Exim Management- Jute Bag Manu Unit(Export Oriented)

7/31/2019 Exim Management- Jute Bag Manu Unit(Export Oriented)

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JUTE SHOPPING BAG MANUFACTURING UNIT (EXPORT ORIENTED)

By

Arka Jyoti Paul

GITAM SCHOOL OF INTERNATIONAL BUSINESS

GITAM UNIVERSITY

EXPORT-IMPORT MANAGEMENT

VISHAKHAPPATNAM


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JUTE GROWING AREAS

Jute is a rainy season crop and hence sown from March to May according to rainfall andtype of land, and harvested from June to September depending on whether the sowingsare early or late.

India is one of the major jute producing countries, accounting for nearly two-thirds ofjute and allied fibers production. According to UN Food and Agriculture Organisation,India produced 2,041 metric tonnes of jute and jute-like fibers in 2006. Within India, themajor jute producing areas are West Bengal, Bihar, Assam, Orissa, Andhra Pradesh andTripura.

Earlier, jute was used mostly for the purpose of packaging, but the advent of syntheticfibers lead to a drop in the demand of the fiber. This dip, lead to intense research anddevelopment resulting in diversified jute products. The versatility of jute has enabled it tobe used in a number of industries ranging from fashion to automobile, hence opening newopportunities. For the purpose of this article, we have studied five opportunities aroundjute.

Jute products are gaining immense popularity around the globe due to the fibers

properties. Jute is high on tensile strength, is bio-degradable, inexpensive, and does notemit poisonous gasses when burnt. Moreover, advanced manufacturing techniques havealso transformed jute into an attractive and versatile fiber, with a high degree of userappeal. A dash of colours, a masters hand at work, and you have the perfect fabric thatcan be transformed into almost anything.

Major Growing AreasJute thrives best in damp heat, and the climatic conditions prevalent in West Bengal in

India are well suited for its cultivation. Indian states ideally suitable for the cultivation ofjute are:

West Bengal Bihar Assam Orissa Uttar Pradesh

Mesta, or Kenif, botanically known as Hibiscus Cannabinus, is also grown in these areasas a textile fiber. Mesta is a coarser, more brittle fiber, and is used by the jute mills in

admixture with jute to obtain certain desired properties.

Jute producing countries

The top Ten Jute Producing countries are:


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India Bangladesh People's Republic of China Cte d'Ivoire Thailand Myanmar Brazil Uzbekistan Nepal Vietnam

Jute Bags

Shopping bags, beach bags, Christmas bags, wine bags, designer bagsthese are just a

few of the options. The popularity of jute bags has been increasing tremendously both in

the international and domestic markets because it is available in the trendiest of design,

while being highly utilitarian and eco-friendly.

Jute bags fit in this space perfectly due to its high tensile strength and durability.

Moreover, with shopping marts such as Wal-Mart and Tesco switching to jute bags and

others following suite, the demand for these products is not anymore seasonal. Another

advantage is that these bags can be manufactured in several colours, designs, shapes, and

sizes, according to the consumers choice. The bags produced in India find market mostly

in Europe, and the profit margin ranges from as low as 20% to as high as 100% while

catering to niche markets.

On the other hand, the domestic market for jute bags is also fast catching up. This is

evident from the mushrooming of several retail outlets catering exclusively to juteproducts. According to Rajalakshmi of Chennai-based Jute Emporium, in India, these

bags are also being increasingly asked for by corporate houses and big businesses, which

are becoming environment conscious. She says that besides being inexpensive, another

advantage of using these bags is that it can be customized. Festive season also determine

the sales of such products in India. For example, for Rajalskshmi, Navratri and Durga

Puja season proves to be profitable. An unit manufacturing jute bags is highly labour-

intensive, and a skilled artisan can make up to 50-80 bags in a single day. For setting up a

medium-sized unit, a jute entrepreneur would require 10,000-12,000 sq feet of land, and

equipments such as sewing machines, screens for printing, and cutting equipments. The

operating cost of such a unit would be near about 2-2.5 lacs.

The government is also supportive and provides several concessions for exporting such

products. Given the nature of investment, demand for such products, and profit margins,

this area is worth venturing into.


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Project Introduction:

Jute shopping bag is an item which has large demand in our domestic market as well as inthe export market.

Jute is the world's second most used fiber after cotton. The India jute industry is an

integral part of the Indian Textile Industry. Jute is a natural fiber and is grown inextensive parts of West Bengal, Bihar, Assam, and Orissa.

