UWSOB IB MAJOR SIXTH TRIM (1)

8/7/2019 UWSOB IB MAJOR SIXTH TRIM (1)

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United World School of BusinessUnited World School of Business

Kolkata CampusKolkata CampusPGPM ProgrammePGPM Programme

IB SpecializationIB Specialization-- MajorMajor

International BusinessInternational Business ± ± Commodity TradeCommodity Trade

Documentation.Documentation.

SessionSession--1; Term1; Term--VIVI

A.K.BandyopadhyayA.K.Bandyopadhyay..



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Commodity TradeCommodity Trade Commodity Specialization:Commodity Specialization: The commodity specializationThe commodity specialization

organizations, as part of the institutional framework, includesorganizations, as part of the institutional framework, includes

Export Promotion Councils, Commodity Boards, and ExportExport Promotion Councils, Commodity Boards, and ExportDevelopment Authorities. A network of Export PromotionDevelopment Authorities. A network of Export PromotionCouncils, to take care of export promotion of the specificCouncils, to take care of export promotion of the specificproducts or product groups assigned to them, was created duringproducts or product groups assigned to them, was created duringthe Third Plan period. Commodity Boards covering mainlythe Third Plan period. Commodity Boards covering mainlytraditional items, with the exception of a few like silk and spices,traditional items, with the exception of a few like silk and spices,

had been in existence for a very long time, much before thehad been in existence for a very long time, much before theinstitutional infrastructure was strengthened after launching theinstitutional infrastructure was strengthened after launching thePlanning era. The Export Development Authorities are relativelyPlanning era. The Export Development Authorities are relativelya new creation having been set up in seventies. The broad areas of a new creation having been set up in seventies. The broad areas of difference between the Export Promotion Councils and thedifference between the Export Promotion Councils and theCommodity Boards or Export Development Authorities lie inCommodity Boards or Export Development Authorities lie intheir status, settheir status, set--up and functions. The commodity Boards andup and functions. The commodity Boards andExport Development Authorities are similar in terms of their setExport Development Authorities are similar in terms of their setup and functions; in their case it is the nomenclature that differs.up and functions; in their case it is the nomenclature that differs.These bodies have been established under Acts of Parliament andThese bodies have been established under Acts of Parliament andare Government of India organizations. Their functions are allare Government of India organizations. Their functions are all

comprehensive, encompassing developmental activities for comprehensive, encompassing developmental activities for stepping up production for export, research and developmentstepping up production for export, research and development



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Commodity Trade.Commodity Trade. Commodity Specialization (contd.):Commodity Specialization (contd.): to increase productivity or yield,to increase productivity or yield,

overseas market development and export promotion.overseas market development and export promotion. Export Promotion Councils have been set up under the SocietiesExport Promotion Councils have been set up under the Societies

Registration Act or the Companies Act. These are partially funded byRegistration Act or the Companies Act. These are partially funded bythe Ministry of Commerce from the Market Development Assistancethe Ministry of Commerce from the Market Development Assistance(MDA).(MDA). The area of responsibility exclusively assigned to them isThe area of responsibility exclusively assigned to them is

export promotion. The Councils are largely managed and run byexport promotion. The Councils are largely managed and run bymembers of the exporting community. These are as a liaison or link members of the exporting community. These are as a liaison or link between the private industry and trade and the Government of India.between the private industry and trade and the Government of India.The Export Promotion Councils as also the Commodity Boards or The Export Promotion Councils as also the Commodity Boards or Export Development Authorities themselves do not normally undertakeExport Development Authorities themselves do not normally undertake

commercial or export activities. Their role is basically developmentalcommercial or export activities. Their role is basically developmentaland promotional in nature.and promotional in nature.

