PROJECT REPORT ON AGARBATTI INDUSTRY

1. WELINGKAR INSTITUTE OF MANAGEMENT DEVELOPMENT & RESEARCH
INTERNATION MARKETING
PROJECT REPORT
ON
AGARBATTI INDUSTRY
BY
Abul Hasan Rajani 1
Sanket Kabra 16
Juhi Parekh 23
Saloni Shah 34
Sidharth V.D. 39
Vivek Rajan 41

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Table of Contents
Section – A
a.I. Executive Summary.................................................................................................... 5
a.II. About Acharya Exports............................................................................................... 6
a.III.Industry Overview ...................................................................................................... 7
a.IV.SWOT Analysis .......................................................................................................... 9
a.V. HS Code for Agarbattis............................................................................................. 10
a.VII. Industry Structure ................................................................................................... 11
Section-B
BUSINESS PLAN
b.I. Introduction about our company............................................................................... 13
b.II. Business model ......................................................................................................... 13
b.III.Tie ups....................................................................................................................... 14
X. ......................................................................................................................................
XI.

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Section-A
Industry Analysis

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Acknowledgement
We would sincerely like to thank Professor R. Venkatesh sir for giving us
this opportunity to do this project. This project has helped us on
understanding International marketing much better.

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Executive Summary
The projects aims to understand the nuances of export in relation to the agarbathi (aka
Incense) industry. The data has been collected from Mr. Dinesh, Exports Manager at
Acharya exports, Matunga. Since the company exports most of its goods to USA. We
have taken USA as a target market for our in-depth analysis. Finally we have made a
business plan to start our own company

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About Acharya Exports
Acharya exports is a the leading incense trading house established over 50 years ago in
the name of Acharya Products based in Mumbai.
Acharya Exports is a specialized export marketing and trading company. It is the sole
exporter and distribution agency for many leading incense/agarbatti manufacturers in
India.
Acharya exports is a largest incense trading group, with over half a century of experience.
Its expertise lies in accessing and assisting esteemed customer's requirements in regard to
quality of incense, fragrance, packaging etc.
Acharya exports offers competitive prices and has earned a reputation for maintaining
strict delivery schedules. At any given time, the company is adequately stocked with
most of India's leading brands of incense. Since Acharya exporters are located in the port
city of Mumbai, it becomes more convenient for shipping small or larger quantities of
incense as per client‟s requirement.
Acharya Exports has a satisfied clientele in over 58 countries worldwide, to whom they
export to on a regular basis.

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Industry Overview
India is a vast country and the Indians follow various religions, speak different languages
and follow different customs and traditions. Inspite of this diversity, all people use
Agarbatti (Incense sticks) at all the places of worship, religious functions, festive
occasions, weddings. Agarbatti has paramount importance in India. Besides, it is also
used as air- freshener.
Agarbatti Industry is a real employment generator and is capable of providing
employment to the weaker sections of both the urban and rural populace. Most of the
persons engaged in fashioning Agarbattis are women.
A salient feature of Agarbatti Industry is that raw materials are provided by Agarbatti
units to artisans who do the job of rolling of Agarbatti at their home besides looking after
their children and household work. This largely helps them to supplement their family
income. Agarbatti has become a significant foreign exchange earner because of its
demand in overseas markets.
The burning of incense in religious and social functions has been practised in India since
early times. “Dhup” an aromatic powder or paste is burnt in Indian homes as a fragrant
fumigant and is reputed to possess insecticidal and antiseptic properties. Agarbatti also
known, as Udubattis similar to joss sticks are a development of Dhup.
Agarbattis are obtainable in different colors and with different perfumes. The burning
time of an agarbatti varies from 15 minutes to 3 hours according to quality and size.
Agarbatti is also obtainable in other forms such as dashang (stickly paste or powder),
deep (cones and Dhup, tablets etc.).
About 75% of the agarbattis manufactured are of cheap quality containing only charcoal
powder or low quality sandalwood powder with a mixture of 50% of “wood gun”
powder. Cheap perfumes are used to give them a top note. In superior varieties, essential

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oils, purified resins, natural fixatives like amber, musk and civet are used along with
synthetic aromatics. Absolutes are used in the costlier types.
The state of Karnataka is referred to as the Capital of Agarbatti. It is the leading producer
of the agarbatti in India, with Mysore and Bangalore being the main manufacturing
centres. The Mysore region is recognised as a pioneer in the activity of agarbatti
manufacturing and this is one of the main cluster activities that exist in the city.
Significant Characteristics of the Agarbatti Industry
1. Technical-know- how is simple.
2. Sophisticated equipments‟ are not required.
3. Implements/tools used are simple, portable and not costlier.
4. Large capital investment is not required.
5. Initially the industry can be started with a small investment even at the residence of the
artisans.
6. It is eco- friendly
7. Highly labour- intensive industry with no dependence on power supply.
8. No work related hazards.

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SWOT ANALYSIS
Strength
•Ease availability of Manpower
•Eco-friendly Product
•Lean cost base
• Less Skill Manpower
•Minimum Initial Investment
Weaknesses
•Enhance people‟s efficiency with training
•Scarcity of resources while seasonal
employment.
•Disorganized
•Unstructured workforce –attrition
•Highly labour oriented
•Brand Creation
Opportunities
•High Potential/Demand
•Demography of urban & Rural
•High social exposure for urban & Rural
Threats
• Imports by Multinational Players
• Dependency on supply of Bamboo
•Competition can mushroom very fast

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HS Code for Agarbattis
The agarbattis are shipped under HS codes 33074100
The Harmonized System (HS) is an international product classification protocol used by
customs officials for levying tariffs and controlling quotas on imported goods.The HS is
organized into 21 sections and 96 chapters, accompanied with general rules of
interpretation and explanatory notes. First, the system assigns goods to sections, and then
proceeds to assign these goods to their specific chapter, heading, and subheading, in that
order, as necessary.
The international Harmonized System (HS) is administered by the World Customs
Organization and serves as the foundation for the import and export classification
systems used in the United States. The United States import classification system, the
Harmonized Tariff Schedule (HTS) administered by the U.S. International Trade
Commission (USITC), and the U.S. export classification system, rely on the international
HS codes for their 4- and 6-digit headings and subheadings. The World Customs
Organization updates the HS System approximately every five years. The year 2012
marked the most recent HS revision, meaning the next revision will not be due until
2017.
The description for the three HS codes is as follows
3307 - Falls under the Section VI - Products of chemicals or Allied Industries and under
Chapter 33 - Essential oils and resinoids; perfumes, cosmetic or toilet preparations.
Handling section 3307 corresponds to Pre-shave, shaving or after-Shave preparations,
personal deodorants, bath preparations, depilatories and other perfumery, cosmetic or
toilet preparations, Not elsewhere specified or included, prepared room deodorisers,
whether or not perfumed

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33074100 - This HS code corresponds to Preparations for perfuming or deodorizing
rooms, including odoriferous preparations used during religious rites: agarbattis and other
odoriferous preparations which operate by burning
Industry Structure
The above picture represents the industry structure of the Agarbatti industry.

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Section – B
Business Plan

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Introduction about our company
Our company, Shri. KRISHNA exports is a sole-proprietorship business undertaking
export of „Agarbattis‟. We wish to situate ourselves in Mumbai, Maharashtra that is a
well-connected hub for both Air and Sea transport. The initial exports are aimed from
India to United States of America. With extensive Demand for the Agarbattis in USA and
also the due to large chunk of Indian population, United States of America can be seen as
a feasible market for the export business. The main function of the company is trading
and exports.
Business model
We register ourselves on multiple online portals such as Indiamart, Export India and
many other portals. Once the customer shows interest in our product we provide them a
quotation along with the samples of our product in USA. If the customer agrees to the
quotation, we insists the client on opening the Letter of Credit (LC). If Incase the client is
not comfortable with the same, we provide him an option of Advance Payment. Then, we
place the order with the manufacturer who based out of Bangalore, India. Once the
shipment arrives Mumbai quantity and the quality is verified and then it is shipped to
USA. Our source of revenue will be from the export margin.
Order details
Shri. Krishna exporters act as agent. The orders are received through online portals such
as Indiamart and TradeIndia.
Shri. Krishna exports‟ Minimum order price is $5000. Since the manufacturer (based out
of Bangalore) takes order only for very large quantities. Shri. Krishna Exports takes
many small orders from multiple companies. This gives us a competitive advantage.

