EXPORT INCENTIVES

IN TRACTOR INDUSTRY WITH REFERENCE TO -

EICHER TRACTORS, Bhopal

A PROJECT REPORT

Submitted by

PRERNA GAUTAM

in partial fulfillment for the award of the degree

of

MASTERS IN BUSINESS ADMINISTRATION

IN

FINANCE

INSTITUTE OF PROFESSIONAL EDUCATION &

RESEARCH, BHOPAL

BARKATULLAH UNIVERSITY, BHOPAL

2017
 ACKNOWLEDGEMENT

I take this opportunity to express my profound gratitude and deep regards to my principal Dr.
Amarjeet Singh Khalsa , Group Director for her exemplary guidance, monitoring and
constant encouragement throughout the course of this research project. The blessing, help and
guidance given by her from time to time, shall carry me a long way in the journey of life on
which I am about to embark.

I also take this opportunity to express a deep sense of gratitude to Mr. SARWAR KHAN
(AGM, FINANCE DEPARTMENT, TMTL, MANDIDEEP) Bhopal for her cordial
support, valuable information and guidance which helped me in completing this task through
various stages.

I am obliged to the staff members of EICHER TRACTOR, BHOPAL for the valuable
information provided by them in their respective fields. I am grateful for their cooperation
during the period of my study. I also thank my guide Mrs. Himadri Srivastava IPER Group
of Institution, Bhopal for his encouragement and support in the form of various facilities
which create a very peaceful atmosphere for our studies.

Lastly, I thank almighty, my parents and friends for the constant encouragement without
which this project would not be possible.

2
 STUDENT DECLARATION

This is to certify that, I have completed the Summer Project titled” “EXPORT
INCENTIVES IN TRACTOR INDUSTRIES” under the guidance of “Mrs.Himadri
Srivastava” in the partial fulfillment of the requirement for the award of Degree of Bachelor
of Business Administration at Institute of Professional Education and Research, Bhopal. This
is an original piece of work & I have not submitted it earlier elsewhere.

Date: Signature:

Place: Bhopal Name:

University Enrolment No:

3
 TABLE OF CONTENT

CHAPTERS

Chapter 1- Conceptual overview (Executive Summary)

Chapter 2- Research Methodology

Chapter 3- Theoretical Background

Chapter 4- Company Introduction (In the Form of Case Study)

Chapter 5- Data Analysis

FINDINGS

CONCLUSION

BIBLOGRAPHY

ANNEXURES

4
 Chapter – I

Conceptual overview

(Executive Summary)

5
CONCEPTUAL OVERVIEW (EXECUTIVE SUMMARY)

Tractors are used in the wide variety of farm projects, which include cultivating land,
ploughing, clearing debris, moving, road building and many other jobs. Tractors are
definitely the key feature of the farm. To make tractors even more versatile, they can be
outfitted with additional attachments like the front end loaders. 62% population of India is
depending upon agriculture. Agriculture contributes about 25.6% of GD Textiles, chemical,
food processing included in major production. Accounts for 13% of India’s exports. Second
largest producer of rice and wheat in the world. Largest producer of pulses. Fourth largest
producer of coarse grains. Second largest producer of vegetables, groundnuts, and fruits.

To present study is a comprehensive study of EXPORT INCENTIVES IN TRACTOR

INDUSTRIES. This research work is done in collaboration with Export Documentation and
procedure of Exporting to access the overall growth or sales of EICHER Tractor. On
concerning the objective of project, the maximum information is summed up sequentially.
The executive summary of the study describes….

Title:

“EXPORT INCENTIVES IN TRACTOR INDUSTRY”

Organization:

“TAFE MOTORS AND TRACTORS LIMITED (EICHER TRACTORS)”

OBJECTIVE:

The primary objective of this study is to Get familiar with the working of Finance
Department, as well as understand the role of export incentive, procedure, documentation and
working of various Finance Department and To get familiar with the policies and other
financial activities which are related to Export Incentives in tractors industry. The intent of
the project was to gain as much as knowledge which will help me to enhance my skill and
strengths.

The main objective of the study is to formulate the overall procedure of export orders and the
documentation which is done by the industry. We can say that ‘ how to export’ ,

6
documentation, modes of payment and EXPORT incentives from government as well as the
unit of TAFE motors gives to the buyers of EICHER TRACTOR.

About agriculture machinery industry

Farm Mechanization helps in effective utilization of inputs to increase productive of and

labour. Besides it helps to reducing the drudgery in farm operations. The early agricultural
mechanization in India was greatly influenced by the technology development in England.

Since ancient time India is known as an agriculture based country. Around 66% population
lives in the villages and farming is the base of their earning directly or indirectly. In other
words, more than two third of the people in India, live in around 550000 villages, depend
upon farming. Although India occupies only 2.4% of the world’s land area, it supports over
15% of the world’s population. Around 42% of total land is cultivated, 27% double cropped,
effectively giving India 173 million hectares of cultivated land. Share of agriculture in Indian
GDP in only 25% while 62% of work force is engaged in farming activities. It accounts for
13% of India’s exports. This indicates low per capita income for rural population

7
 CHAPTER II

RESEARCH METHODOLOGY

8
RESEARCH METHODOLOGY :-

OBJECTIVES OF THE RESEARCH

The main objective of the research methodology are as follows

 To study the overall Documentation and Procedure of export orders.

 To study the Export Incentives Policies

Target Population-All Dealers of Eicher Tractors

Area- Bhopal

Sample size- 30 respondents

Sampling Method-

Data Collection Tool- Primary Data

 Questionnaire Method

SCOPE OF THE STUDY:-

The study was confined to EICHER TRACTOR with special reference to its EXPORT
INCETIVE procedure.

