Final Summer Internship Project Report for fall 2011 submitted to theDepartment of Finance, International School of Business and Media, Bangalore

In Partial Fulfillment of the requirements for thePost Graduate Diploma in Management in Finance

Submitted By:Mousumi Ghosh

ID : 610016International School of Business and Media, Bangalore

Submitted To:V Naresh

General Manager – Finance & AccountsThe Global Green Group

# 14, 80 Feet Road, 4th Block, Koramangala,Bangalore - 560034, INDIA

Office: +91-80-25536038;+91-80-25527217 Fax: +91-80-25536061

INDIA - BELGIUM - HUNGARY - TURKEY - U.S - DUBAIWebsites: www.globalgreencompany.com;

Acknowledgement

FOREX and FINANCE

Apart from the efforts of me, the success of any project depends largely on the encouragement and

guidelines of many others. I take this opportunity to express my gratitude to the people who have given

me the golden opportunity to do this wonderful project and been instrumental in the successful

completion of this project.

I would like to show my greatest appreciation to my mentor and supervisor Ms. Priyanka Sur. I can’t say

thank you enough for her tremendous support and help. I feel motivated and encouraged every time we

sat down and brainstormed during the tenure of the project. Without her encouragement and guidance

this project would not have materialized.

The guidance and support received from all the members who contributed and who are contributing to

this project, was vital for the success of the project. I am grateful for their constant support and help.

Approval by Project Advisor

Project Advisor: _______________________________________________

Signature: _______________________________________________

Date: _______________________________________________

I hereby affirm that I have followed the directions and I confirm that this report is my own personal work and that all material other than my own is properly referenced.

Student’s Name: ___________________________________________

Student’s Signature: ___________________________________________

Date: ___________________________________________

Abstract

Internship is a system of on-the-job training for white-collar jobs, similar to an apprenticeship. Interns are usually college or university students, but they can also be high school students or post graduate adults seeking skills for a new career; they may also be as young as middle school students in some areas. Student internships provide opportunities for students to gain experience in their field, determine

if they have an interest in a particular career, create a network of contacts, or gain school credit. Internships provide employers with cheap or free labor for (typically) low-level tasks. Some interns find permanent, paid employment with the companies in which they interned. Their value to the company may be increased by the fact that they need little to no training.The foreign exchange market (forex, FX, or currency market) is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies.The primary purpose of the foreign exchange is to assist international trade and investment, by allowing businesses to convert one currency to another currency. For example, it permits a US business to import British goods and pay Pound Sterling, even though the business' income is in US dollars. It also supports direct speculation in the value of currencies, and the carry trade, speculation on the change in interest rates in two currencies.In a typical foreign exchange transaction, a party purchases a quantity of one currency by paying a quantity of another currency. The modern foreign exchange market began forming during the 1970s after three decades of government restrictions on foreign exchange transactions (the Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states after World War II), when countries gradually switched to floating exchange rates from the previous exchange rate regime, which remained fixed as per the Bretton Woods system.Global Green Group deals in the foreign market while transaction is carried out from INDIA, BELGIUM, HUNGARY, TURKEY, U.S and DUBAI. The project given is divided into four halves,

a. Make a report on booking/utilization and cancellation of derivative contracts (forward & option both import and export) for the financial year of 1st April 2010 to 31st March 2011 which enable the management to analyze gain or loss on treasury activities like booking/utilization and cancellation of forward and options during the year and also reconcile the forex gain/loss with the books of accounts.

b. Design a DOAM (Delegation Of Authority Matrix).

CONTENTS

Introduction .......................................................................................................................................... 1About the company............................................................................................................................... 1Projects Undertaken.............................................................................................................................. 3

INTRODUCTION

This Project on Cancellation of forward contracts is an important document. I am providing this information to ensure that you receive key information about our foreign exchange contracts, (also

referred to as Forward Exchange Contracts and Forward Foreign Exchange Contracts) to help you understand the risks, benefits and costs.Please note that this Project Statement is not a recommendation or opinion that particular foreignExchange products are appropriate for you.

Before entering into a foreign exchange contract we should give consideration to your objectives, financial situation and need.A forward exchange contract is an agreement between two parties to exchange a specified amount of one currency for another currency at a specified foreign exchange rate on a future date. A foreign exchange rate is the price at which one currency can be bought with or sold for another currency. All quotations are made up of two currencies: the ‘base’ currency and the ‘terms’ currency. A quotation shows how many units of the terms currency will equal 1 unit of the base currency. Example: Europe (Euro) against United States Dollar (USD)EURO/USD 0.6660 Here, Euro is the base currency and US Dollars is the terms currency. One Euro is equal to0.7804 US Dollar (78.04 US cents)

PURPOSE

Forward exchange contracts are used by market participants to set exchange rates for a future date. Importers, exporters and investors commonly use forward exchange contracts to hedge foreign currency cash flows.

A forward exchange contract can be:• for a fixed term, such as months;• for a fixed delivery date; or • for a fixed term or fixed delivery date, but with an optional delivery period (in which case you can take delivery atany time in an agreed period leading up to the delivery date).

If you decide to enter into a forward exchange contract, you will need to tell us the term or delivery date, as this willidentify when you want delivery of the currency. If you want a contract with an optional delivery period, you will alsoneed to identify when the period is to begin

About Global Green Group

Global Green Group is a part of the USD 4 bn Avantha Group led by Gautam Thapar (Group Chairman). With a global footprint and operations in ten countries, the Avantha group employs 20,000 people belonging to 20 different nationalities. The group is in diverse fields such as paper and pulp; power

generation and distribution, power transmission and distribution equipment and services; food processing; farm forestry; chemicals; infrastructure, IT and ITES.

lobal Green Group - the food division of the group is one of the sunrise companies within the group’s investment portfolio. It has its customer-base in 50 countries across the world. The

company is professionally managed by Amr Farghal, CEO – Global Green Group, and supervised by the Board of Directors, comprising of promoter(s) represented by Gautam Thapar and other leading professionals as independent directors.

G

Global Green began operations 18 years ago with cultivation and export of gherkins in bulk through a joint venture between the erstwhile Thapar Group (now Avantha) and Poupon Reitzel International (PRI). In 1996, the Gautam Thapar-led Group acquired the company and the new entity called Global Green Company Limited came into existence. In 1999, it acquired VST Natural Products, Hyderabad, which gave it a foothold into the North American market. In 2006 it made a significant acquisition of a Belgium-based company, Intergarden, which allowed it to penetrate and develop the European market and simultaneously diversify into a new product portfolio. With this

acquisition, the company became the 3rd largest pickle packer in the world and also became a force to reckon within the industry. This was followed by another acquisition of a Hungarian based sweetcorn manufacturing company – Puszta Konzervuzem Kft. The overall sales of the group are spread in 50 countries across the world with its main focus being in Western Europe and North America.

The company also processes and markets jalapeños, silverskin onions, pritamin peppers, sweet & sour cherries,

and sweet corn, besides gherkins. In the Indian market, the company’s brand, “Tify”, is uniquely positioned to meet the accelerated growth of retail and the packaged food service industry, supplying to all leading QSR chains and Western restaurants across the country. The brand is a preferred supplier to major chains like Dominos, Pizza Hut, Subway, etc. Currently, Tify offers a wide variety of products, ranging from salsa and pasta sauces, relishes, mayonnaise, ketchups, Saucepeno, etc. and is available at all leading outlets across the country.

Range of ProductsPickles, Gherkins, Cornichons

India, Hungary

Relish IndiaJalapeño, Red Peppers India, HungarySilverskin Onions Netherlands,

BelgiumCherries HungaryCapers TurkeySweet Corn Hungary

lobal Green’s strategy differs from its competitors in that it has an integrated seed-to-shelf operation through contract farming, state-of-the-art processing, and a robust supply chain that

ensures competitive pricing and precise delivery schedules that surpasses customer expectations. Global Green’s stringent quality standards – which begin from seed selection, and continues through harvesting, processing and to the final product –has earned it a reputation of reliability globally. The group has manufacturing bases in India, Hungary, and Belgium that are strategically located from the

advantages arising out of agricultural, supply chain and customer viewpoints.. The ultramodern equipment used by the company is specially designed for handling very high volumes, low operational and maintenance cost, and complete product safety.

