BASIC PROCEDURES FOR SETTING UP AN

INDUSTRIAL UNIT

Setting up of a business enterprise means starting normal

functioning of an enterprise by taking all necessary steps. Setting
up of a business enterprise involves all four major decisions
regarding the formation of an enterprise & completing all
necessary formalities & procedures in its formation.

The four basic steps are:-

a) Discovery of promising business opportunities.

b) Detailed investigation of opportunities for the selection of
best one.
c) Assembling of various business elements for starting a
business activity &
d) Provision of finance for the execution of the project.

The person who discovers promising business opportunity &

completes the process of setting up of a business enterprise is
called promoter/entrepreneur.

Following are the step that must be followed while setting up new
enterprise:-
1. DISCOVERY OF BUSINESS OPPORTUNITY:
Promoters have to select the business opportunity which is most
promising & can be used with limited risk.

2. SIZE OF THE FIRM:

The size of the firm decided must be most convenient. Such
convenient sized firm will offer maximum output at the lowest cost of
production.

3. LOCATION OF BUSINESS ENTERPRISE:

The promoters have to make selection of the best area & specific site
where the enterprise can be located.

4. MACHINERY, EQUIPMENT & LAYOUT:

Machinery & equipment are needed in the case of manufacturing
enterprise. The promoters must consult technical experts before taking
decision on the selection of technology & machinery for the
production unit.

5. SELECTION OF FORM OF ORGANISATION:

A business enterprise may be organized as a sole proprietorship,
partnership, joint stock co. or co-operative society. It can be decided
on the basis of capital requirement of the business, managerial skill
required etc.

6. FINANCIAL PLANNING:
Finance is the basic requirement of the business enterprise. The
required capital can be collected through shares, debentures, public
deposits, bank loans etc.

7. PHYSICAL FACILITIES:
Promoters are expected to give adequate attention to physical
facilities. He should first make arrangement for water, electricity &
disposal of waste material.

8. COMPLETION OF LEGAL FORMALITIES:

Setting up of a new enterprise involves various procedural & legal
formalities. This include license permission from local authorities,
sanction from financial agencies etc.
9. TAX PLANNING:
Tax liability can be minimized by selecting a suitable form of
organization as tax liability is not identical in all kinds of
organization.

10.ORGANISATIONAL STRUCTURE:
Selection of suitable organizational structure is necessary for the
conduct of various business activities in orderly manners & this avoid
confusion, duplication of work, wastage etc.

11.MANPOWER REQUIREMENT:
Promoter has to estimate the manpower requirement including skilled
& unskilled employees, supervisor, manager etc. for regular &
efficient working of an enterprise.

12.LAUNCHING THE ENTERPRISE:

Promoters have to take important steps for starting the business
activity by taking decision on acquisition of land, construction of
building, purchase of machines, arrangement of tools & equipments
etc.
 BASIC PROCEDURE FOR EXPORT OF GOODS

A. PRILIMINARY STAGE:

1. Registration:
The exporter has to get himself registered with various authorities, as
follows:
 DGFT to obtain IEC No.;
 Income tax to obtain Permanent Account Number(PAN);
 Other authorities like Export Promotion Council, Sales Tax etc.

2. Appointing Agent:
The exporter may appoint agents or appoint sales representative
abroad to book orders. The exporter may also open sales office
abroad.

B. PRE-SHIPMENT STAGE:

3. Export Order Receipt & Confirmation:

As soon as the order is received, the exporter must verify & confirm
the order. The exporter should check the restrictions on import in the
importers country.

4. Obtaining Letter Of Credit:

The exporter then requests the importer to issue a LC in his favor. The
receipt of LC from the importer’s bank will clear off the foreign
exchange & other restrictions.

5. Obtaining Pre-Shipment Finance:

The exporter may obtain pre-shipment finance from his bankers to
meet working capital requirement by presenting letter of credit in the
bank.
6. Production Goods:
The exporter has to produce the goods as per buyers needs. If the
exporter is not a manufacturer, then he will get the goods ordered
from a local supplier.

7. Packing Of Goods:
The goods must be properly packed. Packing plays three important
roles:
 Protection to goods in transit;
 Preservation of quality &;
 Promotion of goods;

8. ECGC Cover:
The exporter may obtain cover from Export Credit Guarantee
Corporation. Such cover protects the exporter against the credit risk. If
the importer fails to make payment, then exporter can cover from
ECGC to the extent of 90% of the loss.

9. Central Excise Clearance:

Export goods are exempted from excise duty. However, clearance has
to be obtained from excise authorities.

10.Obtain Marine Insurance:

The exporter has to obtain marine insurance policy under CIF (Cost,
Insurance, and Freight) contract. He has to pay necessary insurance
premium & obtain the insurance policy.

11.Appointing C & F Agent:

It is always advisable to appoint specialized forwarding agent to
handle various custom & other work relating to forwarding of goods
activities.
C. SHIPMENT STAGE:

12.Processing of Documents:
The C& F agent prepares the shipping bill & then gets all the
documents processed at the custom house.

13.Physical Examination of Goods:

After obtaining the carting order the goods are cratered & stored in the
shed. The goods are then examined by the customs examiner.

14.Loading of Goods:
After examining the goods, the customs examiner issues ‘Let Export
Order’. The C & F agent then approaches the custom preventive
officer & obtains ‘Let Ship Order’. The goods are then loaded on the
ship, for which mate’s receipt is obtained. The C & F agent then
approaches the shipping company & obtains bill of lading.

D. POST-SHIPMENT STAGE:

15.Shipment Advice to Importer:

The exporter sends shipment advice to the importer informing him
about the dispatch of goods. He may also send advice letter, a copy of
packing list, commercial invoice & copy of bill of lading.

