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The Export Oriented Units Scheme, introduced in early 1981, is

complimentary to the SEZ scheme. It adopts the same production
regime but offers a wide option in locations with reference to
factors like source of raw materials, ports of export availability of
technological skills, need for a larger area of land for projects.As
on 31
December 2005 1924 units are in operation under the EOU
To increase exports
Earn foreign exchange for the country.
Transfer of latest technologies.
Stimulate direct foreign investments.
Generate additional employment.
Increase the competitive strength of domestic
Initially EOUs were mainly concentrated in textiles and
Yarn, Food processing, Electronics, Chemicals, Plastics,
Granites and Mineral Ores
But Now a days Export Oriented Units have extended
their area of work which includes functions like
manufacturing, servicing, development of software,
trading, repair, remaking, reconditioning, re-
engineering including making of gold, silver, platinum
jewellery and articles thereof, agriculture including
agro processing, bio technology, floriculture,
horticulture, poultry, sericulture and granites.

To set up an EOU for the following sectors, and EOU owner
needs a special license:
Arms and Ammunition
Explosives and allied items of defense equipment
Defense aircrafts and warships
Atomic substances
Narcotics and hazardous chemicals
Distillation and brewing of alcoholic drinks
Cigarettes, cigars and manufacture of tobacco substances.
In the above mentioned cases the EOU owners are required to
submit the application form to the development
commissioner who will then put them up to the Board.
Export Oriented Units can be set up anywhere in the
country and may be engaged in the manufacture and
production of software, floriculture, horticulture,
agriculture, aquaculture, poultry and sericulture or other
similar activities.
However it should be noted that in case of large cities
where population is more than a million, such as Bangalore,
Cochin, the proposed location should be at least 25 km
away from the Standard Urban Area Limits of that city
unless it is to be located in area designated as an industrial
area before the 25
July 1991.However non polluting
industries like software, computer, electronics, printing are
exempted from such restrictions while choosing the area.
LOP Letter of Permission
For setting up a EOU unit three copies of the application form as
mentioned in the Handbook Vol-1 are required to be submitted to
the Development Commissioner of the concerned EOU along with 3
copies of project report and a demand draft for Rs 5000/- in favour
of Pay and Accounts officer, Ministry of Commerce, central bank of
India, Udyog Bhavan payable at New Delhi.
Proposals for units requiring Industrial License may be granted
approval by the Development Commissioner after clearance of the
proposal by the EOU Board within 45 days.
LOP letter of permission issued by the Development Commissioner
to the EOU would be construed as a license for all purposes.
LOP must have initial validity of 3 years by which time the unit must
commence production. Once the unit commences production then
the LOP issued is valid for a period of 5 years for its activities.
According to the guidelines the monitoring of the EOU
units is done jointly by the Development Commissioner
and the concerned customs and central excise officers.
The main objective of joint monitoring is to ensure that
the performance of EOUs is effectively monitored and
action is taken against the units which have
contravened the provisions of the Exim Policy and the
Customs procedures.Also joint monitoring helps the
government to solve the problems being faced by the
EOU effectively.
The rules and regulations in matters related to the EOU are basically
governed by the Development Commissioner who is administrative head
of the Export Processing Zones. The Development Commissioner functions
under the guidelines given by the Ministry Of Commerce.
The Development Commissioner of the zone concerned has wide powers
including the following:
To adjust foreign currency fluctuation, in case of capital goods imported.
Enhancement of production capacity.
Change in name of ownership.
Change of location or expansion.
Extension of LOP
In all there are 7 Development Commissioners in the country and 8
processing zones in the country.
Besides the Development Commissioner The Customs and the Central
Excise also forms the governing body of the Export Oriented Units.
Kaizen means Improvement
Kaizen strategy calls for never ending efforts for
improvement involving everyone in the organization
managers and workers alike.
Management has two major components:
Maintenance and Improvement
The objective of maintenance function is to maintain
current technological, managerial and operating
The improvement function is aimed at improving
current standards.

Under the maintenance function, the management must
first establish policies, rules, directives and standard
operating procedures and then work towards ensuring that
everyone follows SOPs. The latter is achieved through
combination of discipline and human resource
development measures.
Under the improvement function the management works
continuously towards revising the current standards, once
they have been mastered, and establishing higher ones.
Improvement can be broken down between innovation and
Kaizen. Innovation involves a drastic improvement in the
existing process and requires large investments.
One of the most difficult aspects of introducing and
implementing kaizen strategy is assuring its continuity.
When a company introduces something new, such as
quality circles or TQM it experiences some initial
success, but soon such success disappears and after a
while nothing is left, and the management keeps
looking for a new flavor of the month.
Kaizen concentrates at improving the process rather
than at achieving certain results. Such managerial
attitudes and process thinking make a major difference
in how an organization masters change and achieves
Quick and easy kaizen is aimed at increasing
productivity, quality and worker satisfaction.
In this every company employee is encouraged to
come up with ideashowever small that could
improve his/her particular job activity, job
environment or any other company process for
that matter.
The employees are also encouraged to
implement their ideas as small changes can be
done by the worker himself with very little
investment of time.
In some Canon plants, the foremen are told to set aside half an
hour as kaizen timetime to do thinking for improvement in the
workshop. The foremen use this period to identify problems and
work on Kaizen programs. Factories are advised not to hold
meetings during this 30 minute period.
Toyota organized their workers by forming teams and gave them
responsibility and training to do many specialized tasks. Teams are
also given the responsibility for housekeeping and minor equipment
repair. Each team has a leader who also works as one of them on
the job. Based on the concept of continuous improvement every
Toyota team member is empowered with the ability to improve
their work environment. This includes everything from quality and
safety to the environment and productivity. Improvements and
suggestions by team members are the cornerstones of Toyotas
Suggestion systems are a valuable opportunity for
worker self development as well as for two way
communication in the workshop. Suggestion systems
make employees Kaizen conscious and provide an
opportunity for the workers to speak with their
supervisors as well as among themselves.
The suggestion system is an integral part of an
established management system that aims at involving
employees in Kaizen. The number of workers
suggestions is regarded as an important criteria in
reviewing the performance of the workers supervisor
and the manager of the supervisor.

The Japanese management encourages employees to
generate a great number of suggestions and works
hard to consider and implement these suggestions,
often incorporating them into the overall Kaizen
strategy. Management also gives due recognition to
employees efforts for improvement. An important
aspect of the suggestion system is that each suggestion
once implemented leads to an upgraded standard.
Japanese managers are willing to go along with a
change if it contributes to the suggestion system. This
is in sharp contrast to Western managers as they are
concerned merely with the cost of change and its
economic payback.