Exporters will get to hedge trade risk

MINI EXIM POLICY 2004 - INITIATIVES

The mini-Exim Policy raised the equity base of the Export Credit Guarantee Corporation (ECGC) of India by Rs 300 crore to Rs 800 crore in order to help the Indian exporters in better risk management.

A national export insurance account will be created for the corporation for underwriting of high value projects being implemented by Indian companies abroad.

Under the tenth plan, Rs 600 crore will be contributed for this purpose, and the corpus will be raised to Rs 2,000 crore subsequently. Commerce Minister Arun Jaitley said that the details would be worked out in consultation with the finance ministry.

In order to ensure easy availability of export credit to the exporters and to enhance the competitiveness of Indian goods and services, a Gold Card scheme for credit worthy exporters with good track record is being considered. The Reserve Bank of India (RBI) is finalising the scheme to make export credit available without any hassles.

The country does not have any formal guidelines on capital adequacy of credit insurance business but there is an informal understanding that capital should be maintained at two per cent of the total liability.

"The maximum claim payment that ECGC can have at a point of time is Rs 40,000 crore, so today's hike in our equity base helps us to meet the norm," Geetha Muralidhar, general manager (marketing), ECGC, told Business Standard . She said that as of now ECGC's claim liabilities were around Rs 37,000 crore.

The new insurance account that was announced today will help a large number of projects that could not be executed earlier for want of re-insurance or some kind of a government support.

Muralidhar said that a separate export insurance account was a long-standing demand. "It is modelled on the Export Credit Guarantee Department of the UK. It provided a 50 million pound cover for the country's exports to Indonesia during the South-east Asian crisis and thus UK could safeguard vital exports to the country," she said.

While being non-committal about the immediate beneficiaries of the scheme, she said that companies like Bharat Heavy Electricals Ltd and Ircon International have a number of projects under implementation in Bangladesh and Malaysia. ONGC Videsh Ltd (OVL) is also gearing up to do important work in Sudan and other countries.

ECGC is the fifth largest credit insurer of the world and it covers 14-15 per cent of national exports.