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Possible Tie-Ups
Tie-ups and collaborations with manufacturing units are necessary for the functioning of
our business operations. We have identified „Shrinivas Sugandhalaya‟ manufacturers in
Bangalore, Karnataka.
We have also found that Shrinivas Sugandhalaya is the largest selling brand of agarbatti
in USA because people love the fragrance and the hexagonal packaging.
For in-land logistics, we have identified companies delivering between Bangalore and
Mumbai. A third party appointed locally will undertake the quality assessment etc.
India – US Bilateral Trade
Trade and commerce form a crucial component of the rapidly expanding and multi-
faceted relations between India and U.S. From a modest $ 5.6 billion in 1990, the
bilateral trade in merchandise goods has increased to $ 63.7 billion in 2013 representing
an impressive 1037.5% growth in a span of 23 years.
India‟s merchandise exports to the U.S. grew by 9.7% from $ 9.66 billion during the
period January-March 2013 to $ 10.60 billion during the period January-March 2014. US
exports of merchandise to India fell by 9.7% from $ 5.17 billion during the period
January-March 2013 to $ 4.66 billion during the period January-March 2014. India -
U.S. bilateral merchandise trade stands at $ 15.26 billion during the period January –
March 2014.
Trade during the year the month of March 2014
i) Major items of export from India to US
major items with their percentage shares, are given below) Textiles (17.1%)
b) Precious stones & metals (19.2%)
c) Pharmaceutical products (11.7%)

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d) Mineral Fuel, Oil (9.4%)
e) Organic chemicals (5.2%)
f) Machinery (4.7%)
g) Lac, Gum, Resins (3%)
h) Electrical Machinery (2.9%)
ii) Major items of export from US to India
major items with their percentage shares, are given below
a) Precious stones & metals (24%)
b) Machinery (11.3%)
c) Aircraft, spacecraft, Parts (8.2%)
d) Mineral Fuel, Oil etc (7.9%)
e) Optical instruments & equipment (6.8%)
f)) Electrical machinery (6.8%)
g) Misc. Chemical Products (4%)
h) Organic chemicals (3.8%)

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Trends with respect to the major items of bilateral trade during the past two years are as
follows.
India’s exports to US
● Cut and polished diamonds and jewellery is a major item of India‟s exports to the
US, accounting for 19.2%. Exports of this item fell from $ 2.10 billion during the period
Jan. – Mar. 2013 to $ 2.04 billion during the period Jan. – Mar. 2014, a decrease of 3.1%.

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● Textiles exports accounted for 16.6% of India‟s exports to the US in 2013. Textile
exports grew from $ 1.14 billion during the period Jan. – Mar. 2013 to $ 1.24 billion
during the period Jan. – Mar. 2014, an increase of 9.1%.
● Exports of pharmaceutical products grew from $ 1109 million during the period
Jan. – Mar. 2013 to $ 1242 million during the period Jan. – Mar. 2014, an increase of
12%.
● Exports of mineral fuel, oil grew from $ 615 million during the period Jan. – Mar.
2013 to $ 999 million during the period Jan. – Mar. 2014, an increase of 62.6%.
● Exports of organic chemicals fell by 6.4% from $ 592 million during the period
Jan. – Mar. 2013 to $ 555 million during the period Jan. – Mar. 2014.
US exports to India
● Exports of precious stones and metals which accounted for 24% of exports from
US to India fell by 23.2% to $ 1118 million during the period Jan. – Mar. 2014 from $
1455 million during the period Jan. – Mar. 2013.
● Machinery exports fell by 20.5% from $ 663 million during the period Jan. – Mar.
2013 to $ 527 million during the period Jan. – Mar. 2014.
● Exports of aircraft, aviation machinery and parts, grew by 37.8% to $ 383 million
during the period Jan. – Mar. 2014 from $ 278 million during the period Jan. – Mar.
2013.
● Exports of mineral fuel oil grew by 26.83% to $ 369 million during the period Jan.
– Mar. 2014 from $291 million during the period Jan. – Mar. 2013.
● Exports of optical, photo, surgical instruments fell by 1.7% from $ 324 million to
$ 318 million during the period Jan. – Mar. 2014.

