EXPORT GUARANTEE SCHEME - GOVERNANCE
News: Centre
to expand definition of ‘political risk’ under export guarantee scheme
What's in the news?
● 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.
Key takeaways:
● Exporters
may soon be able to get insurance cover for some losses suffered on account of
countries sudden imposition of barriers to trade, under the new Foreign Trade
Policy (FTP), which also envisages the formation of a “whole of government”
ministerial panel to address the grievances of small exporters.
Recent changes made:
● Typically,
the Export Credit Guarantee Corporation (ECGC) indemnifies exporters for losses
when
○ buyers
turn insolvent or default on payments
○ political
risks like war and sudden import restrictions or promulgations of laws or
decrees
○ However,
it does not cover anti-dumping steps or non-tariff barriers.
● The
new FTP states that 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.
Export Credit Guarantee Corporation (ECGC):
● ECGC
Ltd. is wholly owned by the Government
of India.
● It
was set up in 1957 with the objective of promoting exports from the country by
providing credit risk insurance and related services for exports.
● The
ECGC was formed to encourage exports by offering
credit insurance services to exporters to protect them from non-payment
risks posed by overseas purchasers owing to economic and political factors.
Objective:
