Launching a million new export ventures

It’s a sad narrative which merits a happy ending. Even though the products manufactured by the small enterprise sector count for over 40 per cent of India’s exports, most export is not sent by the SME manufacturers.

Daunted by the time taking and complex export process, a large number of Indian SMEs, despite manufacturing quality products, have to remain content as product suppliers to large exporters who keep a lion’s share of the margins.

Experience of Germany, Korea, Singapore and many others, suggests that creation of an online platform that enables a firm to meet its export related banking, logistics and regulatory needs empowers the SMEs to export hassle free and direct. We need a more ambitious system in India.

To understand its functioning and usefulness, let’s call this online platform, the National Trade Network (NTN) and see how it helps Ria, the owner of an small sport shoes firm, in completing an export order.

Ria has to respond in 48 hours. She just received an email from Ambrosia, a New York-based retail chain enquiring if Ria can supply 10,000 pairs of children’s shoes at $25 a pair in next 60 days. Is Ambrosia a reliable buyer? Stories of disappearing buyers worry Ria.

She logs into the NTN, which six hours later informs that Ambrosia is a genuine buyer with good credit rating and Ria can be assured of timely payment.

NTN has already tied up with leading global buyer rating agencies for providing this information.

Next, factoring all likely expenditures involved, NTN informs that the average costs of exporting shoes will be $3 per pair. This means a fair margin of $5 a pair as Ria’s costs are less than $17 a pair. NTN also informs that if Ria chooses to export by air, the shoes could be delivered in just two days but at an extra 30 per cent cost. Ria opts for sea route as she still has time. Feeling confident now, she says ‘yes’ to the buyer.

Real operations start now. Ria has to complete banking, logistics and regulatory requirements. She uploads scanned copies of the export order and details of the Letter of Credit issued by her bank. Next, she presses a button to apply for the export credit. NTN sends a message to her bank and by evening money is credited into her account.

For shifting goods from her factory to Mumbai port and booking cargo space in a ship, NTN advises Ria to hire the services of a freight forwarder.

Service panel section of NTN flashes the interest of seven freight forwarders who have quoted price to provide end to end services. Ria selects one, enters into an online agreement and makes part payment through the NTN.

Ria now has to obtain regulatory approvals from central excise, customs, DGFT, port etc. She also needs quality control certificate, marine insurance policy and certificate of origin. This looked daunting but NTN has already consolidated information required by all agencies into one simple form.

NTN routes the relevant details to concerned agencies and in next 24 hours Ria receives all regulatory approvals online.

For guaranteeing quick service to users, NTN has signed minimum service standards agreements with all agencies, binding them to respond fast. This used to take weeks not long ago, Ria remembered.

A container truck booked by the freight forwarder reaches Ria’s factory on the appointed day. The container is sealed electronically to ensure that the contents are never to be checked again along the way or at the port. A central excise officer sitting in his office, remotely monitors the sealing operation.

Use of the RFID tags and Electronic toll system along the way ensures that cess and entry taxes are deducted automatically and the truck need not stop along the way. The truck arrives at the port just in time, enters the terminal. Custom and port officers already have the required information through the NTN. Container seal is intact. The goods are loaded onto the ship.

Ria could track the movement of container from her factory to the NY port in real time. The ship completes its journey in next 15 days to deliver the goods to the buyers’ freight forwarder at the port of NY. Next day Ria receives $250,000 from Ambrosia as agreed. The process completed in the evening when her bank notifies receipt of $5,000 as export incentive.

NTN can be created on the lines of GST-Network (GSTN) which means NTN should serve as the central technology platform that will power the operation, administration and oversight of the entire process.

NTN can be a reality in three steps: 1. Government to select a task leader with proven expertise in delivering complex projects and technology background. He should be assisted by two teams: Team A with expertise in logistics, supply chain management, IT and process reengineering to create ground level process flow map. And Team B comprising of domain experts from customs, excise, shipping, DGFT, banks, insurance companies, port operators etc to identify laws, processes and operations that will require restructuring/ changes.

2. Both the teams will carry out the respective tasks and get regulatory approvals where necessary. NTN should be free to hire external consultants if needed.

3. Creation of NTN platform, testing and migration of all participating firms, agencies and service providers relating to Commercial, Logistics and Regulatory operations to the NTN.

NTN will free SMEs to focus on core business activities like product development, manufacturing and marketing. Soon large number of SMEs with good products will start exporting, creating millions of skilled jobs and earning dollars, euros and yens. From SME cocoons to global butterflies will be an apt metaphor to capture this transformation.

The writer is an Indian Trade Service officer. The views are personal