POLITICAL RISK UNDER EXPORT GUARANTEE SCHEME

  • The government will expand the definition of “political risk” under the export guarantee scheme.
  • To cover any fresh imposition of non-tariff barriers by importing nations after a shipment has left Indian shores.

The Export Credit Guarantee Corporation (ECGC) indemnifies exporters for:

  1. losses when buyers turn insolvent or default on payments,
  2. political risks like war and
  3. sudden import restrictions or promulgations of laws or decrees
  4. But it does not cover anti-dumping steps or non-tariff barriers.

Inclusion in political risk:

Some of the anti-dumping measures or non-tariff barriers introduced after a shipment has been made, will come under the purview of the political risk.

Inter-ministerial committee:

  • The new policy also promises to set up an inter-ministerial committee to examine micro, small and medium enterprises’ (MSME) trade-related grievances, which have policy ramifications.
  • This will expedite decision making with a ‘whole of government’ approach.

Mandatory re-export done away with:

  • It also does away an earlier requirement for importers who store their merchandise in bonded warehouses, which mandated them to re-export such goods if they were not cleared for domestic consumption within one year.
  • The clearance of the warehoused goods shall be as per the provisions of the Customs Act, 1962, which does not have an expiry date.
Export Credit Guarantee Corporation

The ECGC Ltd. wholly owned by government of India, was set up in 1957.

Aim:

1.     promoting exports from the country by providing credit risk insurance and related services for exports.

2.     ECGC is essentially an export promotion organisation, seeking to improve the competitiveness of the Indian exports by providing them with credit insurance covers.

3.     ECGC Ltd. also administers the National Export Insurance Account (NEIA) Trust which caters to project exports of strategic and national importance.

ECGC provides:

·        a range of insurance covers to Indian exporters against the risk of non-realization of export proceeds due to commercial or political risks

·        different types of credit insurance covers to banks and other financial institutions to enable them to extend credit facilities to exporters and

Export Factoring facility for MSME sector which is a package of financial products consisting of:

1.     working capital financing,

2.     credit risk protection,

3.     maintenance of sales ledger and

4.     collection of export receivables from the buyer located in overseas country.

SOURCE: THE HINDU, THE ECONOMIC TIMES, PIB

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