16.Presentation of Documents to Bank:

The exporter then submits all the necessary documents to the bank for
negotiation & realization of export proceeds.

17.Realization of Export Incentives:

The exporter then makes necessary arrangement to obtain export
incentives from concerned authorities. The incentive include duty
drawback, refund of excise duty etc.

18.Follow-up:
Exporters should always have a follow up after the sales, to find out
buyers reactions towards the goods. If there are any complaints from
the buyer then must be immediately sorted out.
 SETUP OF MANTRA EXPORT PVT. LTD.

Mantra Export Pvt. Ltd. is a garment industry. It was

established by Mrs. Deepa Tracy in the year 1996. It is a
sole trading concern. They are engaged in the export of
garments. They do not sell their product in the local market.

Fabric is the main raw material for production. They get the
raw material from southern part of India i.e. from
Ahemdabad, Ludhiyana. Their Production plant is in Tripura
& in Mumbai. They produce all kinds of garments.

There are 200 workers are directly involved in the production

process. They export their products in almost all European
countries like U.K, France, Germany, Belgium & Canada.
Export of goods take place by air & water ways as per the
specification made by the importers.
 EXPORT PROCEDURE OF
MANTRA EXPORT PVT. LTD.

A. PRILIMINARY STAGE:

1. Registration:
Mantra Export Pvt. Ltd. has got them registered with various
authorities, as follows:
 DGFT to obtain IEC No.;
 Income tax to obtain Permanent Account Number(PAN);
 Other authorities like Export Promotion Council, Sales Tax etc.

2. Appointing Agent:
Mantra export Pvt. Ltd. has not appointed sales representative in
abroad. They don’t have their office in foreign country. They get the
direct orders from the importing company.

B. PRE-SHIPMENT STAGE:

3. Export Order Receipt & Confirmation:

As soon as the order is received, they verify & confirm the order. All
the terms & conditions are decided at this stage only like payment
terms, price, delivery date etc.

4. Obtaining Letter Of Credit:

After deciding all the terms & conditions Mantra Export Pvt. Ltd. ask
to their importer to send letter of credit as soon as possible.

5. Obtaining Pre-Shipment Finance:

By presenting letter of credit to their bank they get the finance they
require for production of goods.

6. Production Goods:
After that they produce the garments as per the specification given by
the importers.
7. Packing Of Goods:
Garments are then properly packed as per the specification made by
the importers. Like they want the garments packed in cartons etc.

8. Getting Certificate of Origin:

Textile committee then issue certificate of origin to them. The
committee may differ on the basis of which kind of the industry it is.
They send it to their importer. Because by presenting it, the importer
gets some relief on the import duty.

9. Appointing C & F Agent:

They appoint their C & F agent who gets all the documents cleared
from custom authorities. But the C & F agent of this company is not
fixed.

D. SHIPMENT STAGE:

10.Preparation & Processing of Shipping Documents:

They make a commercial invoice & post it to custom authority along
with ready goods & other necessary documents for Clarence.

11.Getting Let Export Order:

After making examination of goods & other documents the custom
authority then issue “Let Export Order” to them. The C& F agent of
the company then approaches to the custom preventive officer &
obtains “Let Ship Order.”

12.Loading of Goods:
The Mantra Export Pvt. Ltd. then gives their goods to the shipping
industry for export. The shipping industry is not fixed. They can
appoint different shipping company for different contract.
E. POST-SHIPMENT STAGE:

19.Shipment Advice to Importer:

They send shipment advice to the importer informing him about the
dispatch of goods.

20.Presentation of Documents to Bank:

They submit all the necessary documents like letter of credit,
commercial invoice to their bank to obtain payment for export. Their
bank then forwards those documents to the buyer’s bank for collection
of amount from importer.

21.Realization of Export Incentives:

They get incentives in the form of duty drawback which is 7% of
FOB. The rate of duty drawback is not fixed it changes from time to
time.

22.Follow-up:
If the buyer has not get the goods in good condition or there is any
other complaints then they immediately try to solve it.
 SETTING UP AN IDEAL INDUSTRY

We have set up Meghamrit Export Pvt. Ltd. which is engaged in

exporting pickles. We sell our product in local market & also in
foreign market. We export our product in European countries like
England, U.S.A, and Australia. We have set up our production
centers in Nashik & Noida.

Our aim is to provide employment opportunity to the unemployed

women so we have employed around 150 women workers. We
export our product by see & air ways. There is a very little
involvement of machineries in production process. We get the loan
from bank by submitting securities like letter of credit etc.

We try to give the best working environment to our employees by

making proper arrangement for water, electricity& disposal of
waste material. We have got our organization registered under
proper authorities.

Our long term plan is to expand our market & become a no.1
pickle exporting company of India.
 EXPORT PROCEDURE
OF AN IDEAL INDUSTRY

We have got our company registered with various authorities like

DGFT, Income Tax, Export Promotion Council etc. we have
opened our bank account in Bank of India for business transaction.

We are into direct export to other countries & we also take contract
from other companies to complete their order. Once we get the
direct orders from the other country’s importers, we confirm the
order. To take financial assistance from bank we demand letter of
credit from the importer. For the clearance of the documents during
export we have appointed Mr. S.S. Kumar as our C & F agent.

Mr. S.S.Kumar then reserves the shipping space in the vessel for
shipment & arranges the local transport for the goods to reach the
port. At the dockyard our cargo is inspected by the custom officer
& custom clearance is obtained by completing other formalities.

After completion of shipment procedure Mr. S.S.Kumar submits

all the documents in the company & shipment advice is sent to the
importer containing details like date of shipment, name of the
vessel, destination etc. Then we submit all the documents to the
bank. Bank then send this documents to the importer’s bank. After
the goods reaches to importer we make a follow up to find out the
reactions of the importer.