Export Promotion Councils:Export Promotion Councils: There are eleven Export PromotionThere are eleven Export PromotionCouncils under the Ministry of Commerce. These cover products or Councils under the Ministry of Commerce. These cover products or product groups comprisingproduct groups comprising ± ± (a) basic chemicals and pharmaceuticals(a) basic chemicals and pharmaceuticals

(b) chemicals and allied products(b) chemicals and allied products (c) cashew(c) cashew (d) engineering goods(d) engineering goods (e)(e)gems and jewellerygems and jewellery (f)(f) leather manufacturesleather manufactures (g) plastics and linoleums(g) plastics and linoleums



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Commodity TradeCommodity Trade Export Promotion Councils (contd.):Export Promotion Councils (contd.): (h) shellac(h) shellac ((ii) overseas) overseas

construction projectsconstruction projects (j) sports goods and(j) sports goods and (k) electronics and(k) electronics and

computer software.computer software. These Councils are nonThese Councils are non--profit making limitedprofit making limitedcompanies or societies registered under the Companies Act or thecompanies or societies registered under the Companies Act or the

Societies Registration Act. The Ministry of Commerce provides theSocieties Registration Act. The Ministry of Commerce provides the

necessary assistance in relation to their programmes of work. Thenecessary assistance in relation to their programmes of work. The

main functions of the Export Promotion Councils includes:main functions of the Export Promotion Councils includes: to act as link between exporters and the Government and to appraise

the concerned Governmental authorities about the problems faced by

the members of the exporting community .

to keep its members informed with regards to trade enquiries and

market opportunities abroad.

to render assistance on specific problems confronting individual

exporters.

to assist overseas buyers with information relating to various aspects

of the Indian industry and to bring them to touch with reliable sources



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Commodity TradeCommodity TradeExport Promotion Councils (contd.):.Export Promotion Councils (contd.):. of supply in India.of supply in India.

to help resolve amicably disputes between Indian exporters andto help resolve amicably disputes between Indian exporters and

foreign importers.foreign importers.

to act as a medium of channelizing incentives and facilities offeredto act as a medium of channelizing incentives and facilities offered

by the Government of India from time to time.by the Government of India from time to time.

to formulate product wise and market wise targets for the exportto formulate product wise and market wise targets for the export

products looked after by them as also to undertake their appraisal.products looked after by them as also to undertake their appraisal.

Services provided by some of the Councils also include supply of Services provided by some of the Councils also include supply of

indigenous and imported raw materials; compilation andindigenous and imported raw materials; compilation and

dissemination of statistical information on export from India, data ondissemination of statistical information on export from India, data on

imports from different countries, import policy, tariffs, competitiveimports from different countries, import policy, tariffs, competitiveprices, etc.; securing assistance from the Market Developmentprices, etc.; securing assistance from the Market Development

Assistance; extending help in shipping and transport problems;Assistance; extending help in shipping and transport problems;

offering advice on finance, banking, insurance, and joint venture;offering advice on finance, banking, insurance, and joint venture;

facilitating speedy disposal of export assistance applications; givingfacilitating speedy disposal of export assistance applications; giving

assistance in conforming to customs formalities; and promotingassistance in conforming to customs formalities; and promoting



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Commodity TradeCommodity Trade Export Promotion Councils (contd.): participation in overseasExport Promotion Councils (contd.): participation in overseas

international trade fairs and exhibitions and also launching the jointinternational trade fairs and exhibitions and also launching the joint

foreign publicity campaigns.foreign publicity campaigns. The Councils sponsor conduct of market surveys through professionalThe Councils sponsor conduct of market surveys through professional

market research organizations, assists in product development,market research organizations, assists in product development,sponsor trade delegations and guide new comers in the export trade.sponsor trade delegations and guide new comers in the export trade.Some of the Councils have established offices in nerve centres of Some of the Councils have established offices in nerve centres of

commercial activity in markets abroad for mobilizing their exportcommercial activity in markets abroad for mobilizing their exportpotentialities.potentialities.

