reputed and well established enterprises and duly accepted by them will be financed / discounted by NSIC for a maximum period of 90 days. Raw Material Assistance Raw Material Assistance Scheme aims at helping Small Scale Industries/Enterprises by way of financing the purchase of Raw Material (both indigenous & imported). This gives an opportunity to SSI to focus better on manufacturing quality products. Export Development Finance Finance for export development to export oriented units is provided under this scheme for meeting their emergent requirements. Under this scheme pre and post shipment finance is also provided to the units. Composite Term Loan Scheme The Composite Term Loan is granted for acquisition of Land & Building, Machinery & Equipment and Working Capital to Tiny units with total assistance upto Rs. 25.00 Lacs. INTERNATIONAL PROGRAMME International Programmes of NSIC aim at developing and fostering sustainable enterprise to enterprise business relationships between Indian enterprises and enterprises in other countries. Strategy The strategy is to play upon the strengths of Indian enterprises and match these strengths with that of foreign enterprises identified through partner institutions in selected countries.
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NSIC advocates a partnership approach rather than a one-way transaction/transfer of technology or short-term business relationship. This approach is expected to lead to a sustainable and two-way relationship, which can be termed as partnership rather than one way flow of information from a seller of technology to a buyer in India and vice -versa. Partner Institutions NSIC has identified partner institutions in different countries through interactive sessions with industry associations & leading small entrepreneurs. The partner institutions actively co-operate with NSIC in identifying enterprises in their respective areas who are interested to enter into long term and durable relationships with Indian enterprises. SOFTWARE TECHNOLOGY PARKS NSIC has setup NSIC-STP Complex at New Delhi and Chennai under the Software Technology Parks of India (STPI) Scheme. Software Technology Parks facilitate small scale units to establish their units for the 100% export of software products. STPI Scheme To give a fillip to software exports and to encourage entrepreneurs in this industry, Software Technology Parks of India (STPI) an autonomous society was set up by Govt. of India under DOE. These Software Technology Parks cater to the needs of entrepreneurs establishing units for 100% export of software and also act as the nodal point for day-to-day formalities and as the resource centre for member units. The units operating under this scheme enjoys various benefits. NSIC Software Technology Park is one of such parks established by the National Small Industries Corporation Ltd. (A Govt. of India Enterprise, Ministry of Industry) under the STPI scheme to promote small entrepreneurs in software development.
Salient Features of STP Scheme: Approvals are given under single window clearance mechanism.
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Approvals for project involving imported capital goods up to a cost of US $ 10 million with Indian investment are cleared by jurisdictional STP authorities in a time bound manner under delegated authority.
100% foreign equity is permitted. All the imports in the STP units are completely duty free. Re-export of capital goods are permitted. Domestic purchases by STP units are eligible for the benefit of deemed exports. Subcontracting of software development activity by STP units is permitted. Use of computer system for training purposes is permissible subject to the condition that no computer terminals are installed outside the STP premises.
Benefits
Duty Free Imports: No import license is required. Import certificates are issued on request by Director STPI (Noida / Chennai) for duty free Imports of Capital Goods/Raw Material/Components.
Excise Relief: Excise exemption is available on Capital goods bought from Domestic Market on request from Director, STPI (Noida / Chennai) . Income Tax Holiday: Income tax holiday is available for STP units for a block of ten years OR upto the year 2010, whichever is earlier. DTA Sales: The sales in domestic tariff area are permissible upto 25% of the exports in value terms made by the STP unit. Location of NSIC-STP: NSIC Software Technology Park, New Delhi is located in a prime location at Okhla Industrial Area adjacent to NSIC Bhawan. This location is in the near vicinity to Nehru Place. (the commercial centre of computer industry).
NSIC Software Technology Park, Chennai is located in a prime location at Guindy Industrial Estate with a total built area of 48,000 Sq. Ft. This location is in the near vicinity to domestic and international Airports.
Infrastructure Following facilities are available at NSIC Software Technology Park.
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Built-up Space: This enables the software industries to commence their operations with minimum gestation period. A complete environment for software development is thus set up as you work in the cluster of software industries. Space is available in multiples of 1000 sq.ft.
Instant Power Connection: Instant power connections are available at these locations. Generator facility is also available on site, which will allow software units to work without any interruptions.
High Speed Data Link: High speed data communication facility through satellite connection is available. The member units can avail 64 kbps, 19.2 and 9.6 kbps dedicated leased channels. TCP/IP connections are also available.
Business Centre: A business centre comprising of Conference Hall, Photocopier, Fax, Training aids, etc. is available inside the STP complex for the member units. Telephones: Each member units will be provided with one telephone line for business promotion on occupation.
Obligations for the Units Export Obligation: Member Units in STP Scheme have to fulfil export obligation as per the following formula. o US $ 0.25 Million OR o 5 times of CIF (Cost, Insurance & Freight) Value of imported capital goods whichever is higher and 20% net Foreign Exchange against export earnings. Monitoring of Private Bonded Warehouse: In order to facilitate duty free imports the operation is required to be within customs bonded area. Units have to get the customs bonding done for the area where they are going to establish their software development and exporting unit.
MENTORING SERVICES:
Over a period of time, it has been observed that unbalanced management skills in small enterprises are a major cause for early sickness and non-performance in the SSI sector.
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One of the effective ways to address strategic issues which face small enterprises, is to have a Mentor-Pupil relationship in which the Mentor is an experienced person with a back ground of running his own enterprise (preferably in the same industrial sector) who volunteers his services at no or notional cost to individual or a group of units and the Pupil is the unit / units being assisted, whereas an Advisor is a senior professional, generally retired and a specialist in a specific area. Most of the SSI units are not sensitive to the changes in the environment and fast changing developments in the business scenario in terms of easy imports, fast dismantling of tariff barriers, removal of quantitative restrictions, integration with the information society and other core issues resulting from compliance with WTO / IPR regime. The Mentors / Advisors provide the necessary professional and moral support in the early life cycle of an enterprise and this handholding is akin to a child growing up under the protective care of the parent. Mentors / Advisors can also be provided to existing units facing critical operational problems due to changes in environment. Envisaged Role of a Mentor The Mentor will play a very crucial role of handholding in the initial stages of an enterprise. He will be the guardian angel to whom an entrepreneur can turn when in distress. The Mentor will provide business guidance and share his experience and skills with the entrepreneur. The Mentor and the Mentee have to mutually agree on the time the Mentor will spend with the Mentee. This can vary from several hours a week to several days in a month. The Mentor may have one or more Mentees in a cluster of industries depending on the nature of support needed. Mentor-Mentee relationship will be generally a long-term association. Envisaged Role of an Advisor The Advisor will resolve specific issues and problems related to the unit or a group of units based on his knowledge and experience. He will also ensure implementation of the suggestions and solutions offered for effective translation on the ground so that the beneficiary obtains anticipated results. Unlike a mentor, the advisor will be associated with a particular unit or group of units for a short period to advice on specific issues.
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Areas of Operations Marketing Manufacturing and systems Production processes Product Design and Packaging Usage of Information Technology Finance and other fiscal issues such as taxation etc. Quality & standards Environmental Issues
The above services will be offered in the selected clusters.
SEMINARS NSIC organises Seminars, work-shops and conferences with a view to: Make SSI units conversant with the developments taking place at different places within the country and outside. Inform about the opportunities available for business growth. Disseminate information on the challenges both existing and potential. Sensitize the SSI units on the needs of technology up gradation. Disseminate information on facilities being offered by various institutions both national and international Facilities can relate to institutional support in the area of marketing, financing, skill up gradation and training.
NSIC has organised a series of workshops for SSI clusters located at Ahmedabad, Bangalore, Mumbai, Calcutta, Indore, Ludhiana and New Delhi. These workshops covered areas relating to Electrical and Electronics, Light Engineering, Packaging, Software Exports, Information Technology, Food Processing, Machine Tools, Hosiery, Building Materials, Chemicals, Drugs & Pharmaceuticals, Textiles, Sports Goods, Leather and Foundry sectors. The workshops facilitated interaction amongst SSI Units, technology generators and suppliers as well as financial institutions and state level technical consultancy and industrial promotion organisations for evolving packages both for financing and technology. These seminars address to financial, marketing & technology related issues relevant to SMEs.
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FOCUS ON SPECIFIC SECTORS Agro and Food Processing Auto components Biotechnology Glass and Ceramics Dimensional Stones Information Technology Knitwear and Garments Leather and Leather Products Light Engineering Low Cost Building Materials Pharmaceuticals and Chemicals
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CHAPTER 4
OVERVIEW OF EXPORT FINANCE
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OVERVIEW OF EXPORT FINANCE IN INDIA: WHAT IS EXPORT FINANCE:

The statutory basis for regulation of exports from India is the Foreign Trade (Development & regulation) Act, 1992 which has replaced the Imports & Exports (control) Act, 1947. The govt is empowered to ban the export of certain goods from India &/or restrict export in quantity, value etc., by subjecting them to licensing procedures. In exercise of the powers conferred under Section 5 of the Act, the Central Govt has notified the Export & Import Policy valid for a period of five years, 1st April 1997 to 31st march 2002. During the currency of the policy, the Central Govt may make any amendments to it. Such amendments will be published by means of Public Notices issued by the Director General of Foreign Trade. Exports from the country are generally free. Item wise information on the exportability of the product should be verified from the book titled ITC (HS) Classification of Export & Import Items published by the Director General of Foreign Trade. The goods may be classified under any of the following categories: 1. Free goods-item which can be exported without any restriction; 2. Restricted goods-items which can be exported only under a licence; 3. Canalized goods-items export of which can be done only through the specified canalizing agencies 4. Prohibited goods and items which cannot be exported.
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NSICs PROCEDURE OF FINANCING:

Raw Material Assistance Scheme aims at helping Small Scale Industries/Enterprises by way of financing the purchase of Raw Material (both indigenous & imported). This gives an opportunity to SSI to focus better on manufacturing quality products. Benefits of the Scheme Financial Assistance for procurement of Raw Material upto 90 days. SSI helped to avail Economics of Purchases like bulk purchase; cash discount etc. NSIC takes care of all the procedures, documentation & issue of Letter of cred it in case of imports. How to Apply The Entrepreneurs are required to apply for Raw Material Assistance only on the prescribed application forms. The application forms downloaded from the link given below may be filled and submitted to the concerned Regional & Branch Offices. The blank forms are also available free of charge from the Regional and Branch offices. The Process 1. Duly filled application form is to be submitted along with the Application Processing Fee (by Bank Draft / Pay Order in favour of NSIC Ltd.). 2. Preliminary appraisal and Unit inspection is carried out by NSIC.
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3. Sanction of Limit to the Unit. 4. Signing of agreement between NSIC and Unit. 5. Disbursement of assistance to the unit.
Terms and Conditions: Processing Fee Under Open Hypothecation. Security in the form of Interest Rate Maximum Period of Facility Service Charge Bank Guarantee 14% Upto 90 days 0.25% minimum for 30 days and thereafter 0.08% every week OR 2% per annum of limit sanctioned paid in advance Under Lock & Key (Material is stored in CWC or NSIC's own godown) Security in the form of Surrender value of LIC Policy, Units of UTI /NSCs Or Collateral Security (Other than BG) Interest Rate Maximum period of facility Service Charges 14.5 - 17.5% 90 Days 1% for 60 days and thereafter 0.25% every 15 days OR 4% per annum of the limit sanctioned paid in advance Documentation: Application in Prescribed form should be submitted with the following i. ii. Processing fee Photocopy of valid SSI Registration Certificate Rs. 200/- for assistance value below Rs. 5 Lacs.
iii. Latest income tax assessment orders or clearance certificate in respect of the proprietor/partners/directors in their individual capacity
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iv. Specimen signature of the authorised signatory of the applicant unit attested by the banker of the unit. v. If a Private/Public Ltd. Company, a copy of board resolution authorising the signatories to sign for and on behalf of the company. vi. In case of Private/Public Ltd. Company, articles of Memorandum of Association with the list of Directors/Shareholders and if it is a partnership concern, a copy of the partnership deed duly registered with the Authority letter in respect of authorised partner. vii. The statement of personal assets & liabilities of each Proprietor/Partner/Director. viii. In case of any of the Directors (applicable to a Limited Company), partners (applicable to partnership concern), office bearers (applicable to co-operative societies or Trusts) Proprietor of the applicant unit is associated with any other concern(s), the following details in respect of same may please be furnished: a. Name of the Person (s) b. Name & Address of the Firm in which interest is held c. Details of Share Holdings ix. Audited Annual Accounts for last 3 years along with annual report of the applicant unit and associate firms. x. Copies of sanction letter, for the credit units sanctioned by back/financial Institutions.
Documents needed for processing and release of Payment: i. Material Receipt as per Format. ii. Demand Promissory Note as per Format & duly signed. iii. Letter of Continuity as per Format. iv. Bills / Invoices for release of payment in favour of supplier.
USUAL MODES OF EXPORT FINANCE:

1. Pre-shipment credit in foreign currency. 2. Advances against duty drawback. 3. Other services to exporters. 4. Purchase/Negotiation of export bill. 5. Advance against bills under collection.
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1. PRE-SHIPMENT CREDIT IN FOREIGN CURRENCY:

Under the Pre-shipment Credit in Foreign Currency (PCFC) exporters are allowed to avail pre-shipment credit in a convertible currency at interest rates not exceeding 1.5% over 6 months Libor plus without holding tax. The credit will be self-liquidating in nature & will be adjusted by discounting the relative export bill designated in foreign currency. The credit under the scheme is available for a maximum period of 180 days. If extended beyond this period, 2% penal interest is charged. If the PCFC is not adjusted within 360 days, it will be adjusted at the TT selling rate for the currency concerned & will be treated as a rupee advance. PCFC can be extended in one convertible currency in respect of an export order invoiced in another convertible currency. For instance, an exporter can avail of PCFC in US dollar against an export order invoiced in Deutsche mark. The risk & cost of cross currency transaction will be that of the exporter. PCFC may also be availed in rupees towards local payments for materials, labour, etc. In that case the liability of the exporter will be designated in the foreign exchange by applying the ruling TT selling rate.
Forward Cover for PCFC: No exchange risk involved if the PCFC is availed in the same foreign currency as the invoice. If the invoice is in Indian rupee and the PCFC is availed in Indian rupee, yet the liability of the exporter under PCFC will be designated in foreign currency, say, US dollar. In such case, the exporter may book forward cover as under:
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a) From the date of order/letter of credit to the date of drawal of PCFC covering the amount of PCFC sanctioned; and b) From the date of order/letter of credit to the date of discounting converting the invoice less PCFC sanctioned/drawn.
If the exporter avails PCFC in a currency other than the currency of invoice forward cover may be booked as follows: a) Forward cover I the currency in which PCFC is availed of and the rupee, from the date of order/letter of credit to the date of drawl of PCFC, covering the amount of PCFC sanctioned. b) Cross currency forward cover in the currency in which PCFC is availed against invoiced currency from the date of order/letter of credit to the date of discounting. c) Forward cover from the date of discounting between rupee and the currency in which PCFC is taken, to the extent of amount available after discounting of bills and repayment of outstanding PCFC. On availing of PCFC, the contract should be cancelled at prevailing market rates to the extent of the PCFC drawl used for payment towards imported inputs in foreign currency.
2. ADVANCE AGAINST DUTY DRAWBACK:

The import duty paid on raw materials or components for export products or the excise duty paid on items indigenously produced for export are repaid to the exporter on completion of the export. The item on which duty drawback is available is determined by govt policies. The need for advance against duty drawback arises because of the delay involved in verifying the claims of the exporter by the authorities concerned and payment of the drawback by them. The exporters funds are locked up during this interval and he seeks financial assistance from the bank to tide over the situation.
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Normally, the exporter can claim the drawback amount from the customs authorities only after export of goods by producing the necessary documents to them. But bank finance against incentives may be made available either at the pre-shipment stage or at the pastshipment stage. Advance at the pre-shipment stage may take the form of packing credit being granted at a level higher than the FOB value of the contract. Advance against drawback at the preshipment stage is granted only to exporters of goods standing on. Advance may also be made at the post-shipment stage as a separate limit. The advance will be disbursed when the exporter males a claim with the concerned authorities and produces copies of the claims to the bank. As per the RBI directive, advance against incentives can be granted for a maximum period of 90 days at an interest rate of 13% per annum. The advance is to be adjusted out of the incentives to be received by the bank on behalf of the exporter. All claims are now payable directly to the bank. A declaration by the exporter authorizing payment to the bank should be registered with the concerned authorities.
3) OTHER SERVICES TO EXPORTERS:

a. Advising Letter Of Credit:
The letter of credit issued in favour of exporters in India is normally advised through a bank in India. A bank in India may receive a request to advise the letter of credit from its correspondent bank abroad. The letter of credit may be received through cable or by airmail. Where the credit is received by cable, the bank should verify the authenticity by means of the test code incorporated in the message. It should also be noted if there is a mention about airmail confirmation. In the absence of any such notation, the cable message will be the operative instrument. Where the letter of credit is received by airmail, the bank should verify the authenticity of the letter of credit by comparing the signature on the credit with the specimen signatures supplied by the issuing bank; the letter of credit may be advised in either of the 2 ways:
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a) The credit received is incorporated in the format of the advising bank and forwarded to the beneficiary.
b) More commonly, the credit received is forwarded in original to the beneficiary. The advising bank may certify that the signatures on the credit have been verified, by way of a rubber stamp affixed on the letter of credit. Or, a covering letter from the bank may accompany the credit. Such letters of credit are called hand-on credits.
Whether it is a cable credit or airmail credit, the banks should ensure the following: a) The letter of credit conforms to the exchange control requirements in India. b) Proper record is maintained of the letter of credit advised. c) A notation is made in the credit that stamps worth RS.2 should be affixed on the instrument before documents are negotiated under the credit. d) A statement, in form Stat 9, is sent to the Reserve Bank every month for all letters of credit advised, including those confirmed by it.
Advising amendments If the credit is amended, the bank should follow the same procedure for advising the amendment as is followed for advising the letter of credit. Record of the amendment advised should be kept along with the record of advising of the letter of credit. b. Confirming letter of credit:
A letter of credit may be confirmed by the bank in India when a request to this effect is received from the opening bank of the credit. The branch which receives the request to confirm should consult the Head Office to verify that the limit fixed for the opening bank for confirming letters of credit on its behalf is not exceeded. The letter of credit is confirmed by making an appropriate note in the letter of credit under the signature of officials of the confirming bank. The confirmed credit is then advised to the beneficiary.
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For the risk involved in confirming letter of credit, the bank can avail of the transfer guarantee of the ECGC. c. Transfer of letter of credit A request may be received from the beneficiary of the credit to transfer a part or whole of the credit to other exporters(s). The bank should verify that a) The credit is transferable; and b) The second beneficiary is an exporter having an exporters code number.
If the entire credit is transferred to another exporter and the first beneficiary doesnt mind the importer and the second beneficiary knowing each other, the transfer can be affected by simply making an endorsement to this effect and forwarding it to the second beneficiary. The commission for transferring the credit should be recovered from the first beneficiary.
4) PURCHASE/NEGOTIATION OF EXPORT BILL

