NEED FOR THE STUDY:

Export marketing is an important aspect of selling goods from one country to

another country. This helps the country to get more profits and it turn to help BOP of the

home country. For a developing country like India exports play a vital role in balancing

the differences between imports and exports.

The steel industry is the basic and prime industry the Iron and Steel is very much

important for the development of industries and industrialization. The Iron and Steel is

used from small cottage industry to major engineering industry and even domestic

purposes also like stainless steel vessels and construction of buildings houses, etc.

So iron and steel even affects the economy of the country .So the marketing study

of iron and steel industry becomes more important aspect of study.

1

OBJECTIVES OF THE STUDY:

The study has been under taken with the following objectives

To know about the importance of steel industry.

To know about the export procedure of VSP.

To know about the pricing strategies of VSP in the international market.

To know about the sales performance in export marketing.

To know about the profile of VSP.

To identify problems, if any in export marketing.

And to give suggestions.

2

METHODOLOGY OF THE STUDY:

The study is made by collecting data from the both primary and secondary

sources.

Review of iron and steel industry and other facts was done by collecting

information from secondary sources like manuals, journals etc.

The company activities and background was studied by interacting with the

executives and information collected from their records and also by the training guide

provided by the company.

The exports activities and information like product mix, pricing, export marketing

procedure, export documents were collected during the discussion with the guide allotted

by the company for the project and the material give by the guide

Other information like marketing plans, various sales and production figures,

were collected from the management information system (MIS) division of marketing

department.

3

LIMITATIONS:

It is not possible to collect all the data as the managers are not available because

they are busy with their work.

Most of the managers are reluctant to give information because the data is

confidential.

Export marketing is very dynamic .The policies and export procedures are

updated every now and then.

4

IRON AND STEEL INDUSTRY

Steel comprises of the most important inputs in all sectors of economy – steel

industry is both a basic and a core industry. The economy of any nation depends on a

strong base of iron and steel strong potential in that nation. History has shown that

countries having a strong potentiality for iron & steel production have played a prominent

role in the advancement of civilization in the world.

Steel is such a versatile commodity that every object we see in our day to day life

has used steel either directly or indirectly. Their products are innumerable. To mention a

few, it is used for such small items as nails pins needles etc. through surgical instruments,

agricultural implements boilers ships frigates railway automobile parts etc to heavy

machines structures etc. the indirectly many modern fields of today’s science and

technology, it would seem very painful to imagine the great investment that has into

the fundamental research.

In iron & steel technology has helped both directly and fate of today’s civilization

had steel not been there. Steel is a versatile and indispensable item. The versatile of steel

can be traced to mainly 3 reasons. 1) It is the only metallic material item, which can be

conveniently and economically produced in tonnage quantities. 2) It has good strength

coupled with ductility and malleability. 3) Its properties can be changed over a very wide

range. It alloys easily with many the common elements. Its properties can be manipulated

to any extent by proper heat treatment techniques. Taking these factors into

consideration, it can be said without committing a serious error, that the types of steel

available are innumerable.

5

DEVELOPMENT OF STEEL INDUSTRY IN INDIA

The development of steel industry in India should be viewed in conjunction with

the type and system of government that had been ruling the country. Iron & Steel making,

as India has known a craft for a long time. However, its production in significant quantity

started only after 1900. The growth of steel industry can be conveniently studied by

dividing the period into pre & post independent era. By 1950 the total installed capacity

for ingot steel was 1.5 mt per year. During the pre independence period, there was no

significant development in steel sector mainly due to the apathy of the government. It is

only after independent that bold steps were taken to develop this sector. In a short span of

about three decades or so that capacity was chronological order is depicted below:

1830: Joshia marshal health constructed the first manufacturing plant at Porto nova

madras presidency. But it was a financial failure.

1874: James erskin founded the Bengal iron works. It passed on to M/s Hiller &

company. In 1882 and to M/s martin & co in.

1898: Jamshedji tata initiated the scheme for an integrated steel plant.

1906: Sakchi in Bihar was chosen as the site for the tata iron & steel Company. The

same place is now known as Jamshedpur.

1911: TISCO started production initially – 1000t of ingots/year and in TWO Year it

reached 5000t per year by 1939 it reached a Production capacity of 15000t- ingot

steel per year.

1918: Initially iisco was founded and the Bengal iron & Steel was merged with it in

1926 to start with iisco restricted itself for manufacturing of pig iron for export to

U.K. and Japan. It produced steel in 1939.

1949-50: Formulation of the Mysore iron & steel ltd. At bhadravathi in karnataka owing

to the pioneering efforts of sir. M.VISVESVARAYA it originally consumed

charcoal produced by wood distillation plant and continued to produce charcoal

pig iron. Later it started manufacture of steel in 1936 and after 1945 adopted

6

electric reduction of iron ore. It is also manufacturing Ferro alloys and special

steel.

1951-56: FIRST FIVE-YEAR PLAN:

No steel plant came up. First plant was mainly agicultural oriented. But TISCO

was allowed to expand from 1MT/year to 2 MT/year of ingot steel and IISCO

from .5MT/year to 1.0 MT /year. However, the first five plans contemplated a new steel

plant to be erected in public sector. Thus the Hindustan steel ltd was born on 19 th

January 1954, with the decision of setting up three steel plant each with one million

tonne ingot steel per year at Rourkela, Bhilai & Durgapur.

1956-61: SECOND FIVE-YEAR PLAN

It is during this period that additional steel producing capacity was installed and a

bold decision was taken to increase the ingot steel output in India to 6 MT/year. The three

1 MT steel plant one each at Rourkela, Bhilai and Durgapur were completed during this

period. They started production during the end of this plan. In addition we are having the

capacity to produce 300,000 and 350,000 tonnes respectively of pig iron for sale.

1961-66: THIRD FIVE-YEAR PLAN:

During this plan the 3 plants under HSL, TISCO, IISCO, were expanded. The

expansion programs however could be completed only by 1968-’69. Also were added

during this plan an alloy steel plant at Durgapur which has capacity of 100,000 tonnes of

ingots or 60,000 tonnes of finished steel, produces more than 100 categories of alloy

steels. The government was also considered to set up a steel plant at bokaro initially with

help of US. This, however, could not be materialized and in 1964 USSR agreed for

completed technical collaboration and assistance for bokaro plant in January 1964 BSL

came into existence.

7

1966-69: RECISSION PERIOD:

The ambitious expansion programme taken up during the five-year plan could not

be completed during that period. All the expansion programmes were actively executed

during this period. The work on the first stage on bokaro plant (1.7Mt) started in October

1967.

1969-74: FOURTH FIVE-YEAR PLAN:

Balancing facilities have been incorporated in all the steel plants. Work for 2nd

stage expansion of bokaro was registered on October 25, 1972 to 4.0 Mt. Also started in

this period, Salem steel plant. Work on Sales steel plant project was also taken up during

this period licences were given for the setting up of many mini steel plants and re-rolling

mills. Government has accepted the idea of setting up 2 more steel plants in the south one

each at VISAKHAPATNAM AND and hospat. Both these produce plain, low carbon

steel products initially with a capacity 2 mt. Year of ingot steel. SAIL was also formed

during this period on 24 January, 1973. All the plants tried to increase their production

with the result the total steel output also increased. There was significant increase in the

quantity of steel products exported to other countries. Central research & development

organization was set up in June 1973 to tackle the research and development of the iron

& steel industry countries.

1974-79: FIFTH YEAR PLAN:

Work on Salem Project programmed well. Bokaro with 1,7 Mt capacity started in

February’78, The expansion of Bhilai Steel Plant from 2.5 Mt. To 4.0 Mt. And bokaro

from 1.7 mt to 4.0 mt. Picked up momentum. The idea of setting up the 5th integrated

steel plant, the first shore-based plant at vizag took a definite shape. More mini steel

plants and re-rollers have been added. Modernization work on RSP also started. By the

8

end of fifth five-year plan , the total installed capacity from 6 integrated plants was 10.6

mt.

1979-80: ANNUAL PLANS:

The various plans on hand were reviewed and the progress on different plants

consolidated. Soviet Union has agreed to help in setting up the VIZAG steel plant.

1980-85: SIXTH FIVE-YEAR PLANT

Work on expansion of BhilaI & Bokaro plants progressed. Bokaro’s intermediate

stage of 2.5 mt. Completed. Many of the units were commissioned stage – 1 of Salem

plant was commissioned on 13-09-81. Work on VIZAG steel plant started with a big

band and top priority was accorded to start the plant. TISCO was modernized by adding

LD converter shop, continuous casting and vacuum are refining units the capacity to 2.16

mt. Schemes for Modernization of BSP, RSP, DSP, and IISCO were initiated. Production

from mini steel plants improved considerably. At the end of 6 th five-year plan the

capacity from integrated steel plants stood at 11.56 mt.

1985-91: SEVENTH FIVE-YEAR PLAN:

Almost all the units in the expansion work of Bhilai & Bokaro to 4.0 mt

Completed on VIZAG steel plant picked up and the rationalized concept has been

introduced to commission the plant with 3.0 mt liquid steel capacity by 1990.

1992-97: EIGHTH FIVE-YEAR PLAN:

All units of VIZAG steel plant are commissioned by July 1992. Government of

India has given permission to private parties to set up mini steel plant.

9

PRESENT STATE OF INDIAN IRON &

STEEL INDUSTRY AND FUTURE PLANS

Presently in India steel products are being produced from four different sources:

INTEGRATED STEEL PLANTS.

MINI STEEL PLANTS.

RE-ROLLING MILLS.

ALLOYS AND SPECIAL STEEL PLANTS.

CHARACTERISTICS OF INTEGRATED STEEL PLANTS:

1. They have large capacities. A total installed capacity of six major integrated steel

plants is over 70Mt of crude steel per year.

2. Highly capital intensive. Cost of setting up a green field steel plant now is around

Rs 30, 000/- per ton of steel capacity. These have long gestation period.

3. Labour intensive. About 0.28 million employees are employed in Indian iron and

steel industries. Integrated plants and major source of employment of engineers,

technicians, skilled and semi workers.

4. They would have all facilities including raw materials resources , water supply ,

power supply , testing and inspection facilities, township facilities – medical,

educational, recreational etc. ,all under one administrative control . This would

the extent of dependency of outside agencies, which would help the smooth

running of plant.

5. It starts with the fundamental, naturally occurring raw materials, and processes

them to the finished products-all operations being carried out under administrative

control.

6. Interdependencies of all the processing units on the processing units the path of

material flow.

7. Potential source for earning foreign exchange through exports.

10

8. They serve as centers for the development of ancillary industries around the steel

plants.

9. They are major consumers of refractory materials. About 30-40kg of refectories

are needed to produce one ton of crude steel.

.

CHARACTERISTICS OF THE RE-ROLLING MILLS:

1. They buy the primary rolled product from integrated steel plants or mini steel

plants and process them into finished rolled products.

2. They generally don’t have any meeting and refining facilities.

3. Originally re-rolling mills were producing only bars and rods but now they

produce variety of products like light structural, ribbed bars etc. .

4. Though the installed capacity re-rolling mills is 21mt only of the rolling steel. Out

of 1061 re-rolling units, 396 are closed of various problems. Global environment

facility (GFE) a government project has now taken up the revival plan for re-

rolling industry.

