Export Credit Guarantee Corporation (ECGC) is awaiting clearance from the finance ministry to increase its capital base from Rs 300 crore to at least Rs 500 crore. This infusion of capital would enable ECGC to earn the credibility to enter the capital market at a later stage.
Dev Mehta, chairman-cum-managing director of ECGC, while speaking at the Merchants Chamber of Commerce here yesterday, said the corporation actually needs a base of Rs 600-700 crore to support risk policies worth exports of Rs 30,000 crore.
This apart, ECGC feels a separate risk fund should be created to deal with high risk businesses. In this connection, Dev Mehta said the present classification of four types of states according to risk perception would be restructured with the addition of at least two more types.
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The risk perception changes is evident from the fact that of the CIS countries, only Russia and Ukraine fall under C grades of states while the others are in the D category.
Speaking about programmes that ECGC has already taken and will be implemented, Mehta talked about the maturity factor for which permission from the Reserve Bank has already been obtained.
The scheme, which will be put into action within the next six months, will enable banks to discount 100 per cent of the export order with the condition that this will be without recourse. There has to be a preparatory agreement among the exporters, banks and ECGC on the same.
Responding to the chambers demand for 100 per cent cover for exports in place of 90 per cent, Mehta claimed that 95 per cent of exports for the SSI sector are given cover at present.
While agreeing to consider the suggestion, he said exporters should also bear part of the risk.
Mehta claimed that ECGC premium rates are the second lowest in the world in spite of the fact that the corporation is not a profit-making organisation. Its premium income stood at Rs 240 crore in 1996-97, while outstanding payments stood at a staggering Rs 1400 crore. However, ECGC has a comfortable reserve of Rs 675 crore, he said. Mehta observed that meeting claim demands would be a difficult proposition if reserves dwindle and recovery trickles down.
He ruled out any reduction in premium rates and said the rates could go up marginally. However, he assured that premium rates for the SSI sector would be kept at a lower level than for exports. The restructured premium rate will be announced in March 1998.
ECGC cover is stagnating at around 17 per cent of the total exports of the country.
This compares favourably with 0.5 per cent in the US, 9 per cent in the UK, 4.6 per cent in Germany. But in countries like Japan, Denmark and France, the risk cover for exports is higher than India. Mehta assured that the export cover would be extended to 25 per cent of the countrys total exports. Hence, ECGC would set up new branches and satellite offices in many parts of the country.