G

Oblapura, Bangalore, Indiahis facility is located on the outskirts of East Bangalore. It largely caters to the European, Russian and Asia Pacific markets. It also services the North American market. The facility processes 15000 tons of

Gherkins annually in addition to 500 tons Jalapenos Peppers. TVenkatapur, A.P, India

his facility was set up in the year 1996, with most of the equipments, imported from Germany (Niko). The factory has 40 Vats and a barrel preservation yard for Brining about 4000 MT of Greens.

It is also equipped with De-Brining Facility to bring down salt content to the desired level before packing. TNeelamangala, Bangalore

his facility was set up in 2001 and is located on the outskirts of Bangalore North West. It is a state-of-the-art high speed line that meets international standards. The plant processes both bulk and

jars. Most of its sales is to the European and Russian markets. T

Dunakiliti, Hungaryhis facility was set up in 1992 and is located in the North Western part of Hungary which is an excellent agricultural basin. This facility processes about 7500 MT of

gherkin of which about 2500 is grown on its own land using the latest faming and harvesting methods. The factory also processes about 5000 MT of cherries and 400 MT of

pritamin paprika. The factory operations commence in mid-June with cherries and this is followed by gherkins and pritamins till mid-October, after which only labeling activities take place.

T

Aalst, Belgiumhis facility is located at Aalst, which is close to Brussels. This facility contains the Global Green Group European office, labeling line and warehouse. This plant also packs the entire volume of Silverskin

onions which are sourced from Netherlands. T

Haryana Coated Paper Ltd.Ctrl + Click to follow the link to the webiste

Istanbul, Turkeyloragarden has its plants at Tabriz and Julfa Freezone in Iran and purchasing depots at Uzbekia and Krygyzia with its Headquarters in Istanbul. Its main activity is the sourcing of capers and processing

of capers, which is done from May to September every year. It sourcing bases are Mohun, Krygyzia, Jalal Abad, Osh, Uzbekia, Tashkent, Samarkant, Jizzax, Andican and Gumbet and these are processed at the Tabriz plant.

F

Puszta, Hungary uszta Konzervuzem Kft was acquired by Global Green in Sep 2009. This factory is located in Eastern Hungary which is a major agricultural bowl of Eastern Europe. The plant mainly processes Sweet Corn and Peas. It also does Gherkins, Peppers and some tomato based products.

Certifications: Quality and PDIn India, Global Green operates three state-of-the-art, ISO and HACCP compliant factories, located strategically in key growing areas. These plants are ISO 9001:2000 certified. Additionally, the company has implemented robust traceability systems, which ensure that it is possible to trace all greens and ingredients right down to its origin, so as to enable a quick and efficient product recall.

he company’s strong R&D team that monitors seed quality and improves cultivation practices, constantly scanning for opportunities to source new

crops following which trial evaluations are carried out. A very stringent crop monitoring is also followed at all buying points. All fresh products are packed within 24 hours of harvesting to ensure good texture and consistent quality. Each factory complies with all local legal and statutory norms. Food safety is ensured by stringent HACCP implementation. In addition, X-Ray machines and

metal detectors are used to eliminate foreign body contamination.

T

lobal Green works with over 26,000 farmers to take their produce to the world market. Besides providing them with sophisticated technology and extension services, the company also invests in

educating them about efficient cultivation techniques that enhance farm income and productivity. G

n India, Global Green contracts with farmers in the southern states of Tamil Nadu, Karnataka and Andhra Pradesh. In Hungary, 2500 MT is grown on company-owned land, utilizing best farm practices

to optimize quality and yields. One key advantage is that the factory in Dunakiliti, Hungary, is located in the heart of one of the best agronomy belts in Eastern Europe.