The Export Promotion Councils also undertake export managementThe Export Promotion Councils also undertake export managementdevelopment programmes, called Market Orientation Toursdevelopment programmes, called Market Orientation Tours (MOTs),(MOTs),in collaboration with the United Nations Development Programmein collaboration with the United Nations Development Programme

(UNDP)(UNDP) and the International Trade Centre, GATT/UNCTAD. Theand the International Trade Centre, GATT/UNCTAD. TheMOTs enable the Indian executives drawn from small and mediumMOTs enable the Indian executives drawn from small and mediumscale export enterprises to get exposure to various potential andscale export enterprises to get exposure to various potential andleading world markets Under this programme, apart from gettingleading world markets Under this programme, apart from gettingtraining the participants are able to explore market opportunities for training the participants are able to explore market opportunities for

their products. Facilities are provided to members of MOTs totheir products. Facilities are provided to members of MOTs to



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(contd.)hold discussions with Government officials, importers,(contd.)hold discussions with Government officials, importers,

manufacturers, import agents, and representatives of professionalmanufacturers, import agents, and representatives of professionaltrade associations in different markets covered in the programme.trade associations in different markets covered in the programme.

Besides understanding the market conditions and studying theBesides understanding the market conditions and studying theextent of competition, the participants also obtain specific businessextent of competition, the participants also obtain specific businessleads for their lines of export which finally result in considerableleads for their lines of export which finally result in considerableexport business for their organizations. The MOTs are generally of export business for their organizations. The MOTs are generally of a duration of four weeks and the incidental expenses including staya duration of four weeks and the incidental expenses including stay

abroad and international travel are met by the UNCTAD/GATTabroad and international travel are met by the UNCTAD/GATTInternational Trade Centre, Geneva. This activity, before it wasInternational Trade Centre, Geneva. This activity, before it wasassigned to commodity specialization bodies including Exportassigned to commodity specialization bodies including ExportPromotion Councils and Commodity Boards, was handled by thePromotion Councils and Commodity Boards, was handled by theIndian Institute of ForeignIndian Institute of Foreign Trade[UNCTAD=United NationsTrade[UNCTAD=United Nations

Conference on Trade and Development].Conference on Trade and Development]. Export Promotion Councils Under Ministry of Textiles:Export Promotion Councils Under Ministry of Textiles: EightEight

Export Promotion Councils under the Ministry of Textiles look Export Promotion Councils under the Ministry of Textiles look after and coordinate the export activities in respect of the productsafter and coordinate the export activities in respect of the productsassigned to them. These Councils are concerned with the exportassigned to them. These Councils are concerned with the export

promotion of (1) Cotton Textiles (2) Apparel (3) Silk (4) Rayonpromotion of (1) Cotton Textiles (2) Apparel (3) Silk (4) Rayonand S nthetic Textiles 5 Wool and Woolens 6 Car etsand S nthetic Textiles 5 Wool and Woolens 6 Car ets



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Commodity Trade.Commodity Trade. Export Promotion Councils Under Ministry of Textiles (contd.):Export Promotion Councils Under Ministry of Textiles (contd.): (7)(7)

Handicrafts (8) Handlooms. Sustained efforts are made by theHandicrafts (8) Handlooms. Sustained efforts are made by the

respective EPCs to promote diversification, both productrespective EPCs to promote diversification, both product--wise andwise andmarketmarket--wise. Incentives offered by the Government in the recentwise. Incentives offered by the Government in the recentpast have considerably helped in furthering the interests of thesepast have considerably helped in furthering the interests of theseEPCs. Some of the promotional measures taken in respect of exportEPCs. Some of the promotional measures taken in respect of exportof textiles and clothing include (a) import under OGL (i.e. freelyof textiles and clothing include (a) import under OGL (i.e. freelyimportable) of sophisticated garment manufacturing machinery notimportable) of sophisticated garment manufacturing machinery not

produced indigenously; (b) creation of a textile modernization fund;produced indigenously; (b) creation of a textile modernization fund;(c) liberal ceiling for export of yarn; (d) increase in duty drawback (c) liberal ceiling for export of yarn; (d) increase in duty drawback rates for cotton garments; (e) increase in the period of prerates for cotton garments; (e) increase in the period of pre--shipmentshipmentcredit with reduction of interest rate; and (f) establishment of credit with reduction of interest rate; and (f) establishment of National Institute of Fashion Technology.National Institute of Fashion Technology.