FUTURE PLANS:

Though steel industry is having recessionary trends now, it is bound to stage come

back sooner than anticipate. With the increased volumes, economy of operations becomes

competitive. In recent past steel market has turned into buyer market from seller market.

Steel industry in India has prepared their future plans keeping customer satisfaction in

view.

SAIL has prepared a corporate technology plan for 2005A.D which aims to

achieve target capacities through technology upgradation and moderation, creation of

new facilities and introduction of new technologies. Besides this, SAIL has been also

11

planning to hive off some of its power plants, oxygen plants and fertilizer plants at

Rourkela etc.

RINL has worked out a corporate plan up to 2002ad which envisages to introduce

modern technology in coke ovens and blast furnace to increase their capacities, add

second steel melting shop with a slab caster, by investing an amount of approximately

Rs1520crores .When implemented, plant would produce 3.85Mt of hot metal and 4.05Mt

of steel by the year 2201-2002ad.RINL is now also planning to hive off its power plant.

As a separate company, it would come under infrastructure sector and all the benefits

available to this sector can be availed.

TISCO has also completed its modernization plans. Recently they have set up a

hot strip mill and are now setting up a cold rolling mill which is expected to be

commissioned in the year 2000.Setting up of the new bar mill announced earlier has been

put on hold.

Though majority of steel now in India is producing through LD converters present

trend in the world is to adopt electric arc furnace route. It is predicted that percentage of

steel produced through eaf route in the world in the year 2010 will increase to 50% from

the present level of nearly 35% new steel plants are likely to be commissioned in next

few years adding a capacity of 13mt of steel per annum.

12

GLOBAL STEEL SCENARIO:

Evidences indicate that iron and steel items have in use the mankind for almost

6000 years. But the modern form of iron & steel industry producing cheaper steel by

mass production came into being only during the 19th century, after industrial revolution

took routes on Great Britain and other European countries. This was made possible by

DEVELOPMENT of Bessemer steel making process by DR.HENRY BESSEMER, open-

hearth furnace by SIEMEN and MARTIN brother and modern rolling mill by HENRY

CORT.

However, the growth & development of I&S industry of world was comparatively

slow and picked up at a significant rate after World War II. From a level of 28.30Mt in

1990, it rose to 786 Mt in 1989. The oil crisis of the seventies had a pronounced impact

on the over all economy of the world including steel. Steel production started declining

and reached a low of 645.80mt in 1982. Nineties saw the collapse of great Soviet Union

& eastern European economies. However in 1997 there was some recovery when global

steel production and consumption levels touched the figure of 793mt & 695mt

respectively. It is also observed that there is a definite shift in the growth of steel industry

from developed countries to developing countries. The trends that there would be growth

in steel industry at the rate of 0.13% in developed countries as against developing

countries mainly Asian countries where growth is predicted at the rate of 3.25%.the steel

prices in the international arena started declining since dec’95. The economical crisis of

South East Asian countries has started showing its effect and will continue to affect the

international steel market. However, the market conditions are likely

To improve by second half of 1999 however, there is a trend through out the

world to use the latest steel making technologies which are helpful in reduction on cost of

production of steel. Combined blown converters, more and more production by steel by

electric furnace, replacement of ingot route by concast route, thin slab casting use of

alternative routes for iron making viz. corex process are gaining ground.

13

INDIA:

India is the 10th largest producer of steel in the world with a production rate of

23.4MT in 1997. With its abundant mineral resources, cheap lab our and strategic

location India has a potential to become force to recon in global arena. After govt. of

India adopted the policy of economic liberalization is looking up 21 projects with

licensed capacity of 12 MT with investment to the tune of RS22000 have been cleared

since 1991 and are in different stages of construction and commissioned 6 more projects

with 5 MT installed capacity are in the pipeline investing about RS 10000. by 2006 it is

expected steel demand will rise to 49MT including provision of 9MT towards exports

however ,presently Indian steel industry is passing through a dark phase due to crashing

of prices on global market and general recess in Indian economy and currency crisis in

south east Asia since august 1996. Dumping of cheap steel by CIS countries and South

Korea, Japan has affected the local steel industry adversely.

14

INTRODUCTION

To set up an integrated steel plant at Visakhapatnam was announced on 17th

August 1970 by Smt. Indira Gandhi in Parliament and the formal inauguration was done

on 20th January 1971.

The plant annual capacity was 3 million tons of liquid steel in October 1977.

USSR helped India in setting up the 3.4 million tons integrated steel plant at

Visakhapatnam in the year 1979. The project is estimated to cost Rs. 6,269.57 tons based

on Mills as on first quota of 1986.

VSP became the first Integrated Steel Plant to achieve the distinction of covering

all the process and products under ISO 9002, ISO 14000 and ISO 18000 for the entire

plant.

Having a total manpower of about 17,000, VSP has envisaged a labour

productivity of not less than 230 Tonnes per man per year of Steel which is the best in the

country and comparable with the International levels.

The main consideration for setting up the steel plant at Visakhapatnam was to have

locational advantage of port on the coast of Bay of Bengal. However, locational

advantage could not be utilized fully by the Company due to various constraints and non-

development of captive harbor adjoining the plant site. The main objectives of RINL on

its incorporation were to take over the VSP from SAIL with all its assets, liabilities,

rights and obligations and to carry on in India and elsewhere manufacturing, trading,

importing and exporting of iron and steel of all qualities.

15

MISSION:

To be a continuously growing company through technological up-gradation,

operational efficiency and expansion, producing steel at international standards of cost

and quality ensuring optimal return on investment to stakeholders and meeting

expectations of the customers.

OBJECTIVES:

Towards growth-Expand the plant capacity to 7 MT by 2011-12 and 10

MT by 2019-20.

Towards profitability- Achieve net profits from 2002-03 onwards with

special emphasis on enhancement of production.

Towards employees- make RINL the employer of choice. Upgrade the

skills and efficiency of employees through training and development and

maintain high levels of motivation and satisfaction.

Towards safety, environment and safety- Continue efforts towards safety

of employees, conservation of environment and become a good corporate

citizen.

16

INFRASTRUCTURE FACILITIES

Location:

The plant is located on the coast of Bay of Bengal. 16 Kms. to the South west of

Visakhapatnam port. It lies between the northern boundary of National highway from

Madras to Calcutta and 7 Kms. the south of the Howrah - Madras Railway line.

Visakhapatnam is well connected by own with unique cities of India.

The area enclosed within boundary wall of steel Plant is about 2,600 hectares.

Additionally 2,600 hectares is occupied by Steel Plant Township and 350 hectares by

Kaniti Balancing Reservoir.

Power:

Total requirement of power in VSP is 280 MW where 3.0 million tons stage is

reached.

Parts of this requirement are met from 4x60 MW generators at VSP’s own captive

power plant.

Two steam turbine generators of 7.5MW each generates power using waste heat

of dry quenching unit of coke ovens and 2x12.0 MW temperature pressure recovery

turbines will generate power utilizing high pressure available from temperature gases of

BF.

The balance 1.39MW (about 150MVA) of power is to be supplied by the Andhra

Pradesh state electricity board to meet the maximum demand requirement of power at

VSP.

Water:

The total water requirement of the plant will be 73 million gallons per day, which

is to be met by the Yeleru water supply scheme, which is an Andhra Pradesh government

project.

17

Auxiliary Facilities:

Extensive facilities have been provided for repair & maintenance as well as

manufacture of spares. The repair shop complex houses machine shop, structural shop,

Steel and NF foundry, Forge shop, Loco & wagon repair shops, Electrical repair shop,

Utilities equipment repair shop, Air conditioning & ventilation system repair shop.

In addition to the above basic units to carry out various operations, VSP is having

fully equipped Research & Control Laboratories to monitor and control all the operations

carried out in the Plant.

It is also having well established Training and Development Center to train the

newly recruited personnel and to conduct refresher courses for the employees and make

them able to handle jobs assigned to them during their regular duties.

MAJOR SOURCES OF RAW MATERIALS:

RAW MATERIALS SOURCE

Iron one lumps and fines Bailadilla, M.P.

BF Lime stone Jaggayyapeta, A.P.

SMS Lime stone Jaisalmer, Rajasthan

BF Dolomite Dubai

SMS Dolomite Madharam, A.P.

Manganese ore Chipuripalli, A.P.

Boiler Coal Talchar, Orissa

Coking Coal Australia

18

MAJOR UNITS:

Besides these main metallurgical units Captive Power Plant of 247.5 MW

capacities, Oxygen Plant, Acetylene Plant, Compressed Air Plant, Extensive repair and

maintenance facilities form part of the services available at VSP.

Steel Plant can take pride in having a clean & green township with provision of

about 8000 quarters, markets, community welfare centers, clubs, etc. for the employees

and their families besides having a modern hospital with 155 beds

MODERN TECHNOLOGY:

DEPARTMENTS ANNUAL CAP.

(‘000T)

UNITS(3.0MT STAGE)

COKE OVENS 2,261 3 Batteries each of 67

ovens

&7mts Height

SINTER PLANT 5,256 2 Sinter machines of 312

Sqm grate area each

BLAST FURNACE 3,400 2 Furnaces of 3200 cum.

volume each

STEEL MELTING

SHOP

3,000 3 LD Converters each of

150 cum. volume & six 4

strand bloom casters

LMMM(Light &

Medium Merchant Mill)

710 4 stand finishing mill

WRM(Wire Rod Mill) 850 2 x 10 stand finishing mill

MMSM(Medium

Merchant Structural

Mill)

850 6 stand finishing mill

19

Seven-meter tall coke oven worth dry quenching of coke using Nitrogen gas,

steam generated during this process is to be used for power generation. 3200 cum. Blast

furnaces, the longest in the country with conveyor changing the belt less top equipment.

Gas expansion turbines are provided for power generation by utilizing the BF gas top

pressure. Hot metal desulphurization facilities provided for 100 percent continuous

casting of liquid steel into blooms. High speed Rolling mills with computerized controls

and extensive waste heat recovery system were provided

MAJOR PRODUCTION UNITS:

A) Coke ovens:

The coal is proposed before charging into Coke ovens in coal tower. The

prepared coal in the coal tower is drawn by a changing car on the top of the batteries and

charged into the ovens as per the sequence -0 The charged coal is gradually heated in

absence of air to attain a temperature of 1000-1050 0 C which generally takes about 16

hrs for the coke to be ready. The volatile matter escaping during carbonization is

collected in a gas collection main through stand pipe. The stone is cooled by Ammonia

liquid spray and sent to coal chemical plant. The ready coke is pushed out of the oven by

a pusher car into a coke car and is taken to the dry cooling plant for discharging the hot

coke into cooling chambers.

There are three batteries, each having 7 ovens. Each oven is having a volume of

41.6 m2 and can hold 31.6 T of only coal charge.

The heat for carbonization is being supplied by a mixture of blast furnace gas and

coke oven gas having a calorific value of 1000 Kcal/NM3.

Batteries are of under jet, compound type having twin heating filled and

recalculation of waste gases.

20

B) Sinter plant department :

In Sinter plant ore fines are made into Sinter before being charged into blast

furnace. An initial mix consisting of ore fines and blue dust, manganese ore,

metallurgical wastes, dolo-fines, sand, 80% of limestone and 80% of coke fines is

prepared. This mix along with sinter returns, Sinter screenings 20% of lime fines and

20% of fine coke is stocked in bunkers. Moisturizing and palletizing is carried out in 4.2

x 24m drum mixer to obtain homogeneous mixture with partial palletizing and optimum

moisture. 10-25 mm size sinter is used as hearth layers of about 40mm thick. This

decreases dust entrapment by exhaust gases, reduce grate bar consumption.

