How to start an export business in Kerala?

. 7 min read
How to start an export business in Kerala?

The mention of Kerala conjures an image of lush green mountains, plantations, beaches and, of course, the famous backwaters and boat rides. With its vast agricultural resources, rich natural heritage, and quality human resources, Kerala also has a significant presence in the Indian trade, commerce, and industrial scenario.

Kerala contributes to Indian export through spices, marine products, cashew, tea, gems, jewellery, and readymade garments. A focus on Information technology (IT) and IT-enabled services are also helping Kerala to stamp its presence in this growing export sector.

If you are considering how to start an import-export business in Kerala,  studying the local trade and manufacturing activities will give you plenty of export business ideas.

Kerala has a coastline of about 600 km and a chain of ports with a long history of maritime commerce. The main port Kochi is among the major ports of India. The Kochi Port is equipped with all modern facilities for enhancing exports like a container transhipment terminal and a shipyard. The close location of the Kochi port to the international shipping routes increases its strategic importance.

The state is further developing its export ecosystem by strengthening the existing network of waterways, creating additional warehouses, and developing cold chain facilities. These infrastructural measures will further boost the prospects of exports from Kerala soon. However, before delving into the details of the best export business in Kerala, let’s take a look at the requirements of starting an export business.

Enlistment as an exporter

Export involves an elaborate documentation process and obtaining necessary clearances from the concerned agencies before the shipment of goods. One must understand the procedures thoroughly and avail of the applicable incentives to stay competitive in the export business. Even the best export business ideas need to be checked for suitability within the export framework.

To begin the process,  you need to take the following actions :

1. Select a name for your export firm.

2. Register your firm.

3. Get a PAN card.

4. Open a current account with a bank.

5. Register for an Import Export Code with the foreign trade office under the ministry of commerce, Government of India.

6. Obtain an RCMC certificate by Registering with an export promotion council.

If you already have a registered company (with a bank account and PAN), you may get the company enlisted as an exporter by completing the procedures for IEC and RCMC.

Understanding export incentives

1. Import replenishment scheme (REP): This license allows exporters to import necessary input materials for manufacturing the products for export.

2. Impex passbook: This scheme offers duty-free import of raw materials.

3. Export-oriented units:  Units located in specified trade zones (FTZ) and exporting their entire output will be entitled to income tax benefits for five years.

4. Lower tax on export income: Under this scheme, only 50% of the profits from exports are considered for income tax purposes.

5. Duty drawback scheme: This scheme allows exporters a refund of customs duty paid on imported items if such items are used to manufacture export goods.

6. Cash assistance:  Price reimbursement is offered in selected cases and for particular products for matching international market prices.

Once the procedural understanding is complete, the next task is to identify the products for export.

What products can be exported?

It is best to explore local products for the obvious logistic advantages. Besides, Kerala has a history of exporting several local items. Let us find out the main products shipped from Kerala.

A. Agriculture–based products

Spices and Oil extracts: Kerala is the primary state for exporting spices. Pepper, cardamom, ginger, turmeric, curry powder, nutmeg, spice oils, vanilla, etc., are the significant varieties exported out of Kerala. The spices go to various countries like the USA, European countries, Singapore, Srilanka, Malaysia, and the Middle East.

  • Tea:  Along with the other two southern states (Tamilnadu and Karnataka), Kerala exports a sizable amount of tea.
  • Coffee: A vital crop in Kerala, it is also one of the most exported items.
  • Coir and coir products: Coir is a traditional industry of Kerala. Tufted mats, power loom mats, coir geo-textiles, coir fibre, rubberised coir, mattings, and coir yarn are the principal items of export in the coir products category.
  • Coconut: Tender coconut from Kerala is a high preference item in Saudi Arabia and other Middle Eastern countries. Palakkad and Attappady are prime coconut growing zones in Kerala.
  • Cashew: A large quantity of cashew is exported to the USA, China, and many European countries. Kollam is the largest processing centre for cashew in Kerala.

B. Marine products

Seafood from Kerala goes to the USA, China, and many other countries.

C. Other products

Readymade garments and jewellery represent the other product categories to be exported out of Kerala. Choosing a suitable agri-based product is the ideal option rather than pondering over several import-export business ideas.

Here are few tips for improving your export business-

1. Finalise the product/s - Find out the sourcing and logistic costs and work out a tentative landing price at a Kerala port (Kochi).

2. Identify the prospective markets for the selected product.

3. Understand the demand pattern - Clarity on the seasonality and pattern of demand in specific markets will help you work out a product-wise export plan with cost estimates.

4. Find the right channel partner - It is not feasible to service buyers in another country. A local partner/representative can do the coordination. Local export promotion councils can guide you on selecting channel partners, prospective buyers, and market information.

5. Find your buyer

6. Negotiate price, order terms with your buyer based on your research and finalise the deal.

7. Select a reliable logistic partner ( transporting material to port) and a clearing agent (for handling formalities at port).

8. Export benefits - Make sure to avail all applicable benefits. Incentives are a critical aspect of your pricing and profitability.

9. Product quality - You must ensure that the goods to be exported match the buyer's exact specifications and quality parameters.  You should arrange an adequate pre-shipment inspection to recheck quality standards. Shipment rejection can have a significant impact on your business.

It is best to remember that quality plays a crucial role in the success of your export venture; even a minor deficiency can derail your import-export business plan.

Conclusion

Kerala is a place of opportunities and can ignite many import and export business ideas in you. The agri-based items offer a range of exports, while some of the products can become niche items in many markets. For a marketer or an exporter, handling a niche product always brings joy due to the possibility of a better price realisation. The port infrastructure at Kochi, the road network and the vast waterways in Kerala provide just the proper support to your export plans.

Also Read:

1) How to start your tea manufacturing and marketing business?
2) How to start a pharmaceutical manufacturing company?
3) How to become a business broker & start business broker services?
4) How to Become A Successful SME Owner?

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FAQs

Q. Exporters of coffee from other states are quoting lower prices to buyers. What is the way out?

Ans. Price is a sensitive issue and depends on a variety of factors. Most coffee exporters will quote prices based on shipment from any southern port.

It would help if you reworked your logistic costs, sourcing price, and probable export incentives. Please understand that you enjoy the natural advantage of low logistic costs to the port of shipment for coffee export when you are based in Kerala.

Besides, Kochi has a freight advantage (compared to other ports in India) over countries located west of India. Focus on these markets, leaving out the far-eastern zone (of Asia).

Q. Is exporting readymade garments from Kerala a good idea?

Ans. Any profitable business deal, whether local or in export, is always a good idea.

You need to check the availability of the correct type of readymades in Kerala, conforming to the size, style, and specifications of your buyer. Profitability will change if you need to source the required items from a far-off place.

Q. I want to start an export business in agricultural items from Kerala. How to begin?

a. Do the necessary research to identify the item.

b. You can contact the various export promotion councils (like the Spice board, Cashew export promotion council, Coconut development board and other similar agencies).

c. Register your firm for exports.

d. Follow the prescribed guidelines and business tips to launch your venture.