The small scale sector in the Indian jute industry is being encouraged by Govt. to moveinto value added items like shopping bags, wine bags, beach bags , upholstery andconsumer durables which have increasing demand in advanced countries like EUcountries, USA, Japan etc. due to following advantages :

A natural fiber with golden and silky shine 100% bio-degradable and recyclable

Second most important vegetable fiber after cotton, in terms of consumptionand production in the world.

High tensile strength Durable Good insulating property Ensures better breathability Versatile and re-usableGiven the nature of investment, demand for such products, and profit margins, this area isworth venturing into. A shopping bag manufacturing unit (export oriented) of capacity

1000 to 1200 Pieces per day is envisaged to be set up near Kolkata where raw materialsand skilled labours are available.

SET UP THE COMPANY:

As a Partnership company, the statutory requirements to set-up the company is:-


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1.) Register our company under Partnership Deed Act, 19322.) INCOME TAX PERMANENT ACCOUNT NUMBER (PAN) - To start a

business we should have a permanent account number (10 digit alpha-numeric

number).It is issued by Income-Tax department of India

3.) BANK ACCOUNT - We will open a bank account with State Bank of India4.) IMPORTER EXPORTER CODE (IEC) - This is required for the identification of

the company, issued by the Directorate General of Foreign Trade (DGFT)

5.) REGISTRATION CUM MEMBERSHIP CERFICATE (RCMC) - We will getthe RCMC from Apparel Exports Promotion council (EPC)

6.) VALUE ADDED TAX (VAT)/ CENTRAL EXCISE REGISTRATION Forexercising proper administrative control on collection of Central Excise duty,

every manufacturer who is liable for payment of Central Excise duty is required

to get himself registered with the Central Excise Department under whose

jurisdiction his place of manufacture falls. (Section 6 of the CEA 1944 and Rule

174 of the CER 1944)

MANUFACTURING PROCESS


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Fabrics prepared form medium grade jute fiber (sacking) are used for the manufacturing

of jute bags usually used for domestic purpose in our country and fabrics prepared from

of white jute yarn (Hessian) are generally used for export purpose. These fabrics are

available in Kolkata market.

Fabrics are taken and pass over sizing table to cut the fabrics in proper size according torequirement. (Size may be varied from height 15" - 30" and width 10" - 25" generally

without handle). After proper cutting of fabrics, bags are stitched in sewing machine.

When the stitching of bags are over then put the handles on the bag and make the

stiffening border over the bag to make it proper strength. For making decorative bags,

decorative fabrics, dyed or printed fabrics are used:

PROCESSING FLOW SHEET:

FABRICS (SACKING QUALITY)

TO SIZE THE FABRICS

SEWING THE FABRICS TO MAKE SHAPE OF BAG

NOW PUT HANDLES OVER THE BAG

BAG IS READY

GRADED BAGS

STORE

MARKET

PASS OVER SIZING TABLE

PASS THROUGH THE

SEWING MACHINE

GRADING THE BAGS

ACCORDING TO SIZE


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PRODUCT SAMPLES:


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Proposed Location

Location of a plant is determined on the basis of proximity to raw materials, availabilityof infrastructure and distance to potential market areas. Proposed areas selected is

Kolkata as because the main raw material that is jute is produced in high amount in westBengal and Kolkata has easy transportation link with other parts of West Bengal fromwhere the jute will be procured. It is therefore suggested that jute bags producing plant beestablished in shone town.

MANPOWER REQUIREMENT

The plant requires manpower both for production and administrative work. The details of

manpower requirement including monthly salary and annual expenditure is given in

Table

JOB TITLE REQ NO MONTHLYSALARY

ANNUALWAGES

A.ADMINISTRATIONPlant manager 1 5000 60000

Secretary 1 500 6000

Clerk 2 3000 36000

Accountant 1 3000 36000

B. PRODUCTIONSupervisor 1 4000 48000

Worker/ labourer 16 2200 26400

Packer 2 2000 24000

Total 24 19,700 2,36,400

Plant and Machinery:

1. Bag Sewing Machine12 Nos.2. Interlock Sewing Machine2 Nos.3. Cutting Table2 Nos.4. Cutting equipments and stencils etc1 lot.

ABOUT THE BUYER


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The buyer is located in Saudi Arabia; the company name is SOUDI UNITED CO. It islocated in Al-Fouhad Building, Hail Street JeddahSaudi Arabia. The buyer is a reseller tothe multi complex and shopping mall in SAUDI ARABIA. He informed us about thehigh demand of jut fashionable bags in Saudi Arabia.