Sinter mix up to 300mm thick is laid on the heath layer. A mixture of coke oven

gas and blast furnace gas having a calorific value of 2,000 Kcal. NM3 is used for

ignition.

The prepared sinters is crushed to about 15mm size and cooled by forcing

atmospheric air. This sinter is then sends to blast furnace through conveyors.

C) Blast Furnace:

There are two blast furnaces of 3,200 cubic meter useful volumes, each capable of

producing 1.7 Mt of hot metal per year while operating for 350 days are installed. There

are four hot blast stores for each furnace with a total heating surface of 224,000 square

meters. The dome can be heated to a temperature of 1450 0 C maximum while the waste

flue temperature is up to 4000 C. Stores are heated, by a mixture of blast furnace gas and

coke oven gas having a calorific value of 1100 Kcal/N Cum, up to 1300 0C pressure

of mixed gas before burners is 600 mm W.C.

Hot metal is discharged into 140 T hot metal ladles by rocking runners in east

house. There are four railway tracks for hot metal transportation, one service sub-track

and once track for flue dust disposal independent running railway tracks are provided for

delivery of hot metal to SMS requirement = 0.5 - 3 T as per blowing conditions Raw or

calcined coke - used to increase lining life of converter. Lump Coke - Use to preheat the

lining of newly lined converter.

21

D) Rolling Mills:

The cast blooms produced in SMS-CCD do not find much applications as such

and are required to be shaped into products such as Billets, rounds, squares, flats, angles

(equal & unequal), T-bars, Channels, I-PE beams, HE beams, wire rods and

reinforcement bars by rolling them in three sophisticated high speed high capacity, fully

automated rolling mills. They are

1. Light & Medium Merchant Mills

2. Wire Rod Mills

3. Medium Merchant & Structural Mills.

All the above-mentioned Rolling mills are Hi-Tech Rolling mills with

full automation and all modern equipments.

E) Raw material handling plant (RMHP):

The raw material handling plant receives the basic raw materials required for the

steel making process from various sources through railway wagons. The raw materials

like Iron ore fines, iron ore lumps, sized iron ore, limestone, dolomite etc are stocked in

ore and flux yard. Imported coking coal, medium cooling coal and boiler coal is stocked

in coal yard. These raw materials are sent in different proportions to nations departments

through conveyor system.

Salient features of RMHP:

Peripheral unloading system for railway wagons coming directly up to

pushers.

Blender reclaims for blending of ores and flux in which the bucket wheel

has a lateral motion across the bed.

Wheel on boom reclaims for reclaiming different materials from some bed

in ore of flux yard and same type coals in CHP.,

Ring Granulators for crushing of boiler coal.

22

PLC control of all systems.

Driers for dying SMS sized ore.

Mixers for mixing lime in purchased and generated fires.

Preparation of sized iron ore for use in BF to enable close size range of

raw materials.

Dust Extraction system is provided at various locations of RMHP to

absorb the dust generated during the process.

VARIOUS IRON & STEEL PRODUCTS:

VSP holds forth promise of adequate simply to the consumers of Iron & Steel

product in the country. Pig Iron, Billets, Plain rounds, Reinforcement bars, plain and

Ribbed Rods, Equal and unequal Angles, channels and beams flooring out of VSP’s

large capacity mills will ensure that the requirements of all consumers are fully met.

PRODUCTS QUALITY:

Computerized process control of VSP starts right from the hot metal production.

Dynamic control of steel melting operation guarantees steel chemistry strictly as per

specifications, Product with International specifications and tolerance, Reinforcements

bars of VSP produced through “Temp core” cooling process will have high strength

coupled with good bendability and weldability are a boon to the construction sector. VSP

wire rods will have high strength and good ductility because of controlled cooling of wire

rods by the “STELMORE” cooling.

BY-PRODUCTS:

For consumers wanting suppliers of naphthalene, Pitch, Anthracite oil, neonate

oil, coal tar, wash oil, light oil, Benzene, Toluene, Xylene etc.,

By products from its 60 Modern coke oven plant will be useful in many industries.

23

ACHIEVEMENTS:

Commissioned in 1989, it was the shore based, integrated company spread over

an area of 5000 sq.km. Since commissioning, VSP has crossed many mile stones in the

fields of production, productivity and exports. Some of the peak achievements are:

ISO 9002 for SMS and all the downstream units- a unique distinction in

the Indian Steel industry.

Indira Priya Darshini Vriskha Mitra Award: 1992-93.

Nehru Memorial National Award for Pollution Control:1992-93 & 1993-

94.

EEPC Export Excellence Award:1994-95.

CII(Southern Region) Energy Conservational Award: 1995-96

Best Labour management Award from the Government of AP.

SCOPE Award for best turnaround for 2001,02,03.

Environmental Excellence Award from Greentech Foundation for energy

conservation in 2002.

Best Enterprise award from SCOPE,WIPS for 2001-02, besides

A number of awards at the Local, Regional &National level competitions

in the area of Quality Circles &Suggestions schemes, etc.

IMPORTANT DEPARTMENTS IN VSP .

24

Coke & Coal chemical Department.

Thermal power plant (TPP)

Sinter Plant (SP)

Raw materials handling plant (RMHP)

Blast Furnace (BF)

Steel Melting shops (SMS)

Rolling Mills.

Light & Medium Merchant Mill (LMMM) Wire Rod mill (WRM)

Medium Merchant & structural mill (MMSM)

Auxiliary shops.

Forge shop

Steel structural mill

Central Machine shop

Foundry

Field Machinery Department (FMD)

Ore mines and quarries (OMQ)

Traffic Department (TD)

Energy Management Department (EMD)

Production planning and Monitoring (PPM)

Safety Eng. Department

Quality Assurance & Technology Development Department (Q, A

& TD)

2002-03 – AN YEAR OF TURNAROUND

25

For the financial year 2002-03 ,VSP is expected to achieve a net profit if around

Rs.450 crores inspite of the best efforts by VSP, collective, achieving net profit became

an eluding milestone due to various reasons like long gestation period ,high interest loans

and low demand cycles during the last 10 years. But these odds never deterred VSP’s

determination to achieve success. While the tear 2001-02 was the year of achieving

“Rated capacities”, the year 2002-03 is the year of “Turn around” for VSP

Five key parameters that led to VSP’s turnaround are:

1. Innovation and up gradation of the plant equipment.

2. Efficient operations management coupled with optimum waste

utilization and cost reduction measures.

3. Marketing policies and strategies aided by speedy decision making to

achieve record sales.

4. Healthy HR with emphasis on motivation and morale boosting of

employees.

5. Dynamic financial and cost management.

Marketing performance:

VSP has posted its best turnover of Rs. 5059 crs. This corresponds to 24% in

improvement in total sales over the last year. The total sales include best domestic sales

of Rs. 4443 crs and Rs. 626 crs of export sales. While the domestic sales improved by

19%, exports grew by 69 % over last year. VSP has sold 4.25 lakh tons of special steel, a

growth of 16% over last year.

26

ROLE OF EXPORT MARKETING:

Marketing itself is a significant factor of economic development of a country.

Every economy reports to enter the International Trade to develop its manufacturing and

trading activities. The process of industrialization depends on export marketing.

In order to materialize the goal of development planning, many development

economies including India have attached immense role to export marketing. A close

relationship exists between foreign trade and economic breakthrough of a country

whether it is economically developing or developed.

Export Marketing is comparatively a highly complex and scientific activity than

domestic selling. There are different governmental rules and regulations having bearing

on business operations of various countries. International competition in packaging,

credit terms, delivery schedules and after sales service facilities to mention a few in

severe, thereby rendering complex. Therefore, there are a few basic requisites of overseas

selling which a prospective exporter must not only fulfill at a particular point of time but

also continue to keep him always abreast of them.

EXPORT PROCEDURES OF VSP:

27

The main objective of the export producer is for streamlining the various activities

connected with exports. e.g, Booking of Orders, Appointment of handling, dispatch of

materials and claims etc.

The agencies involved in the process are as follows:

Marketing Department

Finance Department

Production Planning and monitoring Department.

Committee of marketing and Finance.

Advance licensing section.

(A) PLANNING:

Marketing department finalizes the material to be exported at least 45 days before

the start of the quarter in consultation with the PPM department. Market information

about demand prices of each country on periodical basis is collected. They also decide

the quantities to be exported through agents and spot booking.

(B) BOOKING OF ORDERS:

1. By inviting bids through Internet.

2. By spot Booking.

1. By Inviting Bids:

28

VSP invites bids from organizations / persons to whom VSP is already exporting

and also to the updated customers. The customer database is regularly updated on the

basis of inquiries received from time to time.

The bids are received by internet/E-mail. After analyzing the bids, VSP allocates

(exports) the products to different bidders on the following basis.

The prices quoted.

The quantity required.

The credit worthiness of the bidder.

Maintaining presence in various markets and not allocating (exporting to only

one market).

2. By spot Booking:

VSP also believes in the demand forecasting about the products produced by them

for the next quarter and the quantity already committed during the next quarter.

If any surplus is left over and if some of the customers require more quantity VSP

takes spot booking taking into consideration the quantity ordered and the quantity

available.

Spot booking is generally accepted for any price, which is above a minimum price

known as floor level price (FLP) the price is fixed after negotiations between VSP and

the trader booking the order.

(C) OPENING OF LETTER OF CREDIT :

29

This step involves opening of letter of credit (L/C) or any other financial

agreement by the customer. Once this is done, it ensures that there is no chance of any

default once the goods are exported by VSP.

(D) DELIVERY SCHEDULE:

It will be confirmed by VSP after the receipt of L/C in VSP’s format. In some

exceptional cases, delivery schedule can be extended beyond the quarter by one month at

the decision based on the rolling programmed.

(E) ADVICE FOR COMMENCEMENT OF PRODUCTION:

At this stage, the advance license department of the exports gives the advance

license application No. Notice of readiness (NOR) is issued to the customer after rolling

is completed.

(F) NOMINATION OF VESSEL:

This step involves nomination of a vessel to carry the goods to their destination.

VSP mainly follows two ways of nomination vessels, which are

FOB (Free on Board): In these conditions the seller delivers the goods on

board the vessel free of cost to the buyer at a port of shipment named in the

sales contract ( (90% of VSP’s export are on FOB basis)

CIF (Cost Insurance and Freight): In it the word “cost” signifies the price for

the goods themselves. In CIF, the seller has to procure insurance against the

risk of loss or damage to the goods during the carriage. The main difference

30

from FOB is that in CIF the seller (VSP) nominates the vessel and pays for

carriage.

This is done by contracting transchart in the ministry of surface transport.

Depending on the destination and the quantity to be exported, transchart nominates a

vessel. Then VSP enters into an charter party agreement with the owner of the vessel

nominated by Transchart.

(G) ACCEPTANCE OF NOMINATED VESSEL:

In this step, the acceptance of the nominated vessel takes place. VSP decides the

acceptance of the vessel on the following basis.

Age of the vessel ( It should not be more than 25 years)

Handling equipment ( Crane etc.) are available on the vessel

(H) TRANSPORTATION OF THE GOODS FROM PLANT TO THE PORT:

Once the product is rolled out as per the customer specification, the next step is

the transportation of the finished goods from the plant to the port. Here, a filled AR4

form has to be submitted to central excise authorities it keeps in eliminating the needs to

pay central excise duty on the goods to be exported.

(I) FULFILLMENT OF CUSTOMS FOR FORMALITIES:

In this stage, some customs formalities are fulfilled.Filing a shipping bill with the

customs. The shipping bill contains the description & quantity of the goods being

exported & the value of the above mentioned goods.

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Presentation of a form known as G/R declaration form (which contains the

shipping bill reference no.) in duplicate to the customs. After shipment and

verification the original is sent to RBI and duplicate copy is returned to VSP

which submits the same to the bank where it presents the documents either for

negotiation against L/C or for onward transmission in case money is received

in advance.

(J) LOADING OF VESSEL:

In this step, when the vessel arrives, loading takes place on the vessel. Generally,

the no of days to be taken for loading is decided before the loading takes of. If VSP loads

the goods in lesser no of days than the agreed no of days (Lay Days) it earns certain

amount of money known as dispatch money from the master of the vessel. In reverse

situation, VSP has to pay to the master of the vessel a penalty, which is known as

demurrage charge.

(K) ISSUANCE OF MATE’S RECEIPT:

In this stage, the Mate’s receipt is obtained. This is issued by the Master of the

vessel on completion of loading. It contains the following particulars.

Description of goods.

Quantity shipped

Loading Port

Destination Port

Name of the consignee

Notify address

Any other particulars, as agreed to between the buyer and VSP.

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This receipt should be dated and stamped by the master of the vessel. Bill of

lading if registered is issued either by the master of the vessel or his agent on submission

of the master’s receipt. It’s prepared strictly in accordance with a specified format.

(L) CONTRACT AND AMENDMENTS THERE TO

After finalization of an order, the marketing department informs the details like

material specification, size, quantity, delivery schedule etc. to PPM, works department

concerned, finance, and advance licensing section etc.

The advance licensing informs the advance license application No. or advance

license No. and Duty Exemption entitlement certificate (DEEC) book number to the

concerned officer in exports section. Marketing people then send the detailed contract for

sale and purchase of steel products/pig iron in the approved form in duplicate to the

buyers for his signature. On receipt of the signed contract copies from the buyer, they

sign the contract on behalf of VSP. They also send one copy of the signed contract to the

buyer and a photocopy of the contract to the Finance Dept., independent Inspection

Agency, and shipping section under marketing.

If the buyer insists on some amendments to the approved format the marketing

department obtains the approval of the competent authority and communicates to the

buyer accordingly. In case any amendments is required in the contract including

extension of delivery schedules, the marketing departments takes the approval of the head

quarters Marketing Committee (HQMC) or competent authority as per the delegation of

powers.

(M) LETTER OF CREDIT AND AMENDMENTS THERE TO

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In case the payment is arranged through L/C, the marketing department ensures

that the buyer opens the letter of credit in the specified format through any of the

International banks having correspondent relationship with SBI, Bank of Baroda, SBH or

any other member of the consortium bankers of VSP. Finance department then forwards

the letter of credit on receipt from the bank to the marketing department along with the

list of amendments required from the finance point of view. They also inform the name of

the bank through which the LC would be negotiated.

Except for the variation in the language from bank to bank the marketing dept

ensures that there is no amendment to the terms and conditions of the L/C and if there is

any amendment, they take the approval of the head quarter marketing committee.

Finance dept also informs marketing department about the confirmation of letter

of credit.

(N) CANCELLATION OF CONTRACT

The contract may be cancelled with the approval of the competent authority in the

following cases.

If the contract copy forwarded to the buyer is not returned to VSP within the

stipulated time.

If the amendment to the agreement proposed are not accepted to VSP.

If the buyer fails to place the vessel for loading within the agreed time or the

vessel placed is not suitable for the loading, negotiate the documents as per the

Red clause. If there is no Red clause cancel the contract.

If a buyer fails to open the letter of Credit (L/C) within the stipulated time or fails

to carry out necessary amendments to L/C within the stipulated time. In such

cases the marketing department informs the Finance departments, works Dept.

concerned and Advance License section about the cancellation of the contract.

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When a contract is cancelled for any of the above reasons, the marketing

department encashes the performance Bank guarantee submitted by the buyer, if any, as

per the delegation of powers.

(O) APPOINTMENT OF PRE-SHIPMENT INSPECTION AGENCY :

The marketing dept. issues tender Enquiry to at least three parties of International

repute, having operations at Visakhapatnam. (The tender enquiry shall be issued at least

30 days before the expiry of the present contract.

They also allow ten days time to the parties to quote against the enquiry. They

also follow the standard procedure for receipt, opening and evaluation of the tenders

received and finalized the tender.

(P) APPOINT OF TRANSPORTATION HANDLING AND STEVEDORING

AGENTS:

The marketing department issue limited tender Enquiry to all eligible parties with

the approval of the competent authority. They ensure that all parties have got valid

license to work at Visakhapatnam Port.

DOCUMENTATION:

35

A distinguishing feature of international trade is the complex paperwork.

Therefore many small exports are frightened by the extent and complexity of the

documentation.

CLASSIFICATION OF DOCUMENTS

A. DOCUMENTS RELATED TO GOODS:

1. Commercial invoice:

A commercial invoice gives details of the goods, which are the basis of the

the transaction between the exporter and the importer. It is an important document.

This performs many functions

i) It is the exporter’s bill of goods.

ii) It serves as the basis for calculation of the import duties by the

custom officials in the buyer’s country.

iii) It serves as the evidence of contract of sale.

2. Performa invoice:

An importer may require a proforma invoice for the following purposes:

i) To obtain an important license from the government of his country.

ii) To help him open a letter of credit.

iii) To obtain the release of foreign exchange.

3. Packing list:

The exporter is required to pack the goods according to the instruction of

the importer. A list of content of each case or pack is called as a packing

Note. If there are many cases or packs, then a “consolidated statement of

contents “ is prepared. A separate packing note is prepared for the each

container.

4. Certificate of origin:

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i) Description, quantity and value of the goods.

ii) Number of packages and markings on each package

iii) Declaration by the shipper(exporter)

iv) Certificate by the issuing authority.

5. GSP Certificate:

Under the generalized system of the preferences scheme of the united Developing

countries are given the facility to export their manufactured goods to developed

countries, at concession rates of duty. India is one of the recipients of such concession. In

order to avail this benefits a GSP.

Certificate of origin is required to be obtained from a competent authority. The

government has authorized the export inspection council and the director general of

foreign trade (DGFT) to issue the certificate for all the items.

It has also authorizes the central silk board, the courier board, the all India

Handicrafts board, the textiles committee and the jute commissioner to issue such

certificate in respect of items falling under their control.

B. DOCUMENTS RELATED TO TRANSPORT:

The exporter can transport the goods by sea, air or combination of road/rail

or even post.

1. Shipping order

2. Mate’s receipt

3. Bill of lading

Contents of bill of lading:

Name of ship or vessel

37

Name of the port where goods were loaded

Name and address of the shipper

Name and address of the consignee. It may be whether blank or in favor of a

Specified person or his order.

Name and address of the person to notify when goods reach destination port

Port of discharge and delivery

Details of freight paid or to be collected

Description of goods

Number and kind of packages

Marks and numbers on packages

Remarks about condition of goods, if any

Contents of the shipping bill

Name, address and IEC number of the exporter

Name of the ship or vessel

Name of the agent

Description, quantity of goods

Value of the goods

Type of cargo (whether containerized or bulk)

Number of packages

Markings and numbers on each of them

Port of discharge of goods

Contents of marine insurance policy

Name of the insurers

Name of the person in whose favour the insurance is effected

Nature of the goods insured

Risk insured against

Sum insured

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Period of insurance

C) DOCUMENTS RELATED TO PAYMENT:

1. Letter of credit:

A letter of credit is a “written undertaking issued by the buyer bank agreeing to

pay a certain sum of money within a stipulated period against a specified set

Documents”.

There are different types of letter of credit such as irrevocable letter of credit,

without letter of credit.

2. Bill of exchange:

A bill of exchange is a negotiable instrument. It is defined as “an unconditional

order in writing, addressed by the one person to another, signed by the person giving it,

requiring the person to whom it is addressed to pay on demand or on a fixed determinable

future time a sum certain in money to or to the order of a specified person, or to bearer”.

A bill of exchanges may be either a sight bill or a time bill. A sight bills required

to be paid immediately on presentation to the buyer a time bill is payable on a fixed dare

specified on the bill, usually after 30, 60, or 90days.The characteristic

Feature of bill of exchange is

a) Negotiability

b) Discounting

c) Unconditional

d) Dishonor

3. Documentary bills:

Documentary bills are sets of bill of exchange which are attached to the

documents related to the export transaction. Usually documents attached are the Bill of

39

lading and insurance policy certificate. These documents will enable the Importer to take

physical delivery of the goods either on payment or on acceptance of time bill.

4. Bank certificate of payment:

This certificate is issued by the negotiating bank, that is, the exporter bank

certifying that the bill covering the particular consignment has been negotiated and the

payment has been received in the maker specified under the exchange control regulations.

D) DOCUMENTS RELATING TO INSPECTION:

Certificate of inspection:

For a number of products notified under the export act 1962 it is obligatory for an

exporter of specified products to obtain an inspection certificate; the scheme is

administered by the export inspection council of India (eic). The exporter has to make an

application in the prescribed form called intimation for inspection to the export agency

along with the following documents:

Copy of the commercial invoice.

Demand draft for the necessary fee in favor of the agency.

Copy of the export contract.

EXPORT PRICING OF VSP

40

Pricing is a very critical decision in International Market because it is major factor

influencing a firm’s total revenue from exports and its profitability. There is no scientific

mathematical formula or method that can be applied in pricing a product correctly.

Export pricing has become a highly specialized and sophisticated technique. It is

imperative to adopt a mass suitable price policy for success in international market, in

terms, is influenced by two major factors i.e cost and marketing situation. The assistance

available against export adds another dimension to the pricing policy. The economy of

scale and technological improvement achieved as a result of scales are still other factors

influencing price decision.

The basic approach to export pricing has been than export order may be booked at

the best obtainable price generally in line with the opportunities exists, at the booking

time, keeping in view the cost of production and the domestic price.

V.S.P generally gets information regarding the price terms in the international

market from the following sources:

1. Business journals such as the London metal bulleting, American market

(metal) built, etc.

2. Market and price information furnished by foreign agents

3. Market and price information gathered by delegation deputed abroad.

4. Export Enquiries giving price indicators firms purchase aids received from

foreign buyer/agents.

V.S.P. is following pricing based on the data of cost of production, cost plus

pricing or full cost pricing method explain that the price is fixed at a level which reflects

the average total cost i.e. the total cost of fixed cost and variable cost, V.S.P. is not follow

the cost plus pricing. If cost plus pricing is followed the price of steel products of the

company international market will be very high and the buyer will not be interested even

though the quality is good.

41

V.S.P. is following marginal cost price. It has good scales in domestic and export

contributes valuable foreign exchange and covers variable cost only and at some time

fixed cost too.

