ECGC to provide insurance for Indian exports to Iran.

Boost for exporters trying to tap a market shunned by US, EU
State-run Export Credit Guarantee Corporation of India (ECGC) has begun to provide risk insurance cover to exporters doing business with Iran, though in a small way, thereby facilitating exports to the sanction-hit nation.

“We have provided credit cover worth Rs 300 crore to exporters for Iran in last three months. But, this is limited to rupee-denominated exports only,” N Shankar, chairman and managing director of ECGC said on sidelines of the third export summit held by industry body, confederation of Indian industry.

Iran was under restricted category as far as credit cover from ECGC was concerned. In March this year, India and Iran worked out a payment mechanism wherein the two countries agreed that 45 per cent of India’s imports from Iran would now be paid back in rupees through UCO Bank after which commerce ministry had asked ECGC to provide risk insurance cover for exports to Iran as well.

Industry experts, however, feel that the ECGC’s exposure to Iran is very low considering that UCO Bank’s line of credit to Iran has virtually doubled. “UCO Bank is already extending line of credit worth Rs 100 crore daily or Rs 3,000 crore a month and hence an exposure of just Rs 300 crore in three months’ is certainly not sufficient,” Ajay Sahai, director general of Federation of Indian Exports Organization (FIEO) said.

ECGC’s role in providing credit cover for Iran is crucial in improving the sentiment of Indian exporters who are desperately wanting to tap the huge opportunity created especially after US and EU sanctions on Iran over its nuclear programme. Even Iran has evinced interest in enhancing imports from India to $25 billion in the long run.

Iran is India’s second largest crude oil supplier accounting for some 12 per cent of its crude oil imports. The bilateral trade between India and Iran stood at $13.6 billion in 2010-11 with exports from India at $2.7 billion while imports from Iran were $10.9 billion.

While raising exports from India to Iran would benefit the latter in utilising the rupee as well as avail of cheaper products from India, it will also give a major push to Indian exports as even Indian exporters are looking at diversifying markets in the wake of slowdown in EU and the US. Besides, it will help India to narrow down trade deficit that is currently in favour of Iran.

Major exports from India include cereals, inorganic and organic chemicals, iron & steel and their products, tea, coffee and spices. Mineral fuel import constitutes over 90 per cent of India’s total imports from Iran followed by organic chemicals and ores.

Source : wrd.mydigitalfc.com