LIMITATIONS :-

 Area was very specific

 Duration was very less
 Specific Respondents were targeted

9
 CHAPTER –III

Theoretical Background

10
TRACTOR INDUSTRY IN INDIA

Since ancient time India is known as an agriculture based

country. Around 66% population lives in the villages and
farming is the base of their earning directly or indirectly.
In other words, more than two third of the people in India,
live in around 550000 villages, depend upon farming.
Although India occupies only 2.4% of the world’s land area, it supports over 15% of the
world’s population. Around 42% of total land is cultivated, 27% double cropped, effectively
giving India 173 million hectares of cultivated land. Share of agriculture in Indian GDP in
only 25% while 62% of work force is engaged in farming activities. It accounts for 13% of
India’s exports. This indicates low per capita income for rural population. This situation is
prevailing because of low land productivity and less use of technology in farming. The
progress made by the farm sector in India since that onset of green revolution, would not
have been possible without using farm machinery in a big way. Mechanization of agriculture,
especially the use of tractors has greatly enhanced the crop production due to financial help
for various banks and load of field work, there is a tremendous increase in the number of
tractors during the past two-three decades. 9.5% of tractors sales are on credit. Credit id
extended by commercial bank, state land development banks and regional rural Banks. Cost
of tractors in India is cheapest in the world. The cost of finished tractors here is as much as
the cost of gear box in developed countries. Hence there exists tremendous scope for exports.

It is therefore considered to be vital sector of the Indian economy as we all know that India is
one of the major tractors manufacturing country in the whole world.

In this development another important factor grew was research and development in
agricultural industry, this include agriculture engineering, hybriding and tissue culture.

Sales of tractors in different states-

STATE SALES IN EXPORT INCENTIVES

UP 16%
MP 9%
RAJASTHJAN 10%
ORRISA 3%
TAMILNADU 7%
MAHARASHTR 7%

11
A
KARNATKA 9%
GUJRAT 9%
HARYANA 6%
BIHAR 4%
AP 8%
PUNJAB 5%
OTHER 7%

SALES in Various States of India

UP MP RAJASTHJAN ORRISA TAMILNADU
MAHARASHTRA KARNATKA GUJRAT HARYANA BIHAR
AP PUNJAB OTHER
7%
5% 16%

8%

9%
4%

6%
10%

9%

7% 3%
9%
7%

Table.3:- SALES IN EXPORT INCENTIVES

Source:- By-State Analysis

The Indian tractor industry is currently at a stabilized stage and a lower growth is expected
over the next few years. However, there are lots of geographical and sector-wise differences
in the expected growth. Tractors and Farm Equipment Limited (TAFE) can exploit these
opportunities by following a multi-pronged approach. This would include getting into joint
ventures and acquiring other tractor companies both in India and abroad, scaling up its
operations in Western and Southern India.

12
AN OVERVIEW OF AGRICULTURAL MACHINERY
INDUSTRY IN INDIA

Farm Mechanization helps in effective utilization of inputs to increase productive of and

labor. Besides it helps to reducing the drudgery in farm operations. The early agricultural
mechanization in India was greatly influenced by the technology development in England.

Irrigation tillage equipment’s, chaff cutters tractors and there here’s were gradually introduce
for the farm mechanization. The yielding varieties with assured irrigation and higher rate of
application of fertilizers gave higher returned that enabled farmers to adopt mechanisation
inputs especially after GREEN REVOLUTION in 1960s.

The development of power thresher’s in1960s with integrated bursa making attachments and
separation was the major achievement of INDIAN engineers. These threshers were highly
adopted by the farmers. Gradually demand for others farm machinery such as reapers and
combined harvester also increased.

Equipment’s and tillage, sowing irrigation plant protection and threshing have also widely
accepted by the farmers. Even farmers with small scale holding utilize many improved farm
equipment’s through customs hiring to insure timelines of farming operations. However
mechanization of horticulture and plantation of crops and commercial agriculture is yet to be
introducing in the country.

The pace of farm mechanization in the country accelerated with the manufacture of the
equipment by the local industry.

OVERVIEW ON INDIAN AGRICULTURAL INDUSTRY:-

Probably the most identifiable piece of equipment’s on the form in tractors. Tractors are used
in the wide variety of farm projects, which include cultivating land, ploughing, clearing
debris, moving, road building and many other jobs. Tractors are definitely the key feature of
the farm. To make tractors even more versatile, they can be outfitted with additional
attachments like the front end loaders.

Modern tractors rely on diesel engines for their power. These engines range in size from
modest horsepower to massive ones nearing 600 horsepower. Most tractors are on wheels,
but a few models are tracked like a typical bulldozer. Tractors keep more contact with the

13
surface area and have better traction. However they are harder to Manu ever and not suited
for working with crops. Especially tractors are designed to tackle unique working
environments. Through a power take off system, tractors lend their horsepower to the various
attachments like mower, harrow or spreader. All tractors are equipped with power take off for
the rear attachments. Loaders that attach to the front require tractors that are designed to work
with a loader.

62% population of India is depending upon agriculture.

Agriculture contributes about 25.6% of GDP.

Textiles, chemical, food processing included in major production.

Accounts for 13% of India’s exports.

Second largest producer of rice and wheat in the world.

Largest producer of pulses.

Forth largest producer of coarse grains.

Second largest producer of vegetables, groundnuts, and fruits.

INTRODUCTION OF EXPORT

UNDER CUSTOMS ACT,1962

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As per the customs act, 1962 “EXPORT means taking out of India or to a place outside India.
For the purpose of export, goods have been divided in to following category prohibited goods
are not permitted to be exported. Restricted good can be permitted for export under license
and subject to compliance of stipulated procedure. Canalized goods are permitted to be
exported through state trading enterprises,

In order to provide fillips to exports from India, the government has formulated a number of
export promotion schemes such as:-

Duty drawback scheme

Rebate

All the exports intending to export under the export promotion schemes needs to get their
licenses list, DEEC book and documents depending upon the nature of export.

SECTION 50

Section 50 is the customs act, 1962 is a statutory provision for entry of goods for exportation.
This section describe that the be exporter has to file the shipping bill in case of export by air
or sea or a bill of export in the respect of export by land.

SHIPPING BILL(MANUAL)

In order to effect export under the manual system the exporter are required to file shipping
bill in the format prescribed on the shipping bill and bill of export
(form) regulation, 1992. Separate shipping bill are prescribed for:

Export under duty drawback claim

Export of dutiable goods
Export of duty free goods

EXPORT UNDER REBATE

INTRODUCTION:-

15
The condition and procedure relating to export under rebate are contained in notification
19/2004-CE dated the 6th September, 2004 issued under rule 18 of the central Excise Rules,
2002.