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Market research
Agarbatti Industry export overview
Exports (Yr 2012-13)-INR 526.5 Cr. ( $ 87.75 million)
There are 400 exporters in India
Biggest export market is US, UK, followed by Latin America eg. Peru, Argentina &
Brazil, also countries like Egypt, UAE, Nigeria & Sri lanka
Pie chart for Export more than 10 Cr INR ($ 1.66 Million)
Country-wise export statistics:
INR in Cr.
Sr
no.
Country 2009-10 2010-11 2011-12 2012-13 % growth
over 5 years
1 USA 38.19 48.56 51.91 61.91 162
2 Nigeria 17.18 21.58 25.45 33.44 194
3 UAE 21.50 20.75 17.11 28.76 133
4 Sri Lanka 25.53 29.36 23.98 21.32 83
5 Malaysia 16.87 12.79 15.42 20.11 119
6 UK 11.95 8.97 14.84 18.21 152
7 Chile 10.10 12.18 12.56 16.13 159

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The primary market for our Business is USA. Since there is a consistent demand for the
Agarbatti in UAE and UK due to several reasons, we will focus to expand our business in
these two countries. So our secondary and tertiary market will be UAE and UK
respectively.
Statistics of import of Agarbattis to US from different countries
Source
2011 2012 2013 2014
--thousand dollars--
Percent January-June
of total --thousand dollars--
All sources $20,949.00 $23,815.70 $23,320.60 100.00% $12,107.10 $10,412.50
India $10,637.40 $11,599.00 $11,090.40 47.60% $5,783.70 $4,960.20
China $3,653.00 $4,789.40 $4,913.30 21.10% $2,511.30 $2,184.10
France $2,667.00 $3,242.70 $2,908.50 12.50% $1,473.70 $1,160.90
Thailand $1,235.00 $1,509.80 $1,422.60 6.10% $879.50 $570.30
Japan $1,023.60 $920.50 $808.70 3.50% $459.30 $402.70
Hong Kong $844.80 $909.80 $633.80 2.70% $373.90 $662.40
United
Arab
Emirates
$28.00 $41.80 $456.30 2.00% $108.00 $6.50
Vietnam $178.50 $222.90 $319.90 1.40% $117.00 $193.30
Macao $19.50 $60.40 $127.50 0.50% $105.20 $58.30
Indonesia $26.40 $20.20 $77.10 0.30% $48.10 $0.00
Australia $45.90 $20.20 $61.80 0.30% $34.80 $0.00
Saudi
Arabia
$101.20 $69.50 $52.30 0.20% $45.10 $28.50
Nepal $31.70 $44.20 $50.30 0.20% $9.50 $4.30
Taiwan $35.00 $34.50 $49.00 0.20% $34.80 $50.10
Germany $33.50 $35.80 $42.60 0.20% $25.10 $20.50
Greece $34.80 $58.20 $39.80 0.20% $23.00 $14.10

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United
Kingdom
$29.40 $41.00 $36.50 0.20% $25.80 $13.20
Malaysia $9.10 $12.90 $33.40 0.10% $3.30 $4.00
Italy $40.50 $58.90 $32.60 0.10% $2.60 $2.50
Netherlands $40.80 $2.20 $27.10 0.10% $14.20 $4.40
Egypt $0.00 $5.30 $22.60 0.10% $4.00 $0.00
Korea,
Republic of
$8.40 $3.70 $19.40 0.10% $0.00 $6.80
Trinidad
and Tobago
$0.00 $0.00 $19.00 0.10% $6.00 $0.00
Pakistan $8.20 $0.00 $16.00 0.10% $4.50 $8.00
Peru $0.00 $17.90 $14.90 0.10% $0.00 $14.80
Singapore $11.90 $0.00 $8.60 0.00% $0.00 $0.00
Ecuador $0.00 $0.00 $7.90 0.00% $0.00 $18.90
Fiji $26.90 $31.40 $6.80 0.00% $3.50 $7.10
Mexico $8.20 $12.60 $6.10 0.00% $6.10 $9.70
Ethiopia $3.40 $0.00 $3.30 0.00% $0.00 $0.00
Spain $0.00 $0.00 $2.90 0.00% $0.00 $0.00
Republic of
South
Africa
$73.70 $3.00 $2.90 0.00% $2.90 $0.00
Source: US International Trade Commission Tariff Database
US is the largest importer of agarbattis throughout the world. India stands as the largest
exporter of agarbattis to US followed by China. India‟s captures 47.6 % of the total
import of agarbattis to US. It is followed by China which stands at 21.10 %