Export Promotion Council for Handicraft

Marketing Strategy:

1. - To participate in International Trade Fairs where buyers meet sellers.

Partial participation cost is reimbursed by respective Export promotion councils.

Fair Name Venue Date

Heimtextil Fair Frankfurt (Germany) January

Indian handicrafts & gifts fair Greater Noida (India) February

Mohtexa Dubai November

Gift & Handicraft Fair (Spring) Delhi February

Gift & Handicraft Fair(Autumn) Delhi October

Fatex Fair Paris November

2. -To appoint agents in target countries to procure orders.

3. To build a Web-site showing your products

4. To advertise in print media.

5. Attend buyerseller meets organized by Export promotion councils.

6. Keep regular touch with reputed buying houses.

7. Contact big buyers for direct order.


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COMPANY FINANCE

Production Capacity: 1000 to 1200 bags per day

Covered Area Requirement: 2500 Sq. Ft. (Rented shed)

Cost of plant and machinery including packing, transportation and installation charges:

Rs. 5, 75000/-

Labour requirement: 16 per shift.

Approx Cost of a Bag: Tote Bag of Size: 13 x 15 x 5

Rs.

Cost of Fabric : 16.00

Cutting : 0.55

Thread : 1.00

Stitching : 5.00

Packing & Inspection charges : 1.25

Overhead cost : 1.50

Total 25.30

Add profit @ 25% 6.30

31.60

FOB Price @ $1 = 44.5 $0.71 / Pc

Payment Terms: 100% through irrevocable unrestricted Letter of credit in favour of

company.

Mode of shipment: By air / by sea / by road

Packaging: Carton boxes of suitable size.

Project Financing:

Plant and machinery: term loan from bank; self margin

Working capital: Packing credit and Post shipment credit from bank.


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1. Pre-shipment Credit (Packing Credit)2. Post-Shipment Credit

These are available to the exporters, for financing purchase, processing, manufacturing orpacking of goods prior to shipment.

This would mean any loan or advance extended to you by the bank on the basis of:a) Letter of Credit opened in your favour or in favour of some other person, by anoverseas buyer;b) a confirmed and irrevocable order for the export of goods from India;c) any other evidence of an order or export from India having been placed on the exporteror some other person, unless lodgement of export order or Letter of Credit with the bankhas been waived.

Packing Credit is granted for a period depending upon the circumstances of the individualcase, such as the time required for procuring, manufacturing or processing (wherenecessary) and shipping the relative goods. Packing credit is released in one lump sum or

in stages, as per the requirement for executing the orders/LC.

The pre-shipment / packing credit granted has to be liquidated out of the proceeds of thebill dawn for the exported commodities, once the bill is purchased/discounted etc.,thereby converting pre-shipment credit into post-shipment credit.Post Shipment Packing CreditIt runs from the date of extending credit, after shipment of goods to the date of realizationof export proceeds and includes any loan / advance granted on the security of any dutydrawback allowed by the Govt. from time to time. Post-shipment credit has to beliquidated by the proceeds of export bills received from abroad in respect of goodsexported.

The exporter has the following options at post-shipment stage:

i. To get export bills purchased /discounted / negotiated;ii. To get advances against bills for collection;iii. To receive advances against duty drawback receivable from Govt.

The exporter has the option to avail of pre-shipment and post-shipment credit either inrupee or in foreign currency. However, if the pre-shipment credit has been availed inforeign currency, the post-shipment credit has necessarily to be under EBR Scheme sinceforeign currency pre-shipment credit has to be liquidated in foreign currency. The details

of pre-shipment and post-shipment credit in foreign currency are mentioned below.

Once the regular export credit limit is sanctioned, the company is required to submit thefollowing documents to the bank at the time of disbursal of packing credit loan:

1. Export credit Agreement


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2. Hypothecation/ Pledge agreement

3. Corporate/individual guarantees from company/firm/partners/directors/sureties etc.

4. Insurance policy to cover the stocks etc.

5. Necessary undertakings (e.g., for payment of insurance Premium, non-encumbrance of

stocks, Payment of ECGC premium, Waiver of interest change notice, etc.)

6. Formalities connected with registration of charges were necessary.

7. Other documents as specified by the bank in the sanction letter.


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Documents

Exim Management- Jute Bag Manu Unit(Export Oriented)