NEW DELHI: In a move that will provide cushion to Indian exporters in uncertain global markets, and improve risk coverage, the government will provide a higher insurance cover to the sector.
State-owned Export Credit Guarantee Corporation (ECGC), which promotes exports by providing cover to export risks on credit, has promised to increase risk cover of exporters by 5%, according to a senior ECGC official. The risk cover, given to banks by ECGC for its loans to exporters, will be increased by 10%.
To provide this additional credit cover to exporters and banks, ECGC will utilise an amount of Rs 350 crore allocated to it by the Centre under the corpus of the national exports insurance, which is being set up to support medium- and long-term business.
The amount was earmarked by the government to increase insurance coverage for exporters earlier this year as part of its incentive package to help the Indian industry survive the global slowdown. ECGC expects an initial cover to banks and exporters will not exceed Rs 60 crore in the current fiscal year.
“ECGC had sold about 14,500 policies in 2008-09 and it is expecting a 5% increase in sales this fiscal year,” said ECGC chairman and managing director AV Muralidharan, while speaking at an interactive seminar organised by Fieo in New Delhi. The interaction was attended by more than 100 exporters from Delhi and NCR.
The Indian export sector has been badly hit because of payment defaults by buyers globally, especially in Western markets due to the global economic downturn. “Highest default claims are coming from the US with about 25% of the overall claims originating from that country,” he added.
FIEO director-general Ajay Sahai, who was also present at the meet said the Chinese government has provided export credit insurance worth $84 billion to cover export risks.
Source : The Economic Times