Ilobal Green is committed to environmentally sound business practices throughout all its plants. All activities are performed after taking into consideration the minimization of adverse environmental impact. The

PIFSHACCPBRCNFPAISOFPAKosher (OU)USFDACTPAT

G6 World Class Manufacturing Facilities

Venkatapur Hyderabad, India

Pickles, Relish, Jalapeño

Neelamangala

Bangalore, India

Pickles, Peppers

Oblapura Bangalore, India

Pickles, Jalapeño

Dunakiliti Hungary Pickles, Peppers, Cherries

Aalst Belgium Pickles, Capers, Silverskin Onions

Floragarden Turkey Capers

company respects and complies with the existing laws and regulations in the countries in which it operates.

About Avantha Group:

About Avantha: The US$ 4 bn Avantha Group is one of India’s leading business conglomerates. Its successful entities include BILT, Crompton Greaves, The Global Green Company, Avantha Power & Infrastructure, Solaris ChemTech Industries, Biltech Building Elements, Salient Business Solutions, and Avantha Technologies. With an impressive global footprint, Avantha operates in over ten countries, employing 20,000 people worldwide. The Group has business interests in diverse areas including power transmission and distribution equipment and services, paper and pulp, energy and infrastructure, food processing, farm forestry, chemicals, IT and ITES. Led by Gautam Thapar, Avantha demonstrates strong leadership globally and emerges as a focused corporate, leveraging its knowledge, leadership and operations, adding lasting value for its stakeholders and investors. For more information on Avantha Group, please visit www.avanthagroup.com

People Philosophy and Work EnvironmentThe company provides a workplace that nurtures each employee as an individual and an important member of a culturally diverse, worldwide team. The management team comprises professionals from very diverse cultural backgrounds from across the globe that provides the necessary width and depth required to meet all business challenges. The company believes that a diversity of people and ideas is a business imperative and that diversity must be sought and nurtured.

Team members are encouraged to openly communicate and constructively disagree based on mutual respect. Employees ensure that they when they make commitments, they keep them. Participation in cross-functional teams, project assignments and lateral professional development create new challenges and expand knowledge. Development goes hand in hand with training, but neither is a substitute for the other.

The in-house umbrella brand of Global Green: TIFY

Projects Undertaken:

Project 1Make a report on booking/utilization and cancellation of derivative contracts (forward & option both import and export) for the financial year of 1st April 2010 to 31st March 2011 which enable the management to analyze gain or loss on treasury activities like booking/utilization and cancellation of forward and options during the year and also reconcile the forex gain/loss with the books of accounts.

Swaps, caps, and floors are recent innovations in the derivatives markets. The derivatives market traditionally included forward contracts in addition to options (puts, calls, warrants). A forward contract involved a commitment to trade a specified item at a specified price at a future date. For example, if an American company will have need of 1 million British pounds six months from now they may avoid exposure to exchange rate risk by entering into a forward contract for the pounds now. The forward contract takes whatever form the two parties agree to. There is also a market for standardized forward

contracts, which is called the futures market. The standardization makes possible a wider market with greater liquidity and efficiency. Often the futures markets eliminate the ties between specific parties, the party and the counter-party, and the risk that the other might not fulfill the contract. In the futures market everyone deals with the clearinghouse who guarantees fulfillment. In the options market there has developed some terminology that is somewhat intimidating to the uninitiated. A call option is the right to buy a share of a stock, the underlying security, at a specified price, called the exercise price or the strike price. A put option is the right to sell a share of a stock at a specified price, the exercise price or the strike price.There is a limited time for the exercise of the call option. An American option can be exercised at any time up to and including the expiration date. A European option can only be exercised on the expiration date.The project given to me required me to check the transactions in the balance sheet of the organization in order to track the transactions which is has been either went forward and been cancelled. Drafting of the contracts was also necessary for the organization for ready reference in the future, so the contracts were segregated into a monthly basis.The learning outcomes from the project were:

To know when it is beneficial to cancel a contract or utilize it.

Gained knowledge regarding foreign exchange rates.

Segregate the contracts on monthly as well as bank basis.

Reconciling gain or loss for the period April 2010 to July 2010 from the Legacy books of

accounts.