It is worth mentioning that as per the definition of the term “refund” in section 11B of the
Central Excise Act, 1944, refund includes “rebate” of duty of excise on excisable goods
exported out of India or an excisable material used in the manufacture of goods which are
exported out of India. Thus, the procedure specified in the said rules and the notification
issued thereunder are subject to section 11B of the said act.

CATEGORIES OF EXPORTS:-

There are mainly two categories of exports:-

Export of all excisable goods to all countries except Nepal and Bhutan.
Export to Nepal and Bhutan.
Export of tea to any country except Nepal and Bhutan.

PART-1

EXPORT TO ALL COUNTRIES EXCEPT NEPAL AND BHUTAN

 Export of excisable goods (other than mineral oils supplied as ship stores to aircraft
on the foreign run) to all countries except Nepal and Bhutan.

Conditions relating to the said export are as follow:-

It is essential that the excisable goods shall be exported after payment of duty, directly
from a factory or warehouse.

In certain cases, the board may issue instruction/procedures for exporting the duty
paid goods from the place other than the factory of the warehouse.

The excisable goods shall be exported within six months from the date on which they
were cleared for export from the factory of manufacture or warehouse.

16
 The excisable goods supplied as ships stores for consumption on board a vessel bound
for any foreign port are covered by the notification.

The market price of excisable goods at the time of exportation should not be less than
the amount of rebate of duty claimed

The rebate claim will be admissible

 Forms to be used:- ARE-1 is the export document, which shall be prepared in
quintuplicate (5 copies). This is similar to the erstwhile AR.4. This document shall
bear running serial number beginning from the first day of the financial year. During
this year, for AR.4 form may be used with number, as started from 1.4.2001, may
continue.

The different copies of ARE-1 forms should be of different colours indicates below:-

Original white

Duplicate Buff

Triplicate Pink

Quadruplicate Green

Quintuplicate blue

It will be sufficient if the copies of ARE-1 contain a colour band on the top or right hand
corner in accordance with above colour scheme.

 Sealing of goods and examination at place of despatch:-

The exporter is required to prepare five copies of application in the form ARE-1, as per form
a specified in annexure-I to notification no.40/2001-Central Excise (N.T.), dated 26.6.2001.
The goods shall be assessed to duty in the same manner as the goods for home consumption.

 Distribution of documents (ARE-1):-

17
 1.) Export from the factory or warehouse,

2.) Export from place other than factory or warehouse (including diversion of duty paid
goods for export)
 Dispatch of goods by self-sealing and self-certification:-

The facility of self-sealing and self-certification is extended to all categories of manufacturers

exporters subject to compliance with the existing procedures. For this purpose the owner, the
working partner, the managing director or the company secretary of the manufacturing unit
exporter or a person (who should be permanent employee of the said manufacturer-exporter
holding reasonably high position).

The exporter shall distribute the copies ARE- in the following manner:

Original (first copy) and duplicate (second Send to the place of export along with the
copy) goods.

Triplicate (third copy) and quadruplicate(fourth Superintendent or inspector of Central

copy) Excise having jurisdiction over the factory
or warehouse within twenty-four hours of
removal of the goods.

Quintuplicate (fifth copy) Optional copy- send to the place of export

along with the goods

The said superintendent and inspector of Central Excise shall verity the particulars of
assessment, the correctness of the amount of duty paid or duty payable, its entry in the Daily
stock account maintained under rule 10 of said rules.

Once verification is complete and the ARE-1 is in order, he shall distribute the
documents (ARE-1) in the following manner:-

Triplicate (third copy) Send to the officer with whom rebate claim is
to be filed, either by the post or by the handling
over to the exporter in a tamper proof sealed

18
 cover after posting the particulars in official
records.

Quadruplicate (fourth copy) Send to the officer with whom rebate claim is
to be filed, either by the post or by the handling
over to the exporter in a tamper proof sealed
cover after posting the particulars in official
records.

 Examination of goods at the place of export:-

The place of export may be a port, airport, inland container depot, customs freight
stationary land customs station.

The goods are examined by the customs for the purpose of central excise to establish the
identity and quantity, the goods brought in the customs are export on the ARE-1 are the
same which were cleared from the factory. The customs authorities also examine the
goods for customs purposes such as verifying for certain incentives such as drawback,
DEEC, DEPB or for determining exportability of the goods.

For central excise purpose, the officers of customs at the place of export shall examine
the consignments with the particulars as cited in the application and if he finds that the
same are correct and the goods are exportable in accordance with the laws for the time
being in force(for example, they are not prohibited or restricted from being exported),
shall allow export thereof.

The officer of customs shall return the original and quintuplicate (optional copy for
exporter ) copies of application to the exporter and forward the duplicate copy of
application either by post or by handling over the exporter in a tamper proof sealed cover
to the officer specified in the application.

The exporter shall use the quintuplicate copy for the purpose of claiming any other export
incentives.

 SANCTION OF CLAIM FOR REBATE BY CENTRAL EXCISE :-

19
 The rebate claim can be sanctioned by any of the following offices of Central
Excise:-
 Deputy/assistant commissioner of central excise having jurisdiction over the
factory of production of export goods or the warehouse or maritime
commissioner.
It shall be essential for the exporter to indicate on the ARE-1 at the time of removal
of export goods the office and its complete address with which they intend to file
claim of rebate.
The following documents shall be required for filling claim of rebate:

1.) A request on the letterhead of the exporter containing claim of rebate, ARE-1
numbers and dates, corresponding invoice and numbers and dates, amount of rebate
on each ARE-1 and its calculations,
2.) Original copy of the ARE-1
3.) Invoice issued under rule 11
4.) Self-attested copy of shipping bill
5.) Self-attested copy of bill of lading
6.) Disclaimer certificate

After satisfying himself that the goods cleared for export under the relevant ARE-1
applications mentioned in the claim were actually exported, as evident by the original
and duplicate copies of ARE-1.
 EXPORT BY PARCEL POST:- In case of export by parcel post after the goods
intended for export have been sealed, the exporter shall affix to the duplicate
application sufficient postage stamps to the cover postage charges and shall present the
documents, together with the package or packages to which it refers, to the postmaster
at the office of booking.