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Business Start-up plan
Our first step will be to establish a current account with HSBC Bank that can handle
FOREX business. The major requirement is to maintain an AMB (Average Monthly
Balance) of Rs. 1,50,000 in a combination of Savings/Current Accounts/Fixed Deposits.
HSBC is also present in United States of America (USA).
Once a current account eligibility is fulfilled, we will approach the office of the Joint
Director General of Foreign Trade (JDGFT) of the west region to apply for IMPORT
EXPORT CODE [10 digit IE CODE] . For applying for an I E CODE- a certificate from
the Bank that states we have a current account operating with the Bank and the account is
obtained.
After the receipt of an I E CODE from the JDGFT- we have attained eligibility for
IMPORT AND EXPORTS of such commodities that are otherwise not restricted nor
permitted by the prevailing EXIM policy that exists at that time.
While exporting a commodity the tax and levies that accrued in exports need to be
reimbursed as drawback/refund with appropriate forms.
There are other benefits also available for exporters to make the pricing competitive to
the international pricing. But for an exporter to be eligible for such benefits- we need to
be a member of the promotion council of our category of exports.
In this case, we aspire to be a part of the Export Promotion Council. We are eligible for it
with a copy of IE code and bank certificate with a chartered accountant‟s certificate of
the export turnover of the preceding 3 years. Even if we have nil export, eligibility is
considered.

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Incentives
There is 12% duty drawback for agarbattis.
In the case of perfumed agarbattis, taking into account the incidence of duty on packing
material, the drawback rate has been increased from 9.2% to 12%.
Duty Drawback is the special rebate given under the Section 75 of Indian Customs Act
on exported products or materials. Duty drawback rates or concession are only applicable
on products which are used in the processing of goods manufactured in India and
exported and imported to foreign countries.
Duty drawback rates differ from item to item and are normally fix either as a percentage
of the value of goods exported or as a specific value for every unit of the commodity
being exported.
There is also 7% drawback on BRC (Bank realization certificate)
BRC Bank Realization Certificate is issued by bank to its customers against any specific
documents. Normally BRC is issued by bank to their customer who has been in to export
business on each shipment of export proceeds. Various export promotion agencies
provide incentives, import duty exemptions and other financial assistance to the
exporters. These agencies require to be submitted export proof by exporters to claim such
benefits. One of the proof of exports other than export promotion copy of shipping bill,
Mate Receipt issued by the carrier and/or customs authorized ARE-1 (for goods under
central excise only) is Bank Realization Certificate BRC issued by the respective bank
who received foreign amount for exporters.

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Shipment
The shipping agent is usually chosen according to the preference of the client. The
shipping cost is Bourne by the client.
That document and the payments are handled by the Custom Housing Agency.
The documents include
1. Bill of lading
2. Certificate of origin
3. Insurance certificate
4. Immigration certificate
The shipment usually takes less than 45 days to reach the client.
Licenses required
The licenses which are required for export of agarbatti are
1. IEC -
2. Pan card
Export Import Regulations
• Import-export Code (IEC) Number obtained from the Director General of Foreign
Trade (DGFT)regional office
• Registration with Chember of Commerce
• Registered under the Indian Company Act and Export Promotion Councils to obtain
registration cum membership certificate (RCMC)
• Registration with Income Tax authorities for exemption of taxes.