At V.S.P. Pricing is done by comparing the export price obtained by taking

various elements into consideration and then comparing with domestic market and the

prevailing international price in domestic prices the price element takes into

consideration are ex-works, transportation cost, handling cost which include selling

distribution and administration cost.

There are five types of export prices

1. Ex-factory

2. Free alongside ship (F.A.S)

3. Free on board (F.O.B)

4. Cost insurance and freight (C.I.F)

5. Deliver duty paid

The ex-factory price represents the simplest arrangement .The importer is

presumed to have brought the goods right at the exporter’s factory .All cost and risk from

there on becomes the buyer’s problem. The ex-factory arrangement limits the exporter

risk. However, an importer may find an ex-factory deal highly demanding.

The F.A.S contract requires the exporter to be responsible for the goods until

they are placed along side the ship. All charges incurred up to that point must be borne by

the seller. The F.A.S price is slightly higher than the ex-factory price, since the exporter

undertakes to transport the goods to the point of shipment and become liable for the risk

associated with the goods for the longer period.

The F.O.B price includes actual placement of goods aboard the ship. The F.O.B

contract requires the following seller and buyer obligations.

42

The seller must:

a) Deliver the goods on board the vessel named by the buyer at the port if

shipment on the date specified in the contract.

b) Bear all cost payable on or for the goods until they have effectively

been placed aboard the ship.

c) Suitably packed goods for the mode of transportation specified.

d) Provide documentation indicating proof of delivery of goods aboard the

mode of transportation.

The buyer must:

a) Arrange for transportation specifying the mode of transportation to the

port of departure

b) Bare all cost and risk from the time of goods have been placed on

board the mode of transportation.

In the C.I.F price quotation, the owner ship of the goods passes to the importer as

soon as they are loaded abroad the ship. But the exporter is liable for the payment of

freight and insurance charges up to the port of destination.

The delivered duty paid alternative imposes on the exporter the complete

responsibility for delivering the goods at a particular place in the importer country .Thus

the exporter makes arrangements for the receipt of goods at the foreign port ,pays

necessary duties and handling, and provides for further inland transportation in the

importer country. Needless to say, the price of the delivered duty paid goods is much

higher than the goods exported under the C.I.F contract.

Currently VSP follows F.O.B price for exports and C.I.F price for imports as they

are more beneficial.

DISTRIBUTION:

43

Due to its located near the coastal area base and near to the port, it is having very

much suitability for its distribution of its products. The distribution is mainly from the

exports departments and they will distribute according to the demand. The parties which

what the products of V.S.P. Meet at the export section and marketing department or they

will send message by fax or by telephone they will contact and distribution was done

according to the demand of the party.

MODE OF TRANSPORT:

1. Railways

2. Road

3. Sea Port

PROMOTION:

Generally, they advertise through regular builders and contractors in domestic

market. Where as in international marketing they select the world trade magazines and

websites to advertise their products via electronic and print media.

VSP have their website named vizagsteel.com and a few magazines circulated

internally or externally. These are:

1. Steel File (Bimonthly)

2. T.Q.M Journal (quarterly)

3. Gangavaram se (Quarterly)

4. Ukkuvani (Monthly)

44

TERMS AND CONDITIONS FOR AGREMENT FOR SALE BY VSP

FOR EXPORTS OF IRON AND STEEL PRODUCTS ON FOB BASIS.

1. Rastriya Ispat Nigam Limited, Visakhapatnam Steel Plant, a company incorporated in

India under the Companies Act 1956 having its registered office at Administrative

Building .Visakhapatnam Steel Plant ,Visakhapatnam 530031 herein after referred to

as SELLER.

1.1 The SELLER is an independent legal entity with power and authority to enter

into contracts solely in its own behalf under applicable laws of India and general

principles of contract Laws. Government of India is not a party to any agreement

as per these terms and conditions and is not and shall not be liable for any acts,

omissions ,commissions breaches or other wrongs arising out of any agreement as

per the terms and conditions and the BUYER shall waive release and forego any

and all actions for claims including loss claims, impleads claims including loss

claims, impleads claims of counter claims against Government of India arising out

of this contract and shall not sue the government of India as to any manner, cause

of action of thing whatsoever arising of or under this agreement.

2. The person/Company/Firm identified as BUYER in the agreement including his /its

successor /permitted assignee shall be herein after referred to as BUYER.

2.1 The obligations in the agreement are between BUYER and SELLER and

unless otherwise agreed any agreement as per these terms and conditions except

that any communication to / from such representative shall be deemed to be

to/from BUYER.

3. PRICE BASIS:

45

3.1. Unless otherwise agreed, price of the material shall be free on board

(stowed), Visakhapatnam port, Visakhapatnam, India.

3.2. (Applicable for steel products only): The BUYER shall arrange at his own

cost and expense to provide materials including dunnaging required for stowing,

dunnaging, lashing, shoring and securing of the materials inside the hatches /holds

of the vessel at load port to the master of the vessel nominated by BUYER and

accepted by SELLER for delivery as per clause 5 herin below. Labour charges

involved in the work of dunnaging/stowing /lashing/shoring and securing of the

materials shall be borne by seller.

3.3. SELLER shall under no circumstances be liable for any

costs/charges/liabilities /insurance/freight/taxes of duties/levies/fees whatsoever

nature, including by reason of importation of the material in the country of

import, arising subsequent to the delivery of the materials as per the agreement on

the bases of FOBST.

3.4 Marine insurance to be covered by the BUYER.

4. MATERIAL & QUANTITY:

4.1. Subject to these terms and conditions (and expressly agreed deviations

/deletions/additions of any) , the SELLER is obliged to sell material of technical

specifications as agreed and the BUYER is obliged to buy the same.

4.2. (Applicable for steel products only).

Size wise and specifications wise break up shall be as agreed. Unless otherwise

agreed , SELLER has a right to sell/dispatch ./ship the material as per agreement

with quantity variance of +of – 5% on total quantity with + of – 10%for each size

and specification at SELLER ‘s option with packing and marking as usually done

by seller .Unless otherwise agreed, SELLER shall invoice on the basis of actual

46

net weight. Quantity and quality shall be certifier in Inspection Certificate by an

independent inspection agency at BUYER’S cost to co-jointly carryout survey

with the independent

Inspection agency appointed by the SELLER, in accordance with international

standards, regarding the physical condition and packaging of the cargo at the

transit storage yard port on a lot wise basis.

4.3. (Applicable for pig iron material):

Unless otherwise agreed, the tolerance on quantity to be delivered shall be +/-10%

at buyer‘s option .The option shall be exercised by the BUYER at the time of

nomination of the vessel. Weight (quantity) shall be established by draft survey at

loading port by an independent inspection agency, and the quantity and quality

established at load port shall be final. Weight of deleterious impurities such as

nonferrous dirt, dust, moisture over 0.5 %( half percent) shall be deductible from

the final weight. Buyer has freedom to nominate their own agency at Buyer’s cost

to co-jointly carryout out quality and quantity survey with the independent

inspection agency appointed by the SELLER, and the inspection is to be carried

out in accordance with international standards applicable for pig iron of quality

inspection and draft survey.

4.4 The cost of inspection by the independent inspection agency appointed by the

SELLER. The inspection certificate issued by them certify, inter-alia

that the materials were inspected at the loading port prior to loading and that the

marking were as per requirements of the Agreement between the SELLER and the

BUYER;

the size wise break-up of quantity loaded on board the vessel indicating the

number of bundles /coils (APPLICABLE FOR STEEL PRODUCTS ONLY):

and,

that materials were loaded on board the vessel without apparent damage were

found to be in good order and that the materials were properly lashed and secured

inside the hatches /holds of the vessel.

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5. DELIVERY/ SHIPMENT:

5.1. The SELLER shall deliver the materials free in the holds of the vessel

nominated by BUYER and accepted by the SELLER as per these terms and

conditions in one or more safe berths reachable on arrival always afloat at loading

port which shall be Visakhapatnam, India .Unless financial arrangement is made

by the BUYER se per clause 6 .below of otherwise as agreed by SELLER, the

SELLER is not obliged to confirm delivery.

5.2. The BUYER shall nominate a vessel not more than 25 years old with lay

date/cancellation date within 30 days of Seller’s notice of readiness of materials

for shipment of within the laydays in case given by the SELLER of acceptable to

the SELLER whichever is earlier .The BUYER shall take into account limitations

of the port such as maximum LOA of 12 mts , maximum beam length of 30.48

mts and maximum laden draught of vessels as .448 mts in some berths and 10.06

mts in others.

5.2.1 In case there is a delay by the SELLER to confirm notice of readiness of

materials and the BUYER had made financial arrangements as agreed the

BUYER has the option to cancel the contract or take the delivery of the material

at the contract price & terms within a period of 90 days beyond the original

agreed delivery period.

5.3 While nominating a vessel the BUYER shall communicate following

particulars for the nomination.

a) Name of the vessel

b) Year of built & Flag

c) Classification

d) LOA/Beam/Draft at max .DWT.

e) Loadable tonnage /nominal tonnage for delivery

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f) No of Decks /single decker/TWEEN decker if TWEEN, the third deck if

any)

g) No of holds/hatches

h) Hatch Openings: Weather deck/Tween deck

i) Type of hatch covers: Weather deck /Tween deck

j) Cargo gear capacity: Cranes-single swinging Derricks-Configurations

hatchwise-Derricks working in union purchase-not acceptable.

k) ETA /laydate/ cancellation date at load port.

5.3.1 The SELLER is entitled to following additional information if required :

a) Original name of vessel if changed at present

b) Whether disponently owned

c) Owners P & I Club

d) Disponent Owners P & I Club

e) Last special survey

f) Last dry docking

g) Position of engines

5.4 The vessel nominated by the BUYER shall be geared and equipped with

cranes/derricks capable of lifting minimum specified tonnage at a time as below

from the wharf and placing the materials in the places of the hatches including

wing spaces and having minimum four available hatches. The SELLER shall

guarantee a loading rate 2000MT per weather working day of 24 consecutive

hours Sundays , holidays and non-weather working days excepted even if used

(2000 MT PWWD SASHEXEIU) for steel products and a rate of 4000 MT

PWWD SASHEXEIU for pig iron subject to these terms and conditions of the

basis of five or more available workable hatches of hooks ,whichever is less . The

SELLER is not obliged to accept vessels with gear capacities ,less than three

hooks .If due to any reason , a vessel is accepted with lower gear capacity or

lesser number of hatches /hooks ,the load rate shall be reduced prorata .The rate of

demurrage/despatch shall be as mentioned in the below table:

49

In the case any /all vessel gears are not suitable for loading the cargo , due to any

reason and in case buyer provides shore crane berths & shore cranes at his cost

the same will be considered as gear for the purpose of laytime calculations. In

such an event waiting time for getting shore crane berth shall be excluded from

time used.

In case and hatches is doubled up, it shall be considered as double hatch only

when two cranes that are capable of being worked by two gangs simultaneously

are made available for not less than 75% of loading time of that hatch.