The EPCs have also been instrumental in distribution of The EPCs have also been instrumental in distribution of entitlements to exporters. These Councils also sponsor marketentitlements to exporters. These Councils also sponsor marketstudies, exploratory surveys, buyer studies, exploratory surveys, buyer--seller meets, participation inseller meets, participation ininternational trade fairs and exhibitions, organization of fashioninternational trade fairs and exhibitions, organization of fashionshown in target markets; and visits of foreign designers, andshown in target markets; and visits of foreign designers, anddelegation of foreign buyers of textiles and related products.delegation of foreign buyers of textiles and related products.

Government offers financial support to EPCs from marketGovernment offers financial support to EPCs from marketDevelopment Assistance for sponsoring their wide rangingDevelopment Assistance for sponsoring their wide ranging



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Commodity Trade.Commodity Trade.

Export Promotion Councils Under Ministry of Textiles (contd.):Export Promotion Councils Under Ministry of Textiles (contd.):promotional activities. In the wake of economic liberalization, all thepromotional activities. In the wake of economic liberalization, all theExport Promotion Councils, except the Cotton Textiles ExportExport Promotion Councils, except the Cotton Textiles ExportPromotion Council which is already managed entirely by its ownPromotion Council which is already managed entirely by its ownfunds, have been asked by the Government of India to be self funds, have been asked by the Government of India to be self--reliantreliantover the next few years. The EPCs will have to do so by increasingover the next few years. The EPCs will have to do so by increasingmembershipmembership--cumcum--registration fee and by charging their members for registration fee and by charging their members for

the services rendered to them.the services rendered to them. Commodity Boards:Commodity Boards: Plantation industries particularly tea, coffee,Plantation industries particularly tea, coffee,

rubber, spices, and tobacco had initially made a significantrubber, spices, and tobacco had initially made a significantcontribution in the economy of India. Tea had remained one of thecontribution in the economy of India. Tea had remained one of themajor foreign exchange earners for the country for quite many years.major foreign exchange earners for the country for quite many years.In fact, the first three industries had attracted the fancy of theIn fact, the first three industries had attracted the fancy of the

Europeans under the British rule. A large number of tea, coffee, andEuropeans under the British rule. A large number of tea, coffee, andrubber plantation or their processing industries were owned andrubber plantation or their processing industries were owned andmanaged by the British. After independence, when the process of managed by the British. After independence, when the process of strengthening the institutional framework was initiated by thestrengthening the institutional framework was initiated by theGovernment of India during the Third Five Year Plan, commodityGovernment of India during the Third Five Year Plan, commodityBoards were established under Acts of Parliament for systematicBoards were established under Acts of Parliament for systematicdevelopment and export expansion of these traditional sectors.development and export expansion of these traditional sectors.



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Commodity Trade.Commodity Trade. Commodity Boards (contd.):Commodity Boards (contd.): The Tea Board, Coffee Board, andThe Tea Board, Coffee Board, and

Rubber Board were set up in 1954. The Spices Board, and TobaccoRubber Board were set up in 1954. The Spices Board, and Tobacco

Board were set up subsequently in the process of recognizing theBoard were set up subsequently in the process of recognizing the

institutional infrastructure. These five Boards are under theinstitutional infrastructure. These five Boards are under the

administrative control of the Ministry of Commerce.administrative control of the Ministry of Commerce.