(Under and Not under Letter of credit) When a bill is drawn under a letter of credit, the bank has the credit to look to for the conditions to be fulfilled in the preparation of the documents. But where the transaction is not covered by a letter of credit, only the sale contract between the exporter and the importer should be relied upon. The bank may have a general scrutiny of the sale contract to see that the documents tendered are in order. Payment of the ECGC: Settlement of a claim by ECGC does not absolve the exporter of the obligation on the Form GR/PP to realize proceeds of the export within prescribed period. In such cases, exporter should, in consultation with ECGC, take all necessary steps for realizing the proceeds. The bank should continue to hold the duplicate copy of Form GR/PP in its custody and initiate follow-up measures in the normal manner.
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Post-shipment credit in Foreign Currency Reserve bank introduced a scheme of Post-shipment Export Credit Denominated in Foreign Currency (PSCFC) to be operated by banks effective from January 1, 1992. The objective of the scheme was to provide exporters with post-shipment credit denominated in foreign currency at interest rates comparable to international interest rates. The scheme was withdrawn with effect from February 8, 1996.
5. ADVANCE AGAINST BILLS UNDER COLLECTION

An exporter, whose bill has been taken for collection by the bank, may accommodate him by allowing an overdraft or granting a loan up to a certain % of the bill under collection. The major difference between an advance against bill for collection and purchase of a bill is that the former is a rupee advance and the exchange risk remains with the customer. The final amount that the customer realizes, in rupees, on the bill will be determined by the rate of exchange prevailing on the date of realization by the bank. Secondly, when a bill is purchased the full value of the bill is paid to the exporter. If margin is stipulated, the full value less the margin is paid to him. Normally, advance against the bill under collection is made only up to a % of the bill value. Thirdly, when a bill is purchased, the bank becomes the holder of the bill. When an advance is made against the bill under collection, the bank continues to be agent of the exporter. The bank retains the right to reimburse itself from the proceeds of the bill. If the bill is dishonoured, or otherwise there is under delay or difficulty in realizing the bill, the bank can cover the advance from the exporter.
DEVELOPING AN EXPORT PLAN:

Once you have decided to sell your products abroad, it is time to develop an export plan. A crucial first step in planning is to develop broad consensus among key management on the company's goals, objectives, capabilities, and constraints.
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In addition, all aspects of an export plan should be agreed upon by the personnel involved in the exporting process, as they will ultimately execute the export plan. The purposes of the export plan are (a) to assemble facts, constraints, and goals and (b) to create an action statement that takes all of these into account. The statement includes specific objectives, it sets forth time schedules for implementation, and it marks milestones so that the degree of success can be measured and help motivate personnel.
At least the following ten questions should ultimately be addressed: 1. Which products are selected for export development? What modifications, if any, must be made to adapt them for overseas markets? 2. Which countries are targeted for sales development? 3. In each country, what is the basic customer profile? What marketing and distribution channels should be used to reach customers? 4. What special challenges pertain to each market (competition, cultural differences, import controls, etc.), and what strategy will be used to address them? 5. How will the product's export sale price be determined? 6. What specific operational steps must be taken and when? 7. What will be the time frame for implementing each element of the plan? 8. What personnel and company resources will be dedicated to exporting? 9. What will be the cost in time and money for each element? 10. How will results be evaluated and used to modify the plan? Objectives in the plan should be compared with actual results to measure the success of different strategies. The company should not hesitate to modify the plan and make it more specific as new information and experience are gained.
USUAL PROBLEMS IN OBTAINING EXPORT FINANCE: a) Exporters have been facing the procedural rigidities & technicalities. b) Exporters are not aware with the ever changing document process unless they appoint technical consultants.
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c) Pre-ship finance is available generally 3 months during which the process maynt be completed. d) Bank tendering export finance often suspects the genuineness of underlying BOE & other instruments. Unless they are supported by bill of lading, mates receipts etc. e) Now a days export finance institutions have made it obligatory to provide money convertible instruments as the collateral to issue LOC. f) Generally exporters face the rigorous protocols in availing the post-shipment finance at various levels. In general sense bankers are rejecting to provide post-shipment finance unless it is through discounting of bill. g) The interest charged by export finance institutions is not in par with the markets. Therefore higher rate of compulsion will be there to fling to lessor repayment period. h) EFIS may show their reluctant in tendering the loans unless the vogue is covered by the appropriate marine insurance policy. i) Exporters are often exposed to legal rigidities like compulsory excise payment, ccustom duties.
ROLE OF EXPORT INTERMEDIARIES:

Export intermediaries are of many different types, ranging from giant international companies to highly specialized, small operations. They provide a multitude of services, such as performing market research, appointing overseas distributors or commission
representatives, exhibiting a client's products at international trade shows, advertising, shipping, and arranging documentation. In short, the intermediary can often take full responsibility for the export end of the business, relieving the manufacturer of all the details except filling orders. Intermediaries may work simultaneously for a number of exporters on the basis of commissions, salary, or retainer plus commission. Some take title to the goods they handle, buying and selling in their own right. Products of a trading company's clients are often related, although the items usually are noncompetitive. One advantage of using an intermediary is that it can immediately make available marketing resources that a smaller firm would need years to develop on its own. Many export intermediaries also finance sales and extend credit, facilitating prompt payment to the exporter.
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DOCUMENTS USED IN FOREIGN TRADE FINANCE:

1. Bills of exchange 2. Marine insurance policy 3. Invoices 4. Certificates and other documents
BILLS OF EXCHANGE:
A bill of exchange is an instruction by the exporter (drawer) to the importer or the importers bank to make payment of the amount mentioned in it. Types of bills: 1. Sight and usance bills: A bill of exchange is a sight bill (or demand bill) if the drawee is to make payment immediately on presentation of the bill to him. A bill is a usance bill if the drawee is to make payment after a period specified (say, 30 days or 60 days) in the bill has expired. In some countries, including India, for all usance bills, a grace period of three days is available. That is, the bill becomes payable 3 days after the due date calculated as per the usance of the bill. 2. D/A & D/P bills: A usance bill may be on D/A or D/P terms. If it is on D/A terms (documents against acceptance), the collecting bank is to deliver the documents to the drawee on the acceptance of the bill by him. The payment will be made by the drawee on the due date of the bill.
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If it is a D/P bill (documents against the payment), the documents will be delivered to the drawee only on payment till which time they are retained by the bank. So the bank retains control over goods till payment is received.
3. Inland and foreign bill: According to negotiable instruments act, a bill which is drawn in India & made payable in or drawn upon any person resident in India is an inland bill. Thus an inland bill must fulfill both the conditions that A. It is drawn in India, B. It is payable in India Foreign bills are normally drawn in sets. Section 132 of the negotiable instruments act provides: Bills of exchange may be drawn in parts, each part being numbered and containing a provision that it shall continue payable only so long as the others remain unpaid. All the parts together make a set; but the whole set constitutes only one bill is extinguished when one of the parts, if a separate bill, would be extinguished.
MARINE INSURANCE POLICY:

1. Contents of policy: The marine insurance act provides that a contract of marine ins. shall not be admitted in evidence unless it is embodied in a marine policy in accordance with the act. The policy must specify the following: a. The name of the assured or some person who affects the insurance on his behalf; b. The subject matter insured and risk insured against; c. The voyage or period of time or both, as the case may be, covered by the insurance; d. The sum or sums insured; and
e. The name or names of the insurer or insurers.

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INVOICES:
1. Commercial invoice Statement containing full details of the goods shipped. The general content of a commercial invoice used in foreign trade are: a. Names and addresses of the seller and the buyer b. Detail of goods shipped c. Packing details d. Price and amount payable by the buyer e. Terms of tradeFOB, CFR or CIF, etc., f. Details of freight charges g. Reference to the sale contract h. Name of vessel in which goods are shipped i. Reference to the license number under which import is made 2. Consular invoice It is a special type of invoice, usually in a prescribed form, describing the details of the goods shipped. 3. Legalized invoice The purpose of a legalized invoice is similar to that of a consular invoice. 4. Certified invoice A commercial invoice becomes a certified invoice when it contains certain certification by the exporter. a. The goods are of a particular country
b. The goods are in specific contract
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DEALING WITH DISCREPANCIES IN DOCUMENTS: When the bank is satisfied that the doc. Tendered under a letter of credit satisfy the requirements of the credit, they may be negotiated and amount paid to the customer. a. Conformation of opening bank It may be initiate the credit opening bank of the discrepancies and seek their confirmation. While seeking the confirmation by cable or letter, the bank should take care to include all the discrepancies found precisely and completely. b. Negotiation under reserve Even where the confirmation of the opening bank is sought by cable, it takes some time to get it. As, already noted, negotiating under reserve is done only for customers of goods standing. c. Negotiation under indemnity Under this method the exporter executes an indemnity bond in favor of bank under which he promises to reimburse the bank for any loss that the bank may be put to on account of negotiating the doc. with discrepancy. d. Take under collection Where the documents are presented by a person other than the customer of the bank, the negotiating bank may request that the documents be presented through th e exporters bank. Here too, if discrepancies are found in the documents, the bank may: 1. Pay after getting confirmation from the opening bank; or 2. Pay against indemnity of the exporters bank; or
3. Refuse to accept the documents.
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EXPORT DECLARATION FORMS:

All exports from India are declared in any of the following export declaration forms as is appropriate: a) Form GR exports otherwise than by post, including export of software in Physical form b) Form SDF exports through custom offices with EDI system c) Form PP exports by post d) Form SOFTEX export of software otherwise than in physical form. PURPOSE: Export declaration forms are important set of documents through which realization of export proceeds are monitored. The contain details like value of goods, quantity, commission payable, discount allowed, freight, etc. customs verify the value of goods as declared in the form and allow the exports only when satisfied. (1) Procedure for form GR: Form GR is printed by reserve bank and made available to exporters through authorized dealers. It is a set of two copies and both the copies should be completed and submitted by the exporter, along with the shipping bill, to the customs at the port of shipment. 2) Form SDF: For clearance of goods for exports through customs offices which have introduced EDI (Electronic Data Interchange) system of processing shipping bills etc., Form GR has been replaced by form SDF (Statutory Declaration Form). Form SDF in respect of such shipping bills should be submitted in duplicate to the customs. After verifying and authenticating the declaration form SDF, customs will hand over to the exporter one copy of the shipping bill marked Exchange Control Copy with form SDF thereto, for submission to the bank.
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The bank should process form SDF in the same manner as that followed for Form GR. 3) Procedure for Form PP For exporting by parcel post the exporter should declare in Form PP. For PP is also to be completed in duplicate. The form should be presented by the exporter to an authorized dealer for counter-signature. The bank should countersign Form PP after ensuring that the parcel is addressed to their branch or correspondent bank in the country of import, to be delivered to the consignee against payment or acceptance of the relative bill.
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CHAPTER 5
STATISTICS & DATA INTERPRETATION
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NSIC STATISTICS IN 2009-10:

Business Turnover The business turnover of the Company for the year 2009-10 went up to Rs. 4488 crore as compared to Rs. 3508 crore in the previous year registering a growth of 28%. This growth assumes greater significance since the economy all over the world, after witnessing a slowdown, was struggling to revive and come back on normal growth path.
Raw Material Assistance NSIC continued with its efforts to provide various raw materials like steel, aluminum, zinc, copper, paraffin wax etc to MSMEs through arrangements made with bulk manufactures of these materials. The Company also started distribution of coal to MSMEs in the state of West Bengal and has taken up with other states to obtain authorization for starting this activity. Total raw materials facilitation to MSMEs, in quantitative terms, grew up by 18% from 3,02,164 MTs in 2008-09 to 3,55,719 MTs in 2009-10. In terms of the value of raw material assistance extended to MSMEs, the growth of 29% was witnessed as it increased to Rs. 4301 crore in the year 2009-10 from Rs. 3322 crore in 2008-09. The Portfolio of Raw Material Assistance against Bank Guarantee reached to Rs.578 crore on 31st March, 2009 as against Rs. 306 crore on 31st March,2008, thereby registering a growth of 89% during the year.
Credit Facilitation Credit facilitation by NSIC during the year 2009-10 to Micro, Small & Medium Enterprises increased to Rs.1056 crore from Rs. 688 crore in the previous year, registering a growth of 53%.
Export financing: Export to the tune of Rs.48 crores was facilitated during 2009-10 and during 2008-09 Export to the tune of Rs.40 crores has been facilitated.
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Government Purchase & Infomediary Services:
The Revenue from Government Purchase and Infomediary Services (B2B Portal) increased to Rs.5.55 crore in the year 2009-10 from Rs. 4.12 crore in the previous year 200809, thereby posting a growth of 35% over the previous year. NSIC Technical Services Centres Financial year 2009-10 continued to be another year when all seven technical centres operated without getting any grants to meet their administrative cost. This could be possible through the Technical Centres beginning to undertake Techno-Commercial activity. The aggregate income of the Technical Services Centres rose from Rs. 12.54 crore in 2008-09 to Rs. 17.16 Crore in the year 2009-10, registering the growth of 37%.
Implementation of Plan Schemes For the financial year 2009-10, Government Grants were available for two schemes namely Performance & Credit Rating Scheme and Marketing Assistance Scheme. The Company received Rs. 35.09 crore as reimbursement of the expenditure incurred by NSIC under the above two schemes, implemented on behalf of the Government. Under the Performance & Credit Rating Scheme, 7531 micro & small enterprises were rated during the year, an increase of 50% over previous year. Under the Marketing Assistance Scheme, NSIC conducted various events namely Exhibitions, Buyers Sellers Meets, Marketing Campaigns etc. The total number of events held during the year was 963 as against 874 in the previous year.
NSIC Exhibition-cum-Marketing Development Business Park (EMDBP) at Hyderabad: The construction of an Exhibition cum Marketing Development Business Park (EMDBP) at Hyderabad having total floor area of around 15,000 Sqm over a sprawling 8 acre campus has been successfully completed and the building has become operational. The state of art five storied building is equipped with all modern amenities having Exhibition hall, Conference room, Office space & Food court.
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International Co-operation The objective of International Co-operation activities is to initiate long term and sustainable enterprise to enterprise cooperation between Indian enterprises and enterprises in the target countries. This is achieved by exchanging business delegations and organizing one -on-one business meetings with the enterprises of both the countries. The various business delegation meets organized by NSIC during the year 2009-10 are:
NSIC took a business delegation to China which comprised of the micro & small enterprises in the field of light engineering machinery, auto parts, machine components and industrial fabrication.
NSIC organized a business delegation to Trinidad & Tobago which facilitated Indian MSMEs to meet their counterparts in target country and explore opportunities for business venture between both the countries. During the visit of Lieutenant General Mompati Sebogodi Merafhe, Honble Vice President of Botswana to India an agreement of mutual cooperation was signed between NSIC, and Local Enterprise Authority (LEA) of Botswana for the development of Micro, Small & Medium enterprises in both the countries.
An agreement of mutual cooperation between NSIC and Industrial & Infrastructure Development Finance Company Ltd. (IIDFC), Bangladesh, Dhaka was signed on 30th March,2010 for the development of Micro, Small & Medium Enterprises in both countries.
An agreement of mutual cooperation between NSIC and One Village One Product (OVOP), Board of Malawi was signed for the development of Micro, Small & Medium Enterprises in both countries. In addition to exchanging business delegations and organizing business meets, NSIC also provides consultancy services in diverse areas namely: Policy & Institutional Framework, Business Development Services and Capacity Building of Institutions engaged in MSME development.
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FUNDS FROM THE GOVT. BUDGET:

Though MSMEs play a key role in the economy, the sector is usually ignored in the central budgets. The Budget this time was no different, though the finance minister devoted two paragraphs of his speech to the sector. But the important issues dealt with in the speech were on allocations made to the sector-focussed financial institutions, Sidbi and Nabard. For Sidbi, the finance minister said the allocation made for refinancing incremental lending by banks to MSME enterprises would be raised from Rs.4,000 crore in 2008-09 to R5,000 crore in 2009-10. The Rs.3,000 crore allocated for Nabard was to benefit 15,000 weaver cooperative societies and 3 lakh handloom weavers, through a scheme worked out by the ministry of textiles. However, the 12.5% increase in direct budget spending through the MSME ministry to Rs.3,001 crore in 2009-10 was a sharp deceleration from the 58.3% increase in the ministry's spending for 2008-09. The increase in allocations was also very uneven across major spending areas. The khadi and village industries segment, which receives around half the funds allocated for the ministry, saw their outlay increase by a paltry 3.3%. In fact, the allocation for this segment went down from 59% in 2008-09 year to 54% in 2009-10. The MSME segment, which gets less than a third of the ministry's allocations, saw its budget allocation grow by a respectable 12.9%. The allocation for coir industries hardly made up for inflation, with the allocation rising by just 1.7%. With the coir products now coming under an export cess, the industry is likely to be a net loser in the Budget. However, the allocation for the north-eastern region increased by 12.3%. This is substantial and the ministry allots close to a tenth of the spending to this region. The biggest gainer was the National Small Industries Corporation which saw its allocation surge up by a massive 110.4% to a substantial Rs.705 crore. The bulk of the allocation (Rs.550 crore) went to non-Plan spending and the Plan allocation was just Rs.155 crore. The massive injunction of funds was based on the recommendations of the Prime Ministers Task Force on the sector, which favoured larger equity investment in NSIC.
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The funds for NSIC will help on many fronts as the organisation is mandated to provide integrated support services for marketing, technology, finance and the like. This higher support to NSIC is significant as its marketing assistance scheme ensures that micro and small enterprises are provided support to market their products in the domestic and international markets. The corporation's performance and credit rating scheme ensures that the micro and small enterprises are subsidised by the government to the extent of 75% (up to a maximum of Rs.40000) for getting themselves rated for performance and creditworthiness by empanelled accredited credit rating agencies.
FINANCING EXPORTS
40% 35% 30% % OF EXPORTS 25% 20% 15% 10% 5% 0% SBI AB DCB HDFC NSIC SBH
EXPORTS
3 AMOUNT IN CRORES 2.5 2 1.5 1 0.5 0 SBI AB DCB HDFC NSIC SBH B ANKS
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EXPORT FINANCE STATISTICS IN 2009-10:

BASED ON THE EXPORT TURNOVER:
TURNOVER(in crores) <5 5 to 10 10 to 20 20 to 30 >30
NO.OF exports) 32 8 4 3 5
COMPANES(as
per
NO.OF COMPANES(as per exports)

40 30 20 10 0 <5 5 to 10 10 to 20 20 to 30 >30 NO.OF COMPANES(as per exports)
BASED ON COUNTRIES EXPORTED TO:
NO.OF COUNTRY COMPANIES asian 19 (usa-8,uk-11,bothusa, uk middle east african 13 9 7

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3)
NO.OF COMPANIES
20 15 10 5 0 asian usa, uk middle east african NO.OF COMPANIES
BASED ON THE TYPE OF PRODUCTS EXPORTED:
PRODUCT NAME chemicals cement sheets pharma engineering items processed foods production machinery electronic items automobile spare parts others
NO.OF COMPANIES 9 9 7 8 3 3 6 2 5
NO.OF COMPANIES
10 8 6 4 2 0 chemicals cement sheets pharma
processed
engineering
automobile
production
NO.OF COMPANIES others
electronic items
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EXPORT GRAPHS:
Total amount granted by NSIC Hyderabad for export development finance in 2009-10 is 4.7 crores. The categorical split up of this amount is as follows.
PRODUCT NAME chemicals cement sheets pharma engineering items processed foods production machinery electronic items automobile spare parts others
1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0
AMOUNT 2009-10)
0.3 0.4
GRANTED(in AMOUNT GRANTED(in 2008-09)

0.2 0.5 0.3 1.5 0.2 0.2 0.3 0.7 0.8
0.4 1.1 0.5 0.2 0.2 0.9 0.7
AMOUNT GRANTED(in 2009-10) AMOUNT GRANTED(in 2008-09)
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QUESTIONNAIRE:
For this questionnaire, a sample size of 30 SMEs is taken, which is a composition of different categories that includes., Sheet metal fabrication Engineering works Pistons & Pumps Railway components manufacturing Farm equipment, etc.
(1) Are you aware of NSIC and its financing schemes? YES 11
20 18 16 14 12 10 8 6 4 2 0 YES NO
NO 19
Series1
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INTERPRETATION: By this, it is understood that the reach of NSIC and its schemes is poor in the SME sector and there are still more such enterprises whose needs are to be catered to. If YES, (1) Have you ever availed any of these schemes? YES 7
10 8 6 4 2 0 1 YES NO
NO 4
out of these export schemes=3
INTERPRETATION:
This shows that more SMEs have to be made to register and avail these services by making them aware of how these schemes would help them, like in case of working capital requirements, raw material assistance, export financing, marketing fares, etc.
(2) Are you satisfied with the interest rates and the loan repayment procedures? YES 9 NO 2
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10 9 8 7 6 5 4 3 2 1 0 1
YES NO
INTERPRETATION: As per the above response, we can say that a majority of the SMEs have the opinion that the interest rates and the loan repayment procedures of NSIC are flexible enough to avail.
(3) Do you think the criteria to be met for availing these facilities is flexible?
YES 9
10 9 8 7 6 5 4 3 2 1 0 1
NO 2
YES NO
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INTERPRETATION: The financial schemes has to be made more transparent and complexity of the criterion to be met and the documentation has to be lowered as majority of the SMEs complain in these concern as it is the major hindrance for them to avail the services of the NSIC.
If NO, (1) Do you feel like any govt. body like NSIC has to cater to the financial aid of SMEs?
Column1 YES NO
Column2 13 6
Column2
YES NO
INTERPRETATION: Almost 70% of those SMEs that are not aware of NSIC schemes feel the necessity of an organized body so as to benefit financially by the subsidies and services provided by the govt. Also such a body helps them to market themselves by trade fairs and also helps them export their products to other countries.
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(2) How do you feel about obtaining of credit from other sources?
Column1 very difficult difficult medium easy very easy
Column2 4 6 2 4 3
Column2
very difficult difficult medium easy very easy
INTERPRETATION: Obtaining of loan from other sources like commercial banks, financial institutions and other informal means has said to difficult by the respondents. There are many reasons for this like higher interest rates, lower repayment periods, and the risks involved with them. And they also find need for a govt. organization like NSIC.
(3) Do you feel the marketing trade fairs conducted by NSIC would really help the SMEs in projecting themselves?
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YES 21
NO 9
Column2
YES NO
INTERPRETATION: For SMEs to get customers there is a need to conduct marketing fairs so that there will be a direct interaction with the customers, so as to market themselves.
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CHAPTER 6
FINDINGS, RECOMMENDATIONS & CONCLUSION
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FINDINGS:
1) Awareness of NSIC and the reach of its schemes are very less. 2) Few enterprises which are aware of those schemes are repetitively availing the services. Thereby, scope of new enterprises registering with NSIC has become less. 3) In case of the export development finance scheme of NSIC, many SMEs feel it difficult to meet the prescribed criteria, as the documentation process is a tedious one. 4) Maintenance of a consistent database of registered SMEs helps the NSIC in identifying the financial requirements of those enterprises, and in meeting them. 5) Conducting of trade fairs to have a direct contact between the vendor and the customer, which helps the vendor to market his products, and the customer to choose among the existing vendors.
RECOMMENDATIONS:
1) Improving the reach of the NSIC schemes by conducting campaigns, thereby creating awareness among the SMEs. 2) As there are many more SMEs of those categories that already registered with the NSIC, such enterprises should also be recognized and are allowed to participate in the trade fairs. Hence, the buyers who visit the fair will have an opportunity to choose among them, based on its requirements. 3) NSIC has to make a census of the SMEs existing in its region periodically so as to find the ones which are not been served and help them utilise the financial services provided by them. 4) In the trade fairs conducted by the NSIC, the organization has to rate the SMEs based on various parameters both on financials and that of the product, so as to prioritize the enterprises in providing incentives.. This builds competitiveness among the SMEs. 5) Feedback has to be taken from the SMEs who have earlier availed these services and required changes have to be made, if necessary, to be flexible for the SMEs.
64
CONCLUSION:
The Reach of NSIC into the SME sector is increasing day by day as the organization is striving to make more companies register with it. Several campaigns and exhibitions are conducted so as to make the companies project themselves. Still the no. of companies availing these schemes is very less as many of the remaining are still unaware or unable to avail them. Hence, more transparency is required in terms of enrolling, sanctioning and availing of financing, so as to encourage the rest. Gaps have to identified and addressed in this concern. Also, the NSIC has to update the database on a regular basis, so as to continuously monitor the financial needs of the registered companies and cater to them, at the same time making a census of the new SMEs and registering with it.
65
BIBLIOGRAPHY
www.nsicindia.com www.nsic.co.in www.smeloanshub.com www.cgtmse.in www.365businessdays.com EXIM BANK Occasional paper no.132
66
ANNEXURE
QUESTIONNAIRE:
(1) Are you aware of NSIC and its financing schemes? YES/NO
If YES,
(2) Have you ever availed any of these schemes?
YES/NO
(3) Are you satisfied with the interest rates and the loan repayment procedures? YES/NO (4) Do you think the criteria to be met for availing these facilities is flexible? YES/NO
If NO, (5) Do you feel like any govt. body like NSIC has to cater to the financial aid of SMEs? YES/NO (6) How do you feel about obtaining of credit from other sources? DIFFICULT/DIFFICULT/MEDIUM/EASY/VERY EASY VERY
(7) Do you feel the marketing trade fairs conducted by NSIC would really help the SMEs in projecting themselves? YES/NO
67
INSPECTION OFFICERS REPORT:

National Small Industries Corp.-Technical Services Centre, Hyderabad
Registration of Small Scale Manufacturers Detailed report on inspection of premises Date of Inspectors visit to firm
1.
Location of Manufacturing Works
2.
Brief description of the factory E.G.: Area covered accommodation depts :
3.
Organization (Whether registered under Indian Factories/Companies Act) Supervision, Management, etc
4. 5.
Foreign Collaboration, if any Details of stores under manufacture at the time of inspection
: :
6.
Details of plant & machinery installed in each Department
7. Details under stocks of raw materials held At the time of inspection, also whether Imported or indigenous 8. Standard of Workmanship and quality
:
68
9.
The details of DGS&D/State Govt. bodies Orders handled by the firm, so far.
10. Capacity and out turn with the existing 11. Number of Supervisory Staff/Technical Staff& Skilled Lab our at present employed 12(a) Arrangements for quality control& Testing facilities available with Manufacturing unit (b) Details of common testing facilities And quality control providing in common At industrial Estate, or in a Laboratory, Etc. Which the Manufacturing Unit has access. (c) Agreement with any nearby large scale or small scale Unit about the Utilization of their testing facilities together with the details of such Facilities enjoyed. 13. Facilities for after sales service :
: :
14.
Whether the Proprietor/Partner/Director Has any link with large-scale industries, if So, details thereof
69
(a) Is the firm a subsidiary or associate Of a large scale Unit or not (b) Whether sizeable portion of the Capital and loan funds with one or Two large scale units under the same Management? (c) Is there any interlocking of capital And loan funds with one or two large Scale units under the same management? (d) Has any loan or advance been under Written by one or more large scale Units or persons possessing large Means?
15. (a)
RECOMMENDATIONS Remarks when not recommended
: : :
(b) Recommended for registration as a small Scale units and as manufacturers of
70
Sl.No. Name of the Stores
Specification to which Stores are manufactured
Qualitative Capacity
Quantitative Capacity Per month on single shift basis
Signature of the Divl.Head
Inspecting Officer
Counter signed:
Ref. No: NTSC/HYD/GP/RS/
DT:
Station: HYDERABAD.
71

Krishna Teja

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EXPORT DEVELOPMENT FINANCE

Summer Internship Project Report On

Faculty Guide Dr. Satinder Duggal Faculty/Mentor CUIM

Company Guide Mr. M.V.Soma Sekhar GM (Technical) NSIC

CHRIST UNIVERSITY INSTITUTE OF MANAGEMENT BANGALORE-560074

EXPORT DEVELOPMENT FINANCE

Krishna Teja Nukala Reg.no.1020217 CUIM, Kengeri Campus

EXPORT DEVELOPMENT FINANCE

Dr. Satinder Duggal CUIM Kengeri

Dr. S.Jeevananda Co-ordinator CUIM Kengeri

EXPORT DEVELOPMENT FINANCE

KRISHNA TEJA NUKALA

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

INTRODUCTION TO THE TOPIC:

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

OBJECTIVES OF THE PROJECT:

SCOPE OF THE PROJECT:

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

NTSC, HOWRAH: Plastic Machinery and Instrumentation

NTSC, HYDERABAD: Electronics and Computer Application

EXPORT DEVELOPMENT FINANCE

NTSEC, ALIGARH: Lock & Brass Hardware

NTSEC, RAJPURA: Domestic Electrical Appliances

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

Infrastructure Following facilities are available at NSIC Software Technology Park.

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

The above services will be offered in the selected clusters.

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

OVERVIEW OF EXPORT FINANCE IN INDIA: WHAT IS EXPORT FINANCE:

EXPORT DEVELOPMENT FINANCE

NSICs PROCEDURE OF FINANCING:

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

USUAL MODES OF EXPORT FINANCE:

EXPORT DEVELOPMENT FINANCE

1. PRE-SHIPMENT CREDIT IN FOREIGN CURRENCY:

EXPORT DEVELOPMENT FINANCE

2. ADVANCE AGAINST DUTY DRAWBACK:

EXPORT DEVELOPMENT FINANCE

3) OTHER SERVICES TO EXPORTERS:

EXPORT DEVELOPMENT FINANCE

EXPORT DEVELOPMENT FINANCE

4) PURCHASE/NEGOTIATION OF EXPORT BILL