Product Norm.Qty Gear Demurrage/

for delivery Capacity Despatch

(MT) (MT) USD

(MIN) per day

Pig iron 9999 or below 15 NIL/NIL

Pig iron 10000-19999 15 4000/2000

Pig iron 20000 & above 15 6000/3000

Steel 9000 or below 5 NIL/NIL

Steel 9001 – 9999 5 4000/2500

Steel 10000 -19999 5 5000/2500

Steel 20000 & above 10 6000/300

NOTE: Union Purchase Type Gear is not acceptable .The loading shall be on

CQD basis for cashews of NIL demurrage/despatch .It is preferable to have tween

decker for wire rods and single decker for pig iron .Stacking below the coils will

be rolled on plates below wing space will be three high for wire rods ,above

which the coils will be rolled on plates below the wing space and drop stowed in

the hatch openings . Tank tops should be able to support forklift along with

materials for loading steel cargo. Tank top strength should be 10T/M2 in respect

50

of 3T forklift for 3 high stacking and 16T/M2 for 10T forklift for 4 high stacking.

All cargo except WRC will be drop stowed in the hatch opening with in the reach

of vessel cranes only.

If one or more parties nominate a vessel for lifting part quantity of pig iron in

different sale contracts .the dem/dis amount shall be calculated as per the rates

applicable for the total quantity loaded in the vessel by all parties concerned and

the dem/dis amount so arrived shall be payable on prorata bases as per the

quantities lifted by the respective individual p0qrties /in different sale contracts.

In case party nominates part vessels for steel consignment ,the despatch

/demurrage calculations will be made based on per working per hatch per day of

per workable hatch per day basis as given below: “PER WORKING HATCH

PER DAY” or “PER WORKABLE HATCH PER DAY “ – means that laytime is

to be calculated by dividing the “quantity of cargo in the hold with the largest

quantity “ by the result of multiplying the agreed daily rate per working workable

hatch by the number of hatches serving that hold. Thus:

Laytime = Largest Quantity in one hold

--------------------------------------- = Days

Daily Rate per Hatch x number of

Hatches serving that hold

Laytime used shall be corresponding to the hold in which largest quantity is

loaded with allowable exceptions as per our standard terms and conditions. The

time spent for loading cargo in all other holds will not count as laytime.

5.5 The SELLER shall communicate acceptance /non –acceptance within next

working day and with reasons in case of non-acceptance. However, the SELLER

51

is not obliged to consider any nomination of the vessel unless financial

arrangement is made by the BUYER as agreed.

5.6. Upon arrival of the vessel within the limits of the loading port and after.

a) Ensuring that the hatches /holds of the vessel have been thoroughly

cleaned

b) obtaining free pretique and

c) ensuring that the vessel is load –ready in all respects,

the Master of the vessel shall serve the Notice of readiness of the vessel to load

the Materials (i.e. Master’s N/R) on the port office of the SELLER at the loading

port, during normal office hours which are 9.30 AM to 4.30 PM from Monday to

Saturday .The master‘s N/R shall not be server on Sundays /Port holidays /Charter

Party holidays. /Non –weather working days.

5.7.Upon arrival of the vessel within the limits of the loading port or at any time

later till completion of loading ,if the SELLER or the load port authorities

consider that the cranes / gears of the vessel are not capable of lofting the

materials of the weights and dimensions as agreed, from the wharf and placing the

material inside the hatches as required for loading ,the SELLER has right to

reject the vessel outright without any liability including freight and all other

consequences/losses arising thereof. Incase it is considered that the loading rate

guaranteed, the SELLER has a right to assessment by an independent marine

surveyor to determine such load rate and the same shall be binding on the

BUYER .In case the surveyors find the gears not capable of loading from wharf to

any part of the hatches, risks /costs to the SELLER and the charges of the

independent marine surveyor shall be bourne by BUYER.

5.8. The BUYER shall ensure that the charter party governing the shipment shall,

inter-alia, include following provisions:

52

5.8.1. The ship owners shall appoint their own agents at load port.

5.8.2. The ship owners shall bear all ports dues/charges/ levies except port

loading charges, tonnage dues, light dues and other taxes ,assessments and

charges which are customarily payable by shippers.

5.8.3. Ten days prior to ETA of vessel shall give telex/cable/fax intimation to the

SELLER.

5.8.4. Thereafter at the interval of 7 days /72 hrs /24 hrs before the ETA of the

vessel ,master of the vessel shall send telex/cable/radio messages regarding the

ETA of the vessel to the SELLER and as well as to the Port office of the

SELLER.

5.8.5. Each vessel shall hold a valid gear certificate in conformity, covering the

duration of each voyage tested. The gear certificate shall be made available by the

Master of the vessel to the vessel to the representative of the vessel at the loading

port, in any case prior to commencement of loading port, in any case prior to

loading plan for the materials shall be furnished by the master of the vessel before

/on its berthing.

5.8.6. The master of the vessel shall allow on board the vessel the representative

of the independent inspection agency appointed by the SELLER and provide such

information/ assistance as may be required by such agency in connection with the

performance of their assignment duties.

5.8.7. The master of the vessel shall provide free use of light on board the vessel

as may be required for working the vessel at the loading port at all times and in

each case free of expense to the SELLER The master of the vessel shall make

available all the hatches for loading of the materials throughout the period the

53

vessel is worked for loading of the materials except in such hatches where the

materials have been completely loaded.

5.8.8.1. Laytime shall commence at 1300 hrs if Master’s N/R is serve in the

afternoon.

5.8.8.2. Time between noon on Saturday and 0800 hrs on Monday and /of

between noon on the last working day preceding a legal holiday and/of port

holidays /Charterparty holidays and 0800 hrs in the next working day shall not

count as laytime even if used .unless the vessel is on demurrage.

5.8.8.3. After berthing if the port authorities of representative of the SELLER find

that the vessel is not ready in all respects to load ,the laytime will not commence

until the vessel in proceeding from the anchorage to the berth shall not count as

laytime unless the vessel is on demurrage.

5.8.8.4. In the event of breakdown of vessel gear or other equipment of the vessel

by reason such as insufficient power etc, not attributable to shipper the period of

such break down shall not count as laytime.

5.8.8.5. Time lost due of the following reasons shall not count as laytime unless

the vessel is on demurrage:

Non weather working days declared by the port authorities even if the

vessel is worked.

War, Rebellion, Tumult, Political disturbances, Insurrection.

Lockout, Strikes, Riots, Civil commotions.

Epidemics, Quarantine, Land-slips, Floods, Frost or Snow , Boretides ,

Bad Weather.

54

Stoppage of work , weather partial or general by workmen /long shoremen

/tug-boatmen of other hands essential to the working of the vessel or

loading of the materials into the vessel.

Accidents at Wharf

Intervention of security, customs and/or other constituted authorities.

Stoppage, whether partial or total, due to other causes beyond the control

of the SELLER.

5.8.8.6. The opening and the closing of the hatches of the vessel shall always be

done by the vessel’s crew and the cost involved therein shall be to the account of

the vessel.

5.8.8.7. The time lost due to shifting of the vessel within the port limits shall not

count as laytime . However, if the shifting is required by the SELLER, the

shifting charges shall be to the account of the SELLER and time lost in shifting

shall count as laytime.

5.8.8.8. The overtime of the crew and officers shall be to the account of the

vessel.

5.8.9. If any damage is caused to the vessel at the loading port at the time of

loading of the materials by the Stevedores engaged by the SELLER,. The claim, if

any, for such damage shall owners and the stevedores. The Master of the vessel

shall lodge such claim, if any, on the stevedores, promptly after the damage

Reports ,prior to the departure of the vessel from the loading port ,failing which

the claim shall stand barred and the stevedores shall stand absolved and relieved

of all responsibility .Subject to compliance with the conditions enumerated in the

clause ,in case the stevedores fail to settle the same ,the SELLER shall be

responsible for settlement of such claims.

55

5.8.10 Statement of Facts: Immediately after completion of loading of the

materials into vessel and before the sailing of the vessel from the loading port (s)

a statement of facts shall be made out at the loading port(s) duly signed by and

distributed amongst; (a) Master of the vessel /Agent of the vessel at the loading

port (b) Agents/Representative, if any of the BUYER at the loading port and (c)

representative of the SELLER at the loading port.

5.8.11. The Master of the vessel shall deliver a stowage plan in triplicate duly

signed by him before loading and immediately after completion of loading and

sailing of the vessel, if sought by the SELLER..

5.8.12. The ship owners shall instruct their Agents at the loading port to issue the

Bill(s) of Lading with marking as per LC (see 6.2.1(a) to the representative of the

SELLER ,immediately but within one day from the date of completion of loading

of the materials in the materials into the vessel.

5.9 Freight enquiries shall be notified in advance to:

Ministry of surface Transport,

Chartering wing (transchart)

Transport Bhavan , Sansad Marg.

NEW DELHI 1100001(INDIA)

TELEX:031-61147,61158,61159 VAHAN ND.

While nominating a vessel and preference is to be given Indian flag vessels.

6. TERMS AND CONDITIONS:

6.1. Unless agreed otherwise ,financial arrangements shall be made with six

weeks of acceptance of offer by the SELLER of before nomination of the vessel

whichever is earlier ,in USD by the BUYER in favor of SELLER by means of a

confirmed irrevocable without recourse to the drawer’s Letter of Credit governed

by Uniform Customs and Practices for Documentary Credits representing the

56

value or the contract quantity of the basis of FOBST , established through any

first class international bank in fovour of Rashtriyal Ispat Nigam Limited,

Visakhapatnam Steel Plant ,Visakhapatnam, India . The LC should be advised

through

State Bank of India , Bank of Baroda

Steel Project Branch Vadlapudi Branch

Branch code no.6318

TLX:

0495 259 BBVA IN

0495 518 SWAT IN 0495 266 RODA IN

SWIFT:

SBININBBA145

as per the negotiating documents negotiable at the counters of any branch or any

bank of India.

6.2. PAYMENT AGAINST LC

6.2.1. The LC shall be available for payment of 100% of value of invoice (less if

any advance is already paid by the BUYER, covering the material shipped against

presentation of the SELLER drafts drawn at sight accompanied by following

Bank documents (and also against clause no.6.8 herein below)

3/3 original on board ocean of Charter Party Bills of Lading

SELLER ‘s packing list

SELLER’s signed Commercial Invoices

Pre-shipment Inspection Certificate –issued by the independent inspection

agency appointed by the SELLER.

57

Note: One copy each of the aforesaid documents shall be despatched by courier

by the date of BL.

6.2.2. In case the LC shall be available for payment against 100% of invoice value

as per clause 6.8 herein below.

6.2.3. The LC shall specifically provide that Bills of Lading and pre-shipping

Inspection Certificate with remarks such as:

Some ties broken/missing, atmospheric/surface /superficial rust/edge rust

unprotected cargo, stored in open area prior to loading, rust stained/partly rust

stained shall be acceptable for negotiation.

6.4 The LC should provide for shipment of materials with quantity tolerance as

specified in clause 4 herein above or as otherwise agreed .It should be valid from

date of shipment as per the agreement and upto date of completion of shipment in

the vessel nominated by BUYER and 21 days beyond that for negotiations of

documents.

6.5 All Bank and other charges incurred outside the territory of India shall be

borne and paid for by the BUYER .LC confirmation charges ,if required shall be

and paid for by the SELLER.

6.6. The financial arrangement required to be made by the BUYER shall

deemed to be made only on receipt of L/C at the bank as specified in clause 6.1

above unless agreed otherwise .In case the financial arrangement is not made by

the BUYER within the agreed time the SELLER may forfeit the EDM if any

within the agreed time .the SELLER may forfeit the EDM, if any with the

SELLER.