Commodity Boards under Ministry of Textiles: Besides, three

other Commodity Boards, i.e., Coir Board, Central Silk Board, andHandicraft Board which were originally under the Ministry of

Commerce, came under the purview of the Ministry of Textiles,

when the new Ministry was created to pay an exclusive attention to

the important traditional textile sector of the country. While the Silk

Board was created in 1949, the Coir Board was established in

1954. The All-India Handicrafts Board has now been named as

Office of the Development Commissioner for Handicrafts. The

Commodity Boards, having been set-up under Acts of Parliament,

are statutory bodies. The activities and administrative expenses of



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Commodity Trade.Commodity Trade. Commodity Boards under Ministry of Textiles (contd.): of these

Boards are funded by the Government of India. The Commodity

Boards are not commercial bodies and their role is developmental andpromotional in nature encompassing cultivation or production,

processing, research and development, and export promotion. In order

to protect the interests of cultivators or growers and to ensure them

adequate remuneration for their produce, whenever extra ±ordinary

situations so warrant, the Commodity Boards take recourse tocommercial activities as well. For instance, the Tobacco Board has in

the past taken recourse to purchase of tobacco from the growers for

release in the market when prices were favourable. Such cases are rare

to meet exigencies of extra ordinary situations. The main functions of three Commodity Boards are given below:

Tea Board: The Tea Board was set up in 1954 with the main

objective of promoting the development of India¶s tea industry. Its

functions include, among others, organization of production and

promotion of exports of tea.



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Commodity Trade.Commodity Trade. Tea Board (contd.):In addition to encouraging consumption of tea in

the overseas countries, it aims at facilitating smooth flow of tea trade

and presenting interesting facts about Indian tea to the consuming

public of foreign markets. For achieving this objective, the Board

participates in Tea Councils in various countries such as USA,

Canada, Ireland, and Germany which have been set up with the

cooperation of the participating tea producing countries and the localtea marketing agencies. The Tea Board maintains a list of foreign tea

importing firms, tea packers, and wholesalers, and information

regarding foreign markets for the benefit of the industry in India.

Some of the developmental and financial assistance schemes operated

by the Tea Board are Tea Plantation Finance Scheme, Tea Machineryand Irrigation Equipment Hire Purchase Scheme, New Tea Unit

Financing Scheme comprising of loan and subsidy components,

Replantation Subsidy Scheme, Darjeeling Interest Subsidy Scheme,

and other interest subsidy schemes on bank loans for extensionplanting, irrigation, and drainage.



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Commodity TradeCommodity Trade

Tea Board (contd.): The Board is also promoting tea research by

giving grants-in-aid to Tea Research Association (TEA) and the

United Planters Association of Southern India (UPASI). Both theseinstitutions have their well developed scientific departments for

undertaking applies as well as fundamental research in tea in the

specialized areas of agronomy, soil, microbiology, plant breeding,

bio-chemistry, plant protection, and tea processing machinery. TheTea Board makes efforts for research in specialized fields of value

added items for export markets as also in development of by-products

and packaging materials. Wherever necessary, the Board avails of the

services of different professional and specialized Institutes to

supplement its research activities. An important contribution of theTea Board is to provide encouragement to export of thrust items such

as packet tea, tea bags, instant tea, and quick brewing black tea. This

is done through various promotional programmes of the Tea Board

which cover products like Darjeeling Logo and Assam Logo

Companies. Its promotional campaigns are carried out through



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Commodity TradeCommodity Trade Tea Board (contd.): the Board¶s foreign offices located in London,

New York, Brussels, and Dubai.

Coffee Board: The Coffee Board has been vested with the task of

looking after different aspects of the coffee industry such as

production, market development, and export promotion. The Board

estimates periodically the availability of coffee for export Export

samples are also made available at a centralized place to avoidexporters going over to different centres to get the samples. In order

to ensure the export of quality coffee, the Board has devised a system

of screening coffee for export in association with exporters. Under

the Coffee Act, all the coffee produced in the country is

compulsorily pooled with the Coffee Board for sale and disposal.

Coffee sales in the domestic market are through local auctions and

reserve price is based on the minimum reserve price. Coffee meant

for overseas markets is sold in separate export auctions and its

reserve price is based on London Terminal Prices. This system has





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UWSOB IB MAJOR SIXTH TRIM (1)