Increasing ECGC cover will benefit the sector: Exporters

Our Bureau New Delhi | Updated on June 28, 2021

Finance Minister Nirmala Sitharaman addressing a press confrence along with MOS Finance Anurag Singh Thakur, in New Delhi, on Monday   -  Kamal Narang

Providing additional corpus to NEIA will also ease liquidity crunch, mitigate risks

The government’s decision to boost export insurance cover by infusing equity in Export Credit Guarantee Corporation (ECGC) and providing additional corpus to the National Export Insurance Account (NEIA) for project exports over the next five years would help ease liquidity crunch and mitigate risks, say exporters.

The decision to infuse equity in ECGC over five years to boost export insurance cover by ₹88,000 crore, announced by Finance Minister Nirmala Sitharaman on Monday, would certainly benefit exporters as there will be higher leverage for banks towards export finance, said Rakesh Kumar, an exporter of handicrafts and Director General of the Export Promotion Council for Handicrafts. “As the coverage for exporter under ECGC would increase, it would encourage many more exporters to avail of the services of ECGC and mitigate their risk,” he told BusinessLine.

ECGC promotes exports by providing credit insurance services and support around 30 per cent of India’s merchandise exports.

Bright future

While the ECGC has, at present, been managing to provide facility to all exporters, augmenting the funding is a welcome move and shows positivity for the future, said Sanjay Jain, Chairman, Confederation of Indian Textile Industry.

“In the long term, as the ECGC gets better capitalised, it can provide more support to the exporters as their need for insurance increases,” Jain explained.

The planned infusion of additional equity will make ECGC stronger and increase exports, if the scheme starts covering risky importers also, said Anupam Shah, an engineering goods exporter.

“It is only by increasing our importer base can we increase our exports,” he added.

Both the announcements on enhancing ECGC cover and increasing corpus for National Export Insurance Account (NEIA) for project exports are encouraging at a time when liquidity challenges and risks are increasing exponentially for the exporting community, said Ajay Sahai, Director General, FIEO.

Extending risk covers

The decision to provide ₹33,000-crore boost for project exports through NEIA is likely to support more medium and long-term project exports by extending risk covers. The NEIA provides covers to buyer’s credit, given by EXIM Bank, to less creditworthy borrowers and supports project exporters.

“Augmenting NEIA will facilitate merchandise and services exports and open opportunities in project exports,” said Sahai.

India’s goods exports in April-March 2020-21 fell by 7.26 per cent to $290.63 billion compared to the previous fiscal. as the pandemic slowed down production and demand worldwide. Exports, however, seem to be back on the growth track in the new fiscal with a 112.29 per cent growth in April-May 2021 to $62.84 billion compared to the same period last year.

Published on June 28, 2021

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