58

6.7. If any advance is made by the BUYER against any contract ,in part of full, if

the BUYER IS not able to indicate size wise breakup of the material at least 4

weeks prior to the expiry of contractual; delivery period.

(1) In case of fall in prices , the SELLER is entitled to recover difference in

contract price and the weighted average price realized by SELLER for

the deliveries made in the last month within the contract delivery period

and return the balance and EMD to the BUYER without interest.

(2) The SELLER will return the advance without interest in case the

weighted average price realized for the last month of delivery as per

contract is more than the contract price.

6.8. In the event of

(a).The failure of the BUYER to nominate suitable vessel within lay days

given in Seller’s notice of readiness of cargo or otherwise acceptable to Seller, of

within 15 days from the N/R of cargo whichever, or

(b).The vessel nominated by the BUYER and accepted by the SELLER

failing to arrive at the designated load port within the agreed lay-days for reasons

other than Force Majure as defined under clause no.10 herein below ,or

©. The vessel (nominated by the BUYER and accepted by the SELLER )

being found unsuitable after its arrival at designated load port as certified by

independent marine surveyors.

The seller shall be entitled to negotiate his commercial Invoice against the LC

opened by the BUYER and realise 100% of the value of the Materials ready for

shipment on the basis of certificate issued by the SELLER, certifying the quantity

of the materials ready for shipment and alse certifying that the materials are ina

good condition. The materials will therefore be held in custody by the SELLER at

the risk and responsibility of the BUYER at the storage yard of the SELLER at

59

the load port . While the SELLER shall hold the materials free of ground rent for

period of 15 days from the date of payment ,for a storage extending beyond 15

days from the date of payment BUYER shall pay to the SELLER groune rent

calculated at the rate of USD 1.00 per metric ton per week of part therof .The

BUYER shall however nominate another suitable vessel within reasonable time

for taking delivery of the cargo for which payment has been realised by the

SELLER as aforesaid and subject to such vessel arriving at load port within the

agreed lay-days the SELLER shall at his cost deliver FOB (stowed ) the materials

for which payment has been realised by the SELLER as aforesaid .The LC

established by the BUYER in fovour of the SELLER shall make specific and

unconditional provision to the above ,.

7. SETTLEMENT OF DEMURRAGE / DESPATCH MONEY IN RESPECT OF

EACH SHIPMENT.

Based on the statement of Facts , the computation of laytime used shall be based

on provisions contained in clause 5 and its sub clause herein above .Despatch

money ,if any ,calculated on the basis of “Working time Saved” shall be

arranged to be remitted by the BUYER to the SELLER within sixty days from

the date of receipt of the claim of the SELLER with laytime statements .EMD

shall be released after receiving remittance in full towards pending despatch

mondy pending from the BUYER if any .If not , the amount of deurrage within

sixty says from the date of receipt of claim from buyer with supporting

documents.

8. RISK AND TITLE:

Except in the case of negotiations under LC as per clause NO.6.8 herein

above,with respect to each shipment ,the risk shall pass from the SELLER to the

BUYER as soon as the materials cross the ship’s rails at the port of loading and

60

the title to the materials shall pass from the SELLER has negotiated the

documents and has received payment of the full invoice value of the materials

shipped from the negotiating bank

.

9. RIGHT OF TRANSFER:

Neither the BUYER nor the SELLER shall be entitled to assign of transfer

contract resulting from this agreement except to its successor or to the

transferee of all or substantially all of its assests , and in the case of any such

assignment of transfer, the contract shall binding upon and shall isure to the

benefit of such successor of transferee.

10. FORCE MAJEURE:

If the SELLER and /of the BUYER be prevented from discharging its or their

obligation under this agreement by reasons of arrests or restraints of privacy of

rules ,government of people ,war .Blockade,Revolution,Insurrection ,

Mobilisation, Strikes , Riots , Civil Commotions,Lockouts, Accidents, Acts of

God, Plague,or other epidimics,natural clamity of on account of any other cause

intefering with the production and/or delivery of the materials as herein above

contemplated ,the time during which production and/or delivery of the materials

contemplated the time or time during which production and/or delivery os

prevented by any such causes as herein above mentioned, provided that in the

event of sluch delay exceeding ninty days ,the party other than the party which

invokes the force majeure may at their option ,cancel this agreement by Notice in

–writing to the other party in respect of the undelivered quantity of the materials

without ,however ,any right against or being responsible to the other party for

sluch cancellation .The party invoking force –majeure causes ,put the other party

on notice supported by certificate from the Chamber of Commerce of concerned

government authotity and shall likewise intimate the cessatioin of such causes. If

61

the force-months the SELLET or the BUYER may at his option cancel thie

agreement by notice in writing to the materials without ,however ,any right

against or being responsiblw to the other party for such cancellation.

.The party invoking force –majeure causes, put the other party on notice

supported by certificate from the Chamber of Commerce of concerned

government authority and shall likewise intimate the cessation of such causes. If

the force-months the SELLET or the BUYER may at his option cancel the

agreement by notice in writing to the materials without ,however ,any right

against or being responsible to the other party for such cancellation.

11. LEGAL INTERPRETATION:

The contract of sale and purchase and these terms and conditions shall be

governed and construed in accordance with the Laws of India for the time being

in force. For all commercial terms and abbreviations used hereunder, which have

not been otherwise defined, the rules of INCOTERMS 1990, latest revision ,shall

be applied.

12. SETTLEMENT OF DISPUTES:

All disputes of differences whatsoever between the parties here to arising out of

or relating to the construction, meaning or operation or effect of this contract ot

the breach thereof shall unless amicably settled between the parties hereto be

settled by arbitration in accordance with the Rules of Conciliation and Arbitration

of the International Chamber of Commerce(ICC) , Paris .France , by a sole

Arbitrator appointed by the chairman of the

Arbitral Tribunal of the Court of Arbitration of ICC and the Award made in

pursuance thereof shall be binding on both the parties’ .The venue for the

arbitration proceedings shall Visakhapatnam, India.

62

13. JURISDICTION OF COURTS:

All disputes shall be subject to the jurisdiction of the competent courts of

Visakhapatnam.

14. IMPORTS / EXPORTS LICENSE:

It shall be the responsibility of the SELLER to arrange export license, if any,

required and it shall be the responsibility of the BUYER to arrange for the import

license ,if required ,in the country into which the materials are intended to be

imported.

15.MODIFICATIONS / WAIVERS:

No change in respect so these term and conditions are valid unless the same is

agreed to in writing by both the parties .All previous negotiation / understandings

between parties are cancelled while entering into an agreement as per these terms

and conditions .Failure to enforce any condition hereunder contained shall neither

be deemed as waiver of the conditions itself nor authorize any subsequent breach

thereof.

63

PRODUCTS OFFER FOR EXPORT:

The following table shows the different products offered by VSP in the export marketing.

The below table shows the various specifications and grade levels

1. WIRE RODS:

Specification

Grade Remarks

ASTMA510.96SAE 1008 (Si-0.30%Max)

Tensile Strength 430 N/mm2 Max

ASTMA510.96SAE 1010 (Si-0.40%Max) Tensile Strength 450 N/mm2 Max.

ASTMA510.96SAE 1012 (Si-0.40%Max)

Tensile Strength 470 N/mm2 Max.

ASTMA510.96SAE 1015 (Si-0.40%Max)

Tensile Strength 510 N/mm2 Max

Wire rods Hot Roller Rebars

Angles Channels

Beams Billets

Pig Iron

64

Note 1: In straight lengths 12m +/-0.1m but 2% short length in a bundle to be allowed. In coils of dimensions as for Wire Rod Coils

Note 2: Rib design and Sectional Weight as per VSP's design. Size 32 & 28 also likely to

be available. Availability of 32, 28 & 18 size subject to economic quantity of orders.

2. HOT ROLLED REBARS:

Specification Grade Size (mm)

JISG3112 SD35 16, 18, 20, 25

BS 4449 250 16, 18, 20, 25

BS 4449 460 16, 18, 20, 25

JISG3112 SD35 8, 10

3. ANGLES:

Size (mm) Section Weight Kg / metre

100 X 100 X 8 / 10

12.10 / 14.90, +5% -3%

90 X 90 X6 / 8

8.20 / 10.80, +5% -3%

75 X 75 X6 / 8

6.80 / 8.90,   +5% -3%

65 X 65 X6 / 8

5.80 / 7.70,   +5% -3%

65

4. CHANNELS:

Size (mm) Sec.Wt Kg/mtr

50 X 75 X 5.71 16.8 +/-2.5%

125 X 65 X 5.3 13.1 +/-2.5%

100 X 50 X 5 9.56 +/-2.5%

75 X 40 X 4.8 7.14 +/-2.5%

5. BEAMS:

Size (mm)

Web Thickness  Sec. Wt

Remarks

180 X 915.3 +/-0.7%  18.80 +/-4%

Flance Thickness : 8.0 +/- 1.0%

120 X 114

5.0 +/-0.7%  19.90 +/-4%

Flance Thickness : 8.0 +/- 1.0%

6. BILLETS:

66

Size (mm) Chemistry

125 x 125 x 10,000 +/-400

See Note 2 below

65 X 65 X 6,000 +/-100

Is : 2830(C:0.12-0.23%; SI:0.40% Max

75 X 75 X 6,000 +/-100

Mn : 0.3-1.5 Mn:0.3-1.5

Note 1:  Chemistry (other than Billets) JIS G3101 SS400 or IS; 2830; Bundle Wt: 5MT

(Max), Length 12+/- 0.1m (for 6+/-0.1m ends would be gas cut); Allowable short length

upto 2%.

Note 2:  Chemistry for Billets: C: 0.14-0.20%; Mn: 0.5-0.9%; S/P: 0.05% Max; Si:

0.35% Max; OR SAE 1015; OR Forging Quality chemistry as per JIS G4051 GR S20C /

S45C.

7. PIG IRON:

BASIC GRADE STEEL MAKING PIG IRON :

CHEMISTRY:   C: 3.5 - 4.5%; Mn : 1% MAX; Si : 1.25% MAX; P : 0.15% MAX;  S  : 0.05% MAX.

SIZE:   Pigs with upto two notches upto 45kgs in weight. Chips/broken pieces below

25mm not exceeding 5%, dust, dirt and moisture exceeding 0.5% deductible from draft

survey wt.

67

FLOWCHART OF THE TOTAL EXPORT CYCLE:

A) Export Marketing Research 1. Scanning the sources of export trade information

2. Analysing the country export trade scenario

B) Export Marketing Strategy 3. Selection of the products for export marketing

4. Identification of export markets for these products

C) Export Marketing Mix Planning 5. Development of the products for export

6. Deciding the aspects of distribution such as transportation, packaging etc.

7. Deciding the terms of payment and means of financing

8. Studying the benefits available to exporters

9. Fixing the price for export markets

D) Registration formalities 10. Obtaining the RBI code number for exporters

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11. Obtaining the IEC number/ identity card

12. Registration with EP council and obtaining the RCMC

E) Export Order 13.Securing export orders for the products

F) Per- Shipment Activities 14. Scrutiny of the order and confirmation to the importer

15. Approaching the bank for financial assistance

16. Manufacturing/ procurement of goods and packing

17. Clearance of the goods by excise authorities

18. Pre-shipment inspection of the goods of quality control

19. Transportation of the goods to the port of the shipment

20. Appointment of the clearing and forwarding agent

21. Completion of port and customs formalities by the agent

G) Shipment 22. Loading of the goods and their shipment

H) Post- Shipment 23. Despatch of the documents by the agent to the exporter

69

24. Sending the shipment advice to the importer

25. Presentation of documents to the bank or payment collection

26. Presentation of documents to authorities for claiming export benefits.

DUTY EXEMPTION/REMISSION SCHEME

The Duty Exemption Scheme enables duty free import of inputs required for

export production.

