Reduction in insurance cost for exporters, ECGC
The Dollar Business Bureau
In a much-needed relief to the exporters, the Export Credit Guarantee Corporation (ECGC) in its 60th year of operation has taken a customer friendly step by reducing the premium rate by an average of 17% for its whole turnover policy covers. This has reduced the transaction costs for short term business exporters from Rs.28.19 to Rs 25.46 per Rs 100 during FY 2016-17. The premier Export Credit Agency has also initiated several customer friendly steps to boost exports.
In its press release on May 31st, the agency has listed out the initiatives taken during FY 2016-17.
- The agency has taken steps to make Export Factoring Scheme, cheaper for MSMEs.
- To give a fillip to the Medium & Long Term (MLT) export sector, the company has introduced covers to the subsidiary MLT exporters in India.
- To speed-up claim settlement, ECGC has set up Regional Claim Processing Centers (RCPC) at all the five Regional Offices, located in major metro cities.
- As an incentive to large exporters, the Volume Discount has been rationalised to extend the benefits to more and more exporters.
Addressing the media, CMD of ECGC, Geetha Muralidhar, mentioned that the value of exports covered under exporters’ business as well as the number of policies in force had shown a redeeming trend with a growth of 4%. The value of business covered during FY 2016-17 stood at over Rs.1,41,000 crore and the number of policies in force at over 12,000 as compared to Rs.1,35,000 crore and 11,525 respectively in the FY 2015-16.
Under the Export Credit Insurance Covers issued to Banks (ECIB), the export advance outstanding of the banks and covered by ECGC as on March 31, 2017 stood at over Rs.1,17,000 crore covering over 23,500 exporter accounts. All the Government owned banks and 14 private sector banks are under the cover of ECGC. The overall business which includes the covers issued to the exporters, banks and MLT sector, covered during FY 2016-17 stood at over Rs.2,65,000 crore.
In the wake of continued global recession and uncertainties, ECGC also continued to experience high claim pay out of Rs.886 crore during FY 2016-17 after the record claim payout in the last FY 2015-16. The claims paid are spread across various sectors such as agricultural products, engineering goods, gems & jewellery, readymade garments, basic Chemicals & Pharmaceuticals, etc.
ECGC also covers risks of project exporters and banks involved in the medium and long term exports. As on 31st March 2017, around 85 policy covers and about 142 covers to banks were in force. Major projects supported by ECGC, are being executed in Oman, Kenya, Vietnam, Afghanistan and Nepal.
On account of Government of India, ECGC operates National Export Insurance Account (NEIA) Trust to promote project exports from India that are of strategic and national importance. The value of exports enabled by ECGC is over Rs. 26,000 crores and through the Buyer Credit covers it is around Rs.8500 crore.
In the International arena, ECGC signed a bilateral agreement with Iranian counterpart, EGFI on May 23, 2016, in the presence of the Prime Minister of India and President of Iran.
ECGC is in discussion with African Trade Insurance Agency (ATI) to explore the possibilities of supporting exports to African Region through reinsurance and coinsurance. ATI provides political risk and trade credit risk insurance products with the objective of reducing the business risk and cost of doing business in Africa.
The Parliamentary Standing Committee on Commerce in its 125th report, while appreciating the efforts being undertaken by ECGC for the overall growth of Indian exports, the Committee has opined that the framework of export credit needs to be made more robust and hence ECGC needs to be adequately capitalised. In addition, while commending the work of ECGC in covering the banks, owing to high risk that it has to bear, once again they recommend that ECGC should be heavily capitalised.
The company’s contribution in the last decade by way of claim settlements of around Rs.7000 crore has provided the much-needed support to exporters and relief to the banking system in ensuring adequate lending to exporters.
The year ahead looks challenging for the exporters and the Ministry of Commerce is taking several steps to boost exports from the country. ECGC is also looking forward to partner with government in its initiatives by making credit insurance more easily accessible for the exporters.There are many export friendly initiatives under discussion with the regulator and the Government, she said.