 FILLING OF REBATE CLAIMS BY ELECTRONIC DECLARATION AND

SANCTION THEREOF THROUGH ELECTRONIC DATA INTER-CHANGE (EDI)

The new concept of filling of rebate of claim and its sanction through EDI established by the
customs formations at different ports/airports/ICDs/CFSs has been incorporated in the new
procedure however its implementations is dependent upon development of software and

20
formats of electronic forms, administrative set up at the place of exports for auditing such
claims and putting in the place the necessary hardware.

The expression electronic declaration has been defined as the declarations of the particulars
relating to exports goods lodged in the customs computer system through the data entry
facility provided at the service centre or the date of communication networking facility
provided by the Indian customs and central excise gateway (called ICEGATE) from the
computer of the person authorized for this purpose.

EXPORT UNDER CLAIM FOR REBATE OF DUTY ON EXCISABLE

MATERIAL USED IN THE MANUFACTURE OF EXPORTS GOODS:-

INTRODUCTION:-

The government has by notification no. 40/2001-central excise dated 26.6.2001 allowed
rebate of whole of the duty paid on excisable goods which are in the fact materials or inputs
for manufacture or processing of other goods on their exportation out of India to any country
except Nepal and Bhutan to be paid subject to the conditions and the procedure specified in
the above mentioned notifications.

It may be noted that in rule 18 and in said notification expression exports goods has been
used. It refers excisable goods as well as non-excisable goods. Thus the benefit of input stage
rebate can be claimed on exports of all finished goods whether excisable or not.

It may be also noted that material may be used for manufacturer or processing. In other words
any processing not amounting to manufacture will also be eligible for the benefit under said
notification.

The benefit of input stage rebate cannot be claimed in any of the following situations:-

1.) Where the finished goods are exported under claim for duty drawback.
2.) Where the finished goods are exported in discharge of exports obligations under a
value advance licence or a quantity based advance licence issued before 31.03.1995.
3.) Where facility of inputs stage credit is availed under CENVAT credit rules, 2001.
4.) The market price of the goods is less than the rebate amount.
5.) The amount of rebate admissible is less than rs. 500/-.

LETTER OF CREDIT
21
Letter of credit explained:-

A letter of credit (LC) is a documents issued by your bank that essentially acts
as irrevocable guarantee of payment to a beneficiary. This means that if you do not perform
your obligation, your bank pays. The letter of credit can also be the source of repayment of
the transaction meaning that the exporter will get paid with the redemption of the letter of
credit.

This is one of the most popular and more secured of method of payment in recent times as
compared to other methods of payment. A L/C refers to the documents representing the
goods and not the goods themselves. Banks are not in the business of examining the goods on
behalf of the customers. Typical documents, which are required includes commercial invoice,
transport document such as Bill of lading or Airway bill, an insurance documents etc. L/C
deals in documents and not goods.

DEFINITION:

A Letter of Credit can be defined as “an undertaking by importer’s bank stating that payment
will be made to the exporter if the required documents are presented to the bank within the
validity of the L/C”.

PARTIES TO DOCUMENTARY CREDIT:-

Commercial/trade parties buyers/sellers, applicant/beneficiary.

Banks LC issuing bank, advising bank, LC confirming bank, reimbursing bank.

Related paties, shippings/air lines, insurance companies, forwarded etc.

INVOICE

Commercial invoice – invoice issued in terms of the contract/letter of credit.

Customs invoice is issued in specific format for exports to Bangladesh and Nepal.

PARTIES INVOLVED IN LETTER OF CREDIT:

Applicant: The buyer or importer of goods

Issuing bank: Importer’s bank, who issues the L/C

22
Beneficiary: The party to whom the L/C is addressed. The Seller or supplier of goods.

Advising bank: Issuing bank’s branch or correspondent bank in the exporter’s country to
whom the L/C is send for Onward transmission to the beneficiary.

Confirming bank: The bank in beneficiary’s country, which Guarantees the credit on the
request of the issuing Bank.

Negotiating bank: The bank to whom the beneficiary presents his Documents for payment
under L/C

A Letter of Credit contains these elements:

A payment undertaking given by the bank (issuing bank) on behalf of the buyer
(applicant)
To pay a seller (beneficiary) a given amount of money on presentation of specified
documents representing the supply of goods within specific time limits
These documents conforming to terms and conditions set out in the letter of credit
Documents to be presented at a specified place.

In simple words, the Issuing Bank's role is twofold:

To guarantee to the seller that if complete documents are presented, the bank will pay
the seller the amount due. This offers security to the seller – the bank says in effect
“We will pay you if you present documents (XYZ)"

To examine the documents and only pay if these comply with the terms and
conditions set out in the letter of credit. This protects the buyer's interests - the bank
says “We will only pay your supplier on your behalf if they present documents (XYZ)
that you have asked for"

ADVANTAGES OF LETTER OF CREDIT

No blocking of funds.
Clearance of import regulations
Free from liability
Pre- shipment finance
Non-refusal by importer.

23
 Reduction in bad-debts.

ADVANTAGES TO THE IMPORTER:

Better terms of trade.

Assurance of shipment of goods.
Overdraft facility.
No blocking of funds.
Delivery on time.
Better relations.

DISADVANTAGES OF LETTER OF CREDIT:

Lacks flexibility.
Complex method
Expensive for importer
Problem of revocable L/C

ISSUING LETTER OF CREDIT PROCEDURE:

L/c Application form

Indent proforma invoice/purchase order
Insurance cover note/marine insurance policy
Credit report of exporter
Forward exchange booking (at request of importers)
Selection of foreign correspondent/advising bank
Transmission of letter of credit

MODES OF PAYMENT OF LETTER OF CREDIT

Available by negotiation
Available by acceptance
Available by sight payment
Available by deferred payments

TYPES OF LETTER OF CREDIT

Revocable letter of credit

24
 Just like the name says the letter of credit can be revoked by the issuing bank without
the agreement of the beneficiary.
Irrevocable letter of credit
Cannot be cancelled or amended without all the parties’ agreement.

Stand by letter of credit

Guarantee of payment if he beneficiary does not get paid from its customer if can then
demand payments from the bank by forwarding the copy of the invoice that was not paid and
supporting documentation.