An Advance Licence is issued under Duty Exemption Scheme.

The Duty Remission Scheme enables post export replenishment/ Remission of duty on

inputs used in the export product.

Duty Remission Scheme consist of

a. DFRC(Duty Free Replenishment Certificate)

b. DEPB(Duty Entitlement Passbook Scheme)

DFRC permits duty free replenishment used in the export product. The DEPB

allows drawback of import charges on the inputs used in the export product.

An application for grant of an advance licence/ DFRC/DEPB may be maid by the

Registered office or head office or a branch office or manufacturing unit of the eligible

exporter, to the licensing authority concerned.

1. ADVANCE LICENCE:

An advance licence is issued to allow duty free import of inputs, which are

physically incorporated in the export product. Advance licence can be issued for

1. Physical exports

70

2. Intermediate supplies

3. Deemed exports

Advance licence for physical exports and intermediate supplies are exempted from

payment of basic customs duty, additional customs duty, anti dumping duty and safeguard

duty, if any. However, Advance licence for Deemed products shall be exempted from

payment of basic customs duty, additional customs duty only.

An Advance licence shall specify:

1. the names and description of items to be imported and exported.

2. the quantity and value of individual inputs which are to be imported, as per SION

norms.

3. the aggregate CIF value of imports.

4. the FOB value and quantity of exports.

Exports made from the date of receipt of an application for an Advance Licence by

the licensing authority, may be accepted towards discharge of export obligation. If the

application is approved, the licence shall be issued based on input/output norms in force on

the date of receipt of the application licensing authority in proportion to the provisional

exports already made till any amendment in the norms is notified.

Port Of Registration:

The licence holder shall register the licence, the port specified in the licence and

thereafter all imports against the said licence shall be made only through that port. Exports

may be made through any of the specified ports:

Land customs: Ranaghat and Singhabad.

Export obligation period and its extension:

The period of fulfillment export obligation under an Advance Licence shall

commence from the date of issuance of licence. The export obligation shall be fulfilled

within a period of 18 months. The request for extension in export obligation period may be

71

made. The regional licensing authority shall grant one extension for a period of 6 months

from the date of expiry of the original export obligation period to the licensee subject to the

payment of composition fee of 1% of the unfulfilled FOB value of export obligation with

reference to CIF value of imports made for which extension is being sought.

Revalidation of Licence:

The regional licensing authority may consider a request of the original licence

holder and grant revalidation for a period of 6 months from the date of expiry of the

original licence.

Fulfillment of Export Obligation:

The licence holder shall furnish the following documents in support of having

fulfilled the export obligation:

For physical exports:

1. Bank certificate of Exports and Realisation in the form given.

2. EP copy of the shipping bill(s) containing details of shipment effected.

3. A statement of exports giving details of shipping bill wise exports indicating the

shipping bill no., date, FOB value as per shipping bill and description of export

product.

4. A statement of imports indicating bill of entry wise item of imports, quantity of

imports and its CIF value.

Redemption:

In case the export obligation has been fulfilled, the licensing authority shall redeem

the case. After redemption, the licensing authority shall forward a copy of the redemption

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letter indicating the shipping bill no., date, FOB value in Indian rupees as per shipping bill

and description of export product to the customs authority at the port of registration. Before

discharging BG/LUT against the advance licence, the customs shall verify that the details

of the exports as given in the “Redemption Certificate” are as per their records.

Regularisation of Bonafied Default:

The cases of a bonafied default in fulfillment of export obligation may be

regularised by the licensing authority in the manner indicated below:

i) If the export obligation is fulfilled in terms of value, but there is a shortfall in

terms of quantity, the licence holder shall, for the regularisation, pay:

a) to the customs authority, customs duty on the unutilized value of the

imported material along with interest @ 15% per annum thereon; and

b) an amount equivalent to 3% of the CIF value of the unutilized imported

material through a TR in the authorized branch of central bank of India.

ii) if the export obligation is fulfilled in terms of quantity but there is shortfall in

terms of value, no penalty shall be imposed if the licence holder has achieved the positive

value addition. However, if the value addition falls below positive, the licence holder shall

be required to deposit an equivalent amount through TR in the authorized branch of Central

Bank of India, so that the 100 times the deposited amount rupees together account for

positive value addition over the CIF value.

iii) If the export obligation is not fulfilled both in terms of quantity and value, the

licence holder shall, for the regularization, pay as per (i) and (ii) above.

2. DUTY ENTITLEMENT PASSBOOK SCHEME:

Here the duty credit under the scheme shall be calculated by taking into account the

deemed import content of the said export product as per SION and the basic custom duty

payable by export of such product shall also be taken into account while determining the

rate of duty credit under the scheme.

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Fixation of DEPB Rate:

No exports shall be allowed under DEPB scheme unless the DEPB rate of the

concerned export product is notified.

Port of Registration:

The export/import made from the specified ports given shall be entitled for DEPB.

Seaports: Mumbai, Kolkata, Cochin, Dahej, Kakinada, kandla, Mangalore, Marmagoa,

Mundra, Chennai, Nhavasheva, Paradeep, Pipavav, Sikka, Tuticorin, Visakhapatnam,

Surat, Nagapattinam and Okha.

The DEPB shall be issued with single port of registration, which will be the port from

where the exports have been made effected.

Credit under DEPB and Present Market Value:

In respect of products where the rate of credit entitlement under DEPB scheme

comes to 10% or more, the amount of credit against each such product shall not exceed

50% of the Present Market Value (PMV) of the export product.

Application for DEPB:

An application for grant of credit under DEPB may be made to the licensing

authority concerned in the form given, along with the documents prescribed therein. The

FOB value in free foreign exchange shall be converted into Indian rupees as per the

exchange rate for exports, notified by Ministry of Finance, as applicable on the date of

order of “Let Export” by the Customs.

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Restriction on use of DEPB credit:

The CIF value of imports affected under DEPB shall not exceed the FOB value

against which the DEPB has been issued.

Time period:

The application for obtaining credit shall be filed within a period of 6 months from

the date of exports or within 3 months from the date of realisation, whichever is later.

Verification by Customs:

The licensing authority shall ensure that while issuing the DEPB, the shipping bill

no., and date, FOB value in Indian rupees as per shipping bill and description of export

product. Before allowing the imports against DEPB, the Customs shall verify that the

details of the exports are as per their records.

Revalidation:

No revalidation shall be granted beyond the original period of validity of DEPB.

3. DUTY FREE REPLENISHMENT CERTIFICATE:

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The exporter exporting under DFRC shall be required to give a declaration in the

EP copy of the shipping bill no., product group of SION of the export product.

Export/ Imports under DFRC:

The DFRC shall be issued with single port of registration, which will be the port

from where the exports have been effected.

Filling of Application:

An application for grant of DFRC may be made to the licensing authority

concerned in the form given, along with the documents prescribed therein. An application

for DFRC shall be filled only after realisation if export proceeds. However, in case of

exports against irrecoverable Letter of Credit, application may be filled over exports. The

CIF value of DFRC shall be arrived at after discounting 25% from the FOB value of

exports. The FOB value shall be calculated on the basis of the Bank Realisation

Certificate.

Time period:

The application for DFRC shall be filled within six months from the date of

realisation reckoned form the last date of realisation in respect of shipments for which

DFRC is being claimed.

Verification by customs:

The licensing authority shall ensure that while issuing the DFRC, the Shipping

Bill no. and date, FOB value in Indian Rupees as per Shipping Bill and description of

export product are endorsed on the reverse of DFRC. Before allowing the imports against

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DFRC, the Customs shall verify that the details of the exports as given on the DFRC are

as per their records.

PROBLEM OF THE CASE:

According to the terms, we promised to export 15400 MT but we have exported

only 2320.75 MT. Based on the export figure we are eligible to import a total quantity of

3829.89 MTs but we have utilized a total quantity of 15715.44 MTs. So, the excess

utilized benefit to be paid by VSP is Rs. 7128004.27.

SOLUTION FOR THE CASE:

For solving this case we choose 2 schemes:

1 DEPB

2 Advance Licensing

so, we work out on these 2 schemes and choose the one which is beneficial.

In case of DEPB,

DEPB benefit for the balance Qty:

15400-2320.75=13079.25 Mt.

@ 252 X 13079.25 X 47(ER) x 14%=21687489.18

Therefore, net benefit if changed to DEPB is derived by substituting the

(DEPB benefit for the balance quantity – excess utilized benefit to be paid.)

(21687489.18- 7128004.25= 14559484.93

Net benefit if changed to DEPB= 14559484.93

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In case of advance licensing

The export benefit for balance quantity is 6399284.65(13079.25*10.41*47)

CONCLUSION:

So we conclude that by comparing the two schemes DEPB is more beneficial to VSP.

FINDINGS:

The findings of the study are:

VSP is making alliances with some trading companies abroad .This may

strengthen the market of VSP in the foreign market.

VSP has no branch offices abroad. Generally exports orders are booked at VSP’s

main office at Visakhapatnam only.

Price settings are through open tenders.

VSP exports their products on F.O.B price only.

Presently VSP is spending nearly Rs. 90 crores per year as transportation charges.

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VSP mainly exports their products to the neighboring countries only.

VSP exports only ISO 9002 certified products.

SUGGESTIONS:

After analyzing the data and information collected from various sources during

the source of project work and the limitations and problems found, some suggestions are

given which may be help full to the organization in shot run and long run.

As VSP is producing iron and steel products of high standards and company has

given a major thrust to exports, it has to take promotional activities in large scale.

As in the present marketing situation where customers hold the key it is important

to influence the customers. It has been found to have taken up promotional activities at

the national level in a big way; similarly the company has to go for global promotional

campaign.

VSP can conduct seminars and customer counseling at international level so as to

make foreign customers aware of the quality product available in India at a competitive

price.

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VSP has only one office in the exports division .This makes it difficult for

procuring orders directly from the customers. So it will be better for the company

to open international branch in regions where VSP exports large share of its total exports.

CONCLUSION:

In the past the customer had no choice .The government policy and the main

producers options was prevailing in the market .Today with the liberalization the steel

industry decontrolled with abolition of freight reduced drastically, so the compulsory

licensing of the steel industry has been repelled. As a result a lot of secondary producers

with variable product mix are coming up in the steel industry. All these have threatened

the status quo of all the major producers.

In such a situation “customer holds the key” unlike yesterday, he is not dependent

on a few main producer. Thus “customer oriented marketing”should be adopted.

All the suggestions given are directed towards the twin objective of strengthening

the market and improving the customer relationship between the company and its

customers. Both should care for each other without suffering a lot. Then VSP can face all

the competitions and challenges in the market. VSP have their valuable customers with

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them for all times. VSP has yet to do a lot towards “customer oriented marketing” to

attract more and more customers because today’s steel market belongs to customer only.

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