Reconciling gain or loss for the period August 2010 to March 2011 as per SAP.

Reconcile the amounts with the books only the cancellation.

Segregate the amounts other than gain or loss on forwards and options contracts.

Reconcile with the books month wise.

Gained higher knowledge to work on excel sheet.

Foreign exchange risk is the risk that an entity's impact of treasury activities on financial

performance.

Here is an overview of the draft which show 3 transactions of the company

S.No. Bank Month

Doc. Date

Amount in local cur. L Curr

Profit Ctr

Reference Text

1

Cb-Cash HO APRIL'10

22-Apr-2010 -1,624.00 INR 1099

TT Forex - surrender of foreign currency - Vineet Chhabra

Towards exchange diff. (68.10 - 72.00)

2

Cb-Cash HO APRIL'10

22-Apr-2010 -1,156.00 INR 1099

TT Forex - curr.surrendered - Santosh Nair

Towards exchange diff. (63.10 - 59.20)

3 Cb-Cash

APRIL'10 22-Apr-2010

-841.00 INR 1099 TT Forex curr. surrendered - Naresh

Towards exchange diff. (61.75 - 59.20)

HO

Global Green Group deals basically with two banks in the forward market, viz. SBI and Yes bank. The above draft shows 3 transactions which is been cancelled by the company as it may suffer loss in the long run. Through this draft we can manage the sale and purchase of forgein currencies Identification of exposures based on the budgeted sales(month wise) and budgeted cash flow. This Project helped me to know about forgein exchange rates and when to cancel or utilize a particular contract be it a forward or spot.In the event of too much unfavourable market, volatility cover the currency risk to the maximum extent in order to protect budgeted rate. The monthly report of both these private sector and public sector banks are reconciled thoroughly and are drafted.

The YES BANK report drafted:

1 YES

Options

OP32919

3/5/2009

USD

250,000.00

30/10/2009

470,000.00

oct '09

Cancelled

2 YES

Options

OP32919

3/5/2009

USD

250,000.00

11/26/2009

680,000.00

Nov' 09

Cancelled

3 YES

Options

3/5/2009

USD

250,000.00

12/29/2009

577,500.00

Dec' 09

Cancelled

4 YES

Options

3/5/2009

USD

250,000.00

1/27/2010

121,228.00

673,772.00

Jan' 10

Cancelled

5 YES

Options

3/5/2009

USD

250,000.00

2/24/2010

128,772.00

646,228.00

Jan' 10

Cancelled

6 YES

Options

1/18/2010

USD

150,000.00

2/24/2010

Feb' 10

Cancelled

7 YES

Export C/C

515016 2/16/2010

E/D 200,000.00

24/03/2010

3/31/2010

213,084.40

Mar'10

Cancelled

8 YES

Options

1/18/2010

USD

150,000.00

3/29/2010

57,000.00

Mar'10

Cancelled

The SBI Report Drafted:

S.No.

Bank Name

Type

Contract Ref

Date Currency

Amt Due Date

OS Amt (FCY)

Rate

OS Amt (INR)

month

Status

1 SBI Export Fw

0505310FP0000242

5/21/2010

USD 150,000.00

21/06/2010

6/30/2010

150,000.00

47.095

7,064,250.00

June' 10

Cancelled

ds2 SBI Exp

ort Fwds

0505310FP0000243

5/21/2010

USD 150,000.00

20/07/2010

7/30/2010

150,000.00

47.155

7,073,250.00

July' 10

Cancelled

3 SBI Export Fwds

0505310FP0000244

5/21/2010

USD 150,000.00

20/08/2010

8/31/2010

150,000.00

47.225

7,083,750.00

Aug' 10

Cancelled

4 SBI Export Fwds

0505310FP0000279

7/2/2010

EUR 150,000.00

16/08/2010

8/25/2010

150,000.00

58.600

8,790,000.00

Aug' 10

Cancelled

AprilM

ayJu

neJu

ly

August

September

October

November

December

January

Febru

ary

Marc

h

-6000000

-4000000

-2000000

0

2000000

4000000

6000000

8000000

10000000

Series1Series2Series3Series4

This Graph shows the gain or loss on treasury activities of the company during the financial year of April 2010 to march 2011.