Revolving letter of credit

It is established wen there are regular shipments of the same commodity between supplier
and customer. Eliminate the need to issue an letter of credit for each individual transaction.

DRAWBACK SCHEME

DEFINIATION AND OBJECTIVES:-

The term “DRAWBACK” is applied to the certain amount of duties of custom/central excise,
sometimes the whole, sometimes only the part remitted or paid the by government on the
exportation of the commodities on which they were levied. To entitle goods drawback, they
must be exported to a foreign port, the object of the relief afforded by the drawback being to
enable the good to be disposed of in the foreign market a if they had never be taxed at all.

GOODS ELIGIBLE FOR DRAWBACK:-This scheme is applies to

1.) Export goods imported into India a such

2.) Export goods imported in India after having being taken for use
3.) Export goods manufactured/ produced out of import material
4.) Export goods manufactured/produced out of indigenous material

TYPES OF DRAWBACK:-

There are two types of drawbacks. One I called drawback under section 74 of the Customs
Act,

25
 1.) The other scheme is payment of drawback under section 75 and rules made there
under at specified rate on export of goods manufactured in India. The manner and
time limit for filling the claims are prescribed under Customs and central Excise
duties drawback rules, 1995, as amended from time to time.
2.) The central government notifies the drawback rates for various products either on a
general basis. (all industry rates) or for individual exporters (brand rates) as the case
may be.

BRRAND RATES:-

If in any category of goods all industry rates are not available the exporters can approach the
directorate of drawback for fixation brand rates. Brand rates are fixed under rule 6 for
specific manufacturer-exporter.

Supporting documents required for processing the claim:-

1.) Triplicate of the shipping bill

2.) Copy of the bank certified invoices

3.) Copy of the bill of lading/airway bill

4.) Sixtuplicate copy of AR-4 wherever applicable

5.) Freight bad insurance certificate wherever the contract in CIF/C&F

6.) Copy of the test report where the goods are required to be tested

EXPORT PROMOTION SCHEME

ADVANCE AUTHORISATION SCHEME

(ERSTWHILE ADVANCE LICENCE SCHEME)

An advance authorization is issued to allow duty free import of inputs, which are physically
incorporated in export product (making normal allowance for wastage). DGFT, by means of
public notice may include any product from purview of advance authorization.

Advance authorization can be issued either to a manufacturer exporter of merchant exporter

tied to supporting manufacturer for:-

26
  Physical exports
 Intermediate supplies.
 Supply of goods to the category mentioned in paragraph.
 Supply of “stores” on board of foreign going vessel/aircraft subject to condition that
there I specific SION in respect of item supplied.

 Advance authorization is exempts from payment of basic customs duty, additional

custom duty, education cess, anti-dumping duty and safeguard duty, if any.
 However import for supplies coved under paragraph will not be exempt from payment
of applicable anti-dumping and safeguard duty, if any.
 Advance authorization and/or material imported there under will with actual user
condition.
 Advance authorization necessities export with the positive value addition for physical
export for which payment are not received in freely convertible currency some
scheme. To subject to value addition as specified in appendix.
 Similarly in case of spices duty free import of spices shall be permitted only for value
addition purpose like crushing/grinding/sterilization or for manufacture.
 Advance authorization shall be issued in accordance with policy and procedure in
force of authorization issue date.

FREE O COST SUPPLY BY FOREIGN BUYER.

Facility of advance authorization shall also be available where or all inputs are supplied free
of cot to the to the exporter to a foreign buyer.

In such case for calculation of VA national value of free of cost inputs along with value of
other duty free inputs shall be taken into consideration. However if all inputs are supplied
free of cost exporter shall also have option to follow provision prescribed by DOR.

EXPORT OBLIGATION

Period for fulfillment of export obligation under advance authorization shall be as prescribed
in HBP.

ADVANCE AUTHORISATION FOR ANNUAL REQUIREMENTS:-

27
Advance authorization can also be issued for annual requirements status certificate holder and
all other categories of exporters having past export performance ( in preceding to year) hall
be entitled for advance authorization for annual requirements.

ADMISSIBILITY OF DRAWBACK

In case of advance authorization, drawback shall be available for any duty paid material
whether imported or indigenous, used in goods exported a per drawback rate fixed by DOR
ministry of finance(directorate of drawbacks). Drawback allowed shall be mentioned in
authorization.

DEEMED EXPORTS

Deemed Exports

Deemed exports refers to those transactions in which goods supplied do not leave country and
payment for such supplies is received either in Indian rupees or an free foreign exchange.

CATEGORIES OF SUPPLY

Following categories of supply of goods by main/subcontractors shall be regarded as deemed

exports under FTA provided good are manufactures in India.

 Supply for goods against advance authorization/subcontractors shall be regarded as

deemed requirements/DFIA.
 Supply of goods to EOUs or STPs or EHTPs or BTPs.
 Supply of capital goods to holder of authorization under EPCG scheme.
 Supply of goods to projects financed by multilateral or bilateral agencies/funds a
notified by department of economic affairs.
 Supply of capital goods including in unassembled/disassembled condition a well as
plants, machinery, accessories, tools, dies and such goods which are used for installation
purpose till stage of commercial production and spares to extent of 10% of FOR value
to fertilizers plant.

ELIGIBILTY FOR REFUND OF TEMINAL EXCISE DUTY/DRAWBACK

Supply of goods will be eligible for refund to terminal excise duty in terms of
paragraph.

28
 Provided recipients of goods does not avail CENVAT credit/rebate on such goods.

Similarly supplies will be eligible for deemed exports drawback in terms of paragraph, of
FTP on central excise paid on inputs/components provided CENVAT credit facilities/rebate
has been not availed by applicant.

DUTY FREE IMPORT AUTHORISATION

SCHEME:-

DIFA is issued to allow duty free import of inputs , fuel, oil, energy source, catalyst which
are required for production of export product. DGFT, by means of public notice , may
exclude any products from purview of DFIA . this scheme is in force from 1st may, 2006.

ENTITLEMENT:-

Provision of paragraph 4.1.3 shall be applicable in case of DFIA however, these authorization
shall be issued only for products for which standard input or output norms (SION)have been
notified.

VALUE ADDTION:-

A minimum 20% value addition shall be required for issuance of such authorization except
for item in gems and jewellery sector for which value addition. Of HBP items for which
higher value addition is prescribed under advance authorization scheme shall be applicable.

EXPORT OBLIGATION:-

Procedure and time period related to fulfilment of Export obligation have been laid down in
chapter 4 of HBP v1.

CENVAT FACILITY:-

CENVAT credit facility shall be available for input either imported or procured indigenously
deleted.

FOCUS MARKET SCHEME

Focus market and product scheme

EXPANSION OF CEILLING, SCOPE AND COVERAGE:-

29
Under focus market scheme (FMS) and focus product scheme (FPS) coverage/scope of
eligible markets/items would be enhanced, revised allocations for benefits in now Rs. 1000 cr
for exports during 2007-08.

NEW MARKETS AND PRODUCTS:-

16 countries (including 10 from CIS block) are added as new markets and several value-
added low volume exports products have been identified and would be entitled to benefits
under FPS.

OBJECTIVES:-
Objectives are to offset high freight cost and other externalities to select international markets
with a view to enhance our export competitiveness in these countries.

ENTITLEMENT:-
Exporters of all products through EDI enabled ports to notified countries shall be entitled for
duty credit scrip equivalent to 2.5% of FOB value of exports for each licensing year
commencing from 1st April 2006.

Following exporters shall not be taken into account for computation of entitlement:-

1.) Export of imported goods covered.

2.) Exports through transshipment meaning thereby that exports thereby that exports
originating in third country but transshipped through India.

Deemed exports
Service exports
Diamonds and other precious, semi-precious stones.
Gold, silver, platinum and other precious metals in any form, including plain and
studded Jewelry.
Ores and concentrates of all type and in all forms.
Cereals of all types
Crude/petroleum and crude/petroleum based products covered under ITC HS code s.
Items which are restricted or prohibited for exports under schedule-2 of exports policy
in ITC.
FOCUS PRODUCT SCHEME

30
CHANGING ANNOUNCED ON 19-04-2007

FOCUS MARKET AND PRODUCT SCHEMES

EXPANSION OF CEILLING, SCOPE AND COVERAGE :-Under focus market

scheme(FMS) and focus product scheme (FPS) coverage/scope of eligible markets/items
would be enhanced, revised allocation for benefits is now rs. 1000 cr. For exports during
2007-08.

NEW-MARKETS AND PRODUCTS:-16 countries are added as a new-markets and several

value-added low volume exports products have been identified an would be entitled to
benefits under focus product scheme.

OBJECTIVES:- Objective is to incentive exports of such products which have high

employment intensity in rural and semi urban areas, so as to offset infrastructure
inefficiencies and other associated costs involved in marketing of these products.

ENTITLEMENT:-Export of notified products through EDI enable ports to all countries shall
be entitled for duty credit scrip equipment’s to 1.25% of FOB value of exports for each
licensing year commencing from 1st April, 2006 .

 Following exports shall not be taken into account for computation of entitlements:-
1.) Export of imported goods covered.
2.) Export through transshipment.

 Export turnover for SEZ units or supplies made to such units or SEZ products
exported through DTA units.
 Deemed exports.

31
 CHAPTER –IV
Company Introduction

(In the form of Case Study)

32
COMPANY INTRODUCTION

Tractors and Farm Equipment Limited (TAFE) is a unit company of the Amalgamations
group, one of India's largest light engineering groups with diverse interests in diesel engines,
automobile components, tractors and related farm machinery, lubricants, panel instruments,
hydraulic pumps, engineering tools, storage batteries, paints, engineering plastics, automobile
franchises and printing apart from interests in agribusiness, book selling and publishing. The
group's leadership technology, built on foreign know how has been nurtured through
indigenous efforts.

TAFE was established in 1961 to manufacture and market a range of Massey Ferguson
tractors and related farm equipment in India. One of the largest tractor manufacturers in
India, TAFE's vision is to be the first choice of customers in India and to also move towards a
growing presence in the international markets. TAFE has collaboration with AGCO
Corporation, headquartered in Duluth, Georgia, which is one of the largest manufacturers,
designers and distributors of agricultural equipment in the world. Its products are sold in
more than 140 countries

Tractors and Farm Equipment Limited (TAFE), has been a pioneer in the mechanization of
the Indian farms. Beginning with the popularizing of tractors in agriculture in the early 60s,
TAFE has many firsts to its credit. TAFE was the first company to market a total package of
Tractors and farm equipment to not only provides farm power but also interfaces to transform
the farm power to increased farm productivity. TAFE was also the first to introduce the

33
Direct Injection technology in India, thereby initiating considerable fuel saving and the
resulting economies in tractor operations cost to its customers.

TAFE was also the first Indian manufacturer to launch a 75 HP tractor to cater to the
emerging needs of very large farms and agri-businesses. With three manufacturing locations
at Chennai (Sembiam), Madurai (Kallidaipatti) and Bangalore (Doddaballapur), TAFE has a
large manufacturing base. Its Madurai plant, the latest and possibly the largest such plant in
the country is specially tailored to take on short run production batches to the exacting
standards demanded by advanced countries. All its plants and sales offices are linked by
VSAT links providing fast and efficient communications and data linkage another first of its
kind in India.

Tractors and Farm Equipment Limited (TAFE), is also involved in the following areas, apart
from its core business of manufacturing and marketing tractors.

TAFE has developed a range of matching trailers, implements and accessories. These
are marketed through TAFE's dealer network by a totally owned subsidiary, TAFE
Access Limited (TAL).
TAFE, through TAL is also involved in the marketing and distribution of lubricants
and greases for tractors through its dealer network.
TAFE has also diversified into Engineering plastics and production of tools and dies
for this industry.

TAFE's vision of being the customer's first choice on offering to the customer’s quality
products engineered to perfection using technology that is contemporary and relevant to the
market it serves. TAFE's vision is not just wishful thinking but based on recognized
engineering, marketing and financial strengths, built up over the past four decades. In all that
it does, TAFE pursues excellence. "To us in TAFE, excellence is not something that we
engineer, input or inspect into our products. It is an innate desire that inspires our hearts at
work and at home and ripples out into the world around us. "

Tafe take over Eicher Tractors

The Chennai based tractor major, Tractors and Farm Equipment Limited has been
taking over of Eicher’s tractor division near Bhopal, engine division at Alwar
andgears division at Parwanoo, in the biggest such acquisition in the history of the

34
 Indian tractor industry. TAFE, already the second largest manufacturer of tractors in
India, with this approval, comes within striking distance of market dominance in the
domestic tractor industry.

Speaking at a media meet, TAFE’s Director, Mrs. MallikaSrinivasan said, “This move was a
well-deliberated strategic move on our part. This acquisition will provide strong synergies of
growth in the future to help achieve market dominance”.

DEPARTMENTS OF EICHER

 Marketing
 Research & Development
 Manufacturing
 Corporate Function
 FINANCE

Finance is a word which defines structure of a business. Finance is concern with wealth
maximization of the stack holders. Finance is mainly concern with the decision making
regarding investment, finance and dividend. In its endeavor, it focuses on the decisions
making. Almost all decisions taken by an individual or a company have financial aspects and
implications. Finance is the study of decisions that have financial implications. In order to
make optimal decisions, the company must have a goal for evaluating the efficiency of such
decisions process. In finance, this goal is defined as the maximization of wealth of
shareholders. With reference to business firms, every finance manager undertakes the
financial decision making process under three criteria-

These decisions are helpful to fulfill different aspects of the business such as-

Investment decision is helpful to allocate resources.

Financial decision is helpful to find the optimum source of financing the business.
Dividend decision is helpful to decide how much profit to distribute among
shareholders as dividend and how much to keep as retained earnings

35
HIRERACHY OF FINANCE DEPARTMENT

WORK PERFORMED IN EICHER

I got opportunity to work in Export Finance (Finance Department) in Eicher Tractors.

There are many job descriptions in Export Finance they are:

Preparing L/C documents according to the negotiations.

Vendor details.

Export details.

Preparing Bank Realization statement.

Preparing Bangladesh Shipment documents.

36
 Preparing Nepal Shipment documents.

Description of Export Finance:

 Introduction
 Concept of Export finance
 Objectives
 Guidelines for banks dealing in Export finance
 Letter of Credit Introduction
 Parties involved in L/c
 About Are-1 Form
 Details of L/c negotiation documents

TMTL ACHIEVEMENTS

The company has been actively contributing to the social upliftment and development of the
region. TMTL has also donated significantly to district level hospital. Adult and computer
education is regularly provided to nearby villagers under literacy mission. The company
assisted nearby schools in building constructions, drinking water, books etc. It is also the
member of the Mutual Aid at district level.

TMTL has planned many programs for fulfillment its social obligation for spreading the
importance and need of Environment Protection amongst its personnel and nearby villagers
and these programs are now being implemented.

Sites are selected in and around factory boundary and scheme for long life plants is drawn.

AMALGAMATION

Amalgamation
Group

TAFE

TMTL
37
Tractor division Engine Division,
Bhopal Parwanoo

Alwar

TMTL - A wholly owned subsidiary of TAFE (Tractors and Farm Equipment Limited).

TAFE is a unit company of the Amalgamations Group, one of India's largest Light
Engineering Groups with diverse interests in Diesel Engines , Automobile components
,Tractors and related farm machinery, lubricants, panel instruments, hydraulic pumps,
Engineering Tools , Storage Batteries, Paints , Engineering Plastics , Automobile franchises
and Printing apart from interests in Agribusiness , book selling and publishing.

The group's leadership technology, built on foreign know how has been nurtured through
indigenous efforts.

TMTL has in turn three divisions in India –

Tractor Division, Bhopal – Manufacture and Assembly of Tractors

Engine Division, Alwar – Manufacture and Assembly of Auto stationary Engine

Transmission Division, Parwanoo – Manufacture of various Transmission

Components like Spur Gears, Helical Gears, Saline Shafts, Crown Wheel Pinion, Cam
Shaft and Housings

Tractor Division at Bhopal viz. Eicher Tractors is a leading Tractor manufacturer in India and
manufacturing and selling “EICHER” brand of tractors. Eicher Tractors, a pioneer in Tractor
manufacturing in India, rolled out its first Indian Tractor in 1959 with the collaboration of
Gebr-Eicher, Germany in 1960. The other group company TAFE too is amongst the oldest
tractor manufacturer in India and is manufacturing and selling

38
Massey Ferguson and TAFE range of Tractors. TAFE and TMTL as a group is the second
largest Tractor manufacturer in India. Jointly, we have more than 25 tractor models and 100
variants, which is the largest range being offered by any Tractor manufacturer in India.
Eicher Tractors has manufacturing and design facilities in Mandideep in Madhya Pradesh and
producing 13 base models ranging from 24 HP to 50 HP. We are the

only company, which offers a choice to the customers between Air-cooled, and Water cooled
technology. Eicher range of tractors enjoys unique advantages in terms of phenomenal fuel
efficiency, its easy maintenance, higher pulling capacity, reliability and suitability for farm &
commercial applications.

It has been our endeavour to offer the best technology and upgraded tractors to the farmers to
meet their changing requirements. In this context we have entered into technology transfer
agreement with VALTRA Inc. of Finland and RICARDO of UK.TMTL’s Engine Division
produces wide range of stationary and automotive Engines from 22 HP to 60 HP. These find
applications in varied fields of industrial and household applications

TMTL’s Transmission Division manufactures Gears required for Transmission Drive Lines
& supplies to Eicher Tractors Bhopal as well as to Auto Manufacturers like Eicher Motors &
JCB. To serve our customers better, we operate through 14 Regional Marketing Offices for
tractors and 3 offices for engines in various cities of India. Head Office for tractor marketing
is at Mandideep, Bhopal and for engines at Alwar, Rajasthan. A strong network of over 450
Authorized Dealers / 400 Authorized Service Centers and over 250 Stockiest help in
providing prompt services.

39
CHAPTER –V
Data Analysis

40
DATA ANALYSIS-

Interpretation

As in india majority of the population is engaged in agricultural activities belonging to the

rural part of the country. Tractor being the most important element of farming, so mostly
(81.3%) the tractors are sold to primary sector i.e agriculture and rural sector.

41
Interpretation

Every tractor dealer scrutinizes various aspects before making the final purchase. Some of the
commonly criticized factors are incentives, Credit policy, after sale services provided by the
company and the goodwill that the company holds in the eyes of customers. So according to
the dealer’s incentives is the key factor that influences their purchase behavior.

42
Interpretation

It is very important for a tractor producing company to know whether their dealers are
satisfied with the export incentives provided to them. Good incentives attracts dealers as well
as customers. So Eicher makes sure to provide good export incentives and as per the data
75% of the dealers are satisfied with the export incentives provided to them.

43
Interpretation

While investing amount in tractors usually credit policies plays an important role because of
the huge investment and lack of availability of bulk amount at the same time. So it becomes
necessary that the credit policies should be well defined by the company. After conducting
the survey 81.3% of the dealers find the credit policy of Eicher to be well defined.

44
Interpretation

Generally the documentation related to the export procedure is very tedious and lengthy
which results in lack of interest from the dealers. The formalities required for the
documentation is very high. This is where Eicher needs to work as according to 75% of the
dealers the documentation procedure of Eicher is lengthy.

45
As per the information gathered through this questionnaire 81.3% of the dealers believes that
when there is an availability of favorable export incentives scheme, then it has a direct impact
on the local trade that happens in the area along with encouraging the exporters to do more
export and enlarging the market in abroad.

46
When this question was asked that who gets the maximum benefit from export incentives
62.5% of the respondents said that dealers get the maximum benefit. Also 18.8% respondents
believes that customers, dealers and workers all of them get the equal amount of benefit.

47
As per the survey 81.3% of the dealers says that monetary, tax and legal incentives are
equally responsible in encouraging business to export goods and services. Because all three
of them helps in reducing the cost of exporting goods and chances of earning more profit

48
Interpretation-

According to the respondents the incentives that are provided by Eicher specifically in rural
areas, are satisfactory but still there is room for improvement because only 56.3% of the
respondents find the incentives to be satisfactory and 18.8% finds the incentives to be less
satisfactory.

49
 CHAPTER –VI
Findings

Findings-

50
. There are some finding in my study, these are as follows:-

 Sale of tractors is more in rural and agriculture area

 Eicher tractors give huge incentives to the customers
 The credit policy of Eicher tractors id well defined
 Export incentives amount is more for dealers and less for customers
 In rural area the incentives amount is very less
 Export documentation procedure is very lengthy
 Monetary, tax or legal incentives designed to encourage businesses to export certain
type of goods or services
 Export incentives are a very important branch to study & understand the overall
growth of the international EXPORTING market
 Availability of favorable Export incentives schemes directly impacts the local trade,
encourages exporters, enlarges markets abroad, improves quality of domestic goods
and overall helps the nation boost its exchange earnings
 The Government of any nation plays a very vital role in boosting export turnover. The
credit policy of the Indian Government is also changed depending upon the needs of
the exporters, global trade environment etc
 Focus Product Scheme is a best scheme for any buyer.

CONCLUSION
51
It is clear from the above study that the complexity of international import-export business
can be overcome easily by the systematic export procedure and follow the EXPORT
INCENTIVES procedure and also the fair documentation. The Export incentives shows that
the industries growth and overall procedure of exporting.

TAFE has the necessary strengths to succeed and outsmart the competition in the tractor
industry in India. It is present across all the market segments has a vast distribution network
and is financially sound. So the major challenge for TAFE is to exploit its current strengths
and channelizing them in the right direction as discussed in the recommended plan of action.

Learning’s/Suggestions through this project:

 Export incentives are a very important branch to study & understand the overall
growth of the international EXPORTING market.
 Availability of favorable Export incentives schemes directly impacts the local trade,
encourages exporters, enlarges markets abroad, improves quality of domestic goods
and overall helps the nation boost its exchange earnings.
 The Government of any nation plays a very vital role in boosting export turnover. The
credit policy of the Indian Government is also changed depending upon the needs of
the exporters, global trade environment etc.

Export Incentives:-

Market Linked Focus Product Scheme (MLFPS):

Focus Product Scheme (FPS):
Vishesh Krishi and Gram Udyog Yojana (VKGUY):

Monetary, tax or legal incentives designed to encourage businesses to export certain type of
goods or services. A government providing export incentives often does so in order to keep
domestic products competitive in the global market. Types of export incentives include tax
exemption on profits made from exports.

BIBLIOGRAPHY

52
 Jain Ramesh C.2006.Tractor Industry in India-Present and Future . Paper
presented at roundtable forum for regional agricultural machinery.
 P. VEERA REDDY(2nd Edition) Manual on Export Documentation “Based on
foreign trade policy and handbook of procedures corrected up to 19-4-2007”
 https://www.tafe.com/eicher.php
 www.tmtl.co.in
 www.eicherworld.com
 www.tafe.com

Annexure

53
Name- Location-

Contact No-

QuesI. Which sector of economy purchases tractors the most?

o Primary Sector (Agriculture & Rural)

o Secondary Sector (Manufacturing & Transporting)
o Tertiory Sector (Service Sector)
o All of the above

QuesII. Which are the key Factors that influence Dealers’s purchase behavior?

o Incentives
o Credit policy
o After Sales Services
o Goodwill

QuesIII. Are you satisfied with the Export Incentives provided by Eicher?

o Yes
o No
o May be

QuesIV. How do you find the Credit Policy of Eicher?

o Well Defined
o Not Clear
o Difficult
o Easy to understand

QuesV. How do you find the Export Procedure of Eicher?

o Lengthy
o Easy
o Well Defined
o Difficult

54
QuesVII. Availability of Favorable Export Procedure Incentives Schemes Directly
Impact which of the following?

o Local Trade
o Encouraging Exporter
o Enlarge Market Abroad
o All the Above

QuesVIII. Who benefits most from the Export Incentives Amount?

o Customers
o Dealers
o Workers
o All the Above

QuesIX. Which of the following Encourages business to Export goods and services?

o Monetary
o Tax
o Legal Incentives
o All the Above

QuesX. Are you satisfied with the Incentives provided in Rural Area?

o It is Satisfactory
o It is less Satisfactory
o It is highly Satisfactory
o Poor

55