Macro Economy

Shipments to Ukraine under export risk cover body lens

Bharani Vaitheesvaran Chennai | Updated on March 05, 2014

ECGC says monitoring situation, but has not yet upgraded risk level for exporters

The Export Credit Guarantee Corporation of India, a Government enterprise that insures exporters against credit risk, is monitoring Ukraine closely to decide whether the geopolitical turmoil in the country warrants a risk upgrade.

“Exporters who hold our policies now can make shipments and get it covered in the normal fashion. We have not made any move yet, but the recent developments… we have to keep a watch,” Geetha Muralidhar, Executive Director, ECGC, told Business Line over phone from Mumbai. She said the corporation has tie-ups with agencies and industry bodies abroad to gauge the situation.

As of now, ECGC considers 37 countries risky destinations for export. Depending on the level of risk, exporters who hold risk covers have to obtain its approval before shipping their wares.

Ukraine is currently placed in the moderate risk bar B2. Most policies that are covered by ECGC have 12-month validity. Even if Ukraine falls under the Restricted Cover Group II, exporters will not lose the degree of cover, but must seek its “go ahead” before shipping out .

Bilateral trade

Bilateral trade stood at $3.15 billion in 2012-13. Ukraine offers a growing market for Indian pharmaceuticals, which constituted $300 million of the $519 million worth goods exported in 2012-13. In November last year, a delegation of Ministers from Ukraine visited India to sign an agreement on joint ventures and research in pharmaceuticals.

A company official said review of risk is done on a quarterly and annual basis, besides ad-hoc analyses when unforeseeable events such as the Ukrainian crisis take place. “Exchange rate will be the first victim in case of political unrest of such magnitude. With their currency devalued, importers in Ukraine will not be able to import as they used to,” said Rafeeque Ahmed, President, Federation of Indian Export Organisations. On Tuesday, one US dollar equalled 9.9924 units of the Ukrainian currency, the hryvnia, according to the National Bank of Ukraine’s website.

Though, theoretically, India stands to benefit from a depreciating hryvnia, the political turmoil may affect movement of goods, and the currency benefit may not be realised.

Published on March 05, 2014

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