The Final report compiled the entire transaction stating the transactions.

We generally work on Pre shipment credit and post shipment credit. These are available to the

exporters for financing, purchase, processing, manufacturing or packing of goods prior to shipment.

Types of Contracts:

1. Export Forwards

2. Options

3. Import C/C

4. Import Forwards

.Foreign exchange risk is the risk that an entity's impact of treasury activities on financial performance.

FOR CONFIDENTIALITY AND ORGANIZATION RULES, THE SHEET IS NOT INCLUDED

Skills Learnt

Knowing about foreign exchange rates.

When to cancel a particular contract.

Make a proper sheet of the contracts segregating month and categorizing.

Knowledge gained in working with Microsoft Office Excel.

Managing the sale and purchase of foreign currencies.

Methodology

Identification of exposures based on the budgeted sales (month wise) and budgeted cash flow (month wise).

Booking of forward contracts (hedging) in such a way that strike rate is above the budgeted rate.

In the event of too much unfavorable market volatility covers the currency risk to the maximum extent in order to protect budgeted rate.

Project 2Tracking Of L.C Payments & Liability and Preparation of Service Distribution Invoices.

A bill of exchange or "draft" is a written order by the drawer to the drawee to pay money to the payee. A

common type of bill of exchange is the cheque (check in American English), defined as a bill of exchange

drawn on a banker and payable on demand. Bills of exchange are used primarily in international trade,

and are written orders by one person to his bank to pay the bearer a specific sum on a specific date.

Prior to the advent of paper currency, bills of exchange were a common means of exchange. They are

not used as often today.

Bill of exchange, 1933

A bill of exchange is an unconditional order in writing addressed by one person to another, signed by the

person giving it, requiring the person to whom it is addressed to pay on demand or at fixed or

determinable future time a sum certain in money to order or to bearer. (Sec.126)

It is essentially an order made by one person to another to pay money to a third person.

A bill of exchange requires in its inception three parties—the drawer, the drawee, and the payee.

The person who draws the bill is called the drawer. He gives the order to pay money to the third party.

The party upon whom the bill is drawn is called the drawee. He is the person to whom the bill is

addressed and who is ordered to pay. He becomes an acceptor when he indicates his willingness to pay

the bill.The party in whose favor the bill is drawn or is payable is called the payee.

The parties need not all be distinct persons. Thus, the drawer may draw on himself payable to his own

order.

A bill of exchange may be endorsed by the payee in favour of a third party, who may in turn endorse it

to a fourth, and so on indefinitely. The "holder in due course" may claim the amount of the bill against

the drawee and all previous endorsers, regardless of any counterclaims that may have disabled the

previous payee or endorser from doing so. This is what is meant by saying that a bill is negotiable.

In some cases a bill is marked "not negotiable" – see crossing of cheques. In that case it can still be

transferred to a third party, but the third party can have no better right than the transferor.

Venkatapura and Oblapua facility was set up in the year 1996, with most of the equipments, imported from Germany (Niko). The factory has 40 Vats and a barrel preservation yard for Brining about 4000 MT of Greens. It is also equipped with De-Brining Facility to bring down salt content to the desired level before packing. The state of the art facilities is responsible for the quality the organization delivers to the customers. A standard, commercial letter of credit is a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking. The letter of credit can also be a payment for a transaction meaning that redeeming the letter of credit pays an exporter. Typical types of documents in such contracts include:

Financial Documents Bill of Exchange, Co-accepted Draft

Commercial Documents

Invoice, Packing list

Shipping Documents

Transport Document, Insurance Certificate, Commercial, Official or Legal Documents

Official Documents

License, Embassy legalization, Origin Certificate, Inspection Certificate, Phytosanitary certificate

Transport Documents

Bill of Lading (ocean or multi-modal or Charter party), Airway bill, Lorry/truck receipt, railway receipt,

CMC Other than Mate Receipt, Forwarder Cargo Receipt, Deliver Challan etc

Insurance documents

Insurance policy, or Certificate but not a cover note.

All the charges for issuance of Letter of Credit, negotiation of documents, reimbursements and other charges like courier are to the account of applicant or as per the terms and conditions of the Letter of credit. If the letter of credit is silent on charges, then they are to the account of the Applicant. The description of charges and who would be bearing them would be indicated in the field 71B in the Letter of Credit. Risk situations in letter-of-credit transactionsFraud RisksThe payment will be obtained for nonexistent or worthless merchandise against presentation by the beneficiary of forged or falsified documents.Credit itself may be forged.Sovereign and Regulatory RisksPerformance of the Documentary Credit may be prevented by government action outside the control of the parties.Legal RisksPossibility that performance of a Documentary Credit may be disturbed by legal action relating directly to the parties and their rights and obligations under the Documentary CreditForce Majeure and Frustration of ContractPerformance of a contract – including an obligation under a Documentary Credit relationship – is prevented by external factors such as natural disasters or armed conflictsRisks to the ApplicantNon-delivery of GoodsShort ShipmentInferior QualityEarly /Late ShipmentDamaged in transitForeign exchangeFailure of Bank viz Issuing bank / Collecting BankRisks to the Issuing BankInsolvency of the ApplicantFraud Risk, Sovereign and Regulatory Risk and Legal Risks

Risks to the Reimbursing BankNo obligation to reimburse the Claiming Bank unless it has issued a reimbursement undertaking.Risks to the BeneficiaryFailure to Comply with Credit ConditionsFailure of, or Delays in Payment from, the Issuing BankCredit Issued by Party other than BankRisks to the Advising BankThe Advising Bank’s only obligation – if it accepts the Issuing Bank’s instructions – is to check the apparent authenticity of the Credit and advising it to the BeneficiaryRisks to the Nominated BankNominated Bank has made a payment to the Beneficiary against documents that comply with the terms and conditions of the Credit and is unable to obtain reimbursement from the Issuing BankRisks to the Confirming BankIf Confirming Bank’s main risk is that, once having paid the Beneficiary, it may not be able to obtain reimbursement from the Issuing Bank because of insolvency of the Issuing Bank or refusal of the Issuing Bank to reimburse because of a dispute as to whether or not payment should have been made under the CreditOther Risks in International TradeA Credit risk risk from change in the credit of an opposing business.An Exchange risk is a risk from a change in the foreign exchange rate.A Force majeure risk is 1. a risk in trade incapability caused by a change in a country's policy, and 2. a risk caused by a natural disaster.Other risks are mainly risks caused by a difference in law, language or culture. In these cases, the cargo might be found late because of a dispute in import and export dealings.

Project 3Report making on Cenvat

Cenvat, or the Central Value Added Tax, is a component of the tax structure employed by many countries in the western section of Europe. The inspiration for Cenvat is derived from a tax system that is generally referred to as VAT, or a Value Added Tax. Both Cenvat and VAT are designed with the express purpose of minimizing a cascading effect when it comes to taxes on income, goods and services, and other forms of tax revenue. The aim of Cenvat is to aid in maintaining a tax structure that is

considered equitable for both the citizens incurring the tax and the government that is collecting the tax revenue.One notable example of Cenvat can be found in India. Originally designated as a modified value added tax, this approach placed some limits on the type of taxation that could occur on goods used in the manufacturing process of finished consumer products. Modvat was later designated as Cenvat, and continued to function as a means of promoting industry within the country while still receiving some form of tax revenue from the effort.

It is helpful to think of Cenvat as an incentive that encourages the production of goods within the country, rather than outsourcing the production to countries where the economic and tax climate is more favorable. By providing a credit on the taxes associated with materials used in the creation of finished goods, the government makes it more attractive for manufacturers to maintain operations within the country. This of course leads to the creation of more jobs for the citizens within the community and provides income for the purchase of products within the country. By reducing the tax burden for the end user of the materials, Cenvat opens the door to a more stable economy within the country, and a better standard of living for its citizens.Under the best of circumstances, the application of Cenvat can accomplish three goals. First, the structure for Cenvat requires a tax collection procedure that is fairly transparent and easy to follow. Second, the benefits associated with Cenvat help to cut down on tax evasion and creative bookkeeping. Last, the use of Cenvat ultimately leads to an overall increase in collected tax revenues by keeping more citizens employed and thus able to pay taxes on salary and wages.

WHEN AND HOW MUCH CREDIT CAN BE TAKENThe Cenvat Credit in respect of inputs may be taken immediately on receipt of the inputs.

1. The Cenvat credit in respect of Capital Goods received in a factory at any point of time in a given financial year shall be taken only for an amount not exceeding fifty percent of the duty paid on such capital goods in the same financial year and the balance of Cenvat Credit may be taken in any subsequent financial year.

2. The Cenvat credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair etc. and it is established from the records that the goods are received back in the factory within180 days of their being sent to a job worker.

3. Where any inputs are used in the final products which are cleared for export, the Cenvat Credit in respect of the inputs so used shall be allowed to be utilised towards payment of duty on any final product cleared for home consumption and where for any reason such adjustment is not possible, the manufacture shall be allowed refund of such amount.

CENVAT IF FINAL PRODUCT EXEMPTED

No Cenvat credit shall be allowed on any input or capital goods which is used in the manufacture of exempted goods. This provisions shall not be applicable in case the exempted goods are either;

i. Cleared to a unit in a free Trade Zone.ii. Cleared to a 100% E.O.U.

iii. Cleared to a unit in an Electronic Hardware Technology Parks or Soft ware Technology Park.

iv. Supplied to the UN or an International Organisation for their official use or supplied to projects funded by them.

v. Cleared for export under bond.

CONDITIONS

Various documents have been prescribed on the basis of which a manufacturer can avail the Cenvat Credit.

1. The Manufacturer shall take all reasonable steps to ensure that the inputs or Capital goods in respect of which he has taken the Cenvat Credit are goods on which the appropriate duty has been paid.

2. The Cenvat credit in respect of inputs or Capital Goods purchased from a first stage or second stage dealer shall be allowed only if such dealer has maintained records indicating the fact that the inputs or capital goods were supplied from the stock on which duty was paid by the producer of such inputs or capital goods and only an amount of such duty on pro-rata basis has been indicated in the invoice issued by him.

3. The manufacturer of final products shall maintain proper records for the receipt, disposal, consumption and inventory of the inputs and capital goods and the burden of proof regarding the admissibility of the Cenvat Credit shall lie upon the manufacturer taking such credit.

Shifting, Sale, Merger, Amalgation etc.of Unit

If a manufacturer shifts his factory to another site or the unit is transferred on account of change in ownership, sale, merger, amalgamation etc., the manufacturer shall be allowed to transfer the Cenvat credit lying unutilised to the accounts of such transferred factory.

UNUTILISED CREDIT

1. Any amount of credit earned by a manufacturer under the CENVAT Credit Rules. 2001 as they excisted prior to the 1st day of March, 2002 and remaining unutilised on that day is allowable as Cenvat credit and be allowed to be utilised.

2. A manufacturer who opts for exemption under a notification based on the value of clearances in a financial year and who has been availing of the credit of the duty paid on inputs before such option is exercised, shall be required to pay an amount equivalent to the credit in respect of the inputs lying in stock or used in any finished goods lying in stock on the date when such option is exercised.

EXPLANATION :-

Design a DOAM (Delegation Of Authority Matrix).

Authority matrix is fundamentally an arrangement where the decision making is

divided in different levels to empower specialized task. Accountability is directly

associated with the person who delivers the job. Responsibility would be from the

person who is responsible for the one who is delivering the job, i.e. the reporting

manager. Every job would require certain degree of indirect association, i.e. through

consulting where the employee may not be responsible for the end result yet

require to recommend. For e.g. in a technical firm the engineer would be

accountable for developing the product , the Project manager would be responsible

for the project completion, the subject matter experts may require to consult finally

the senior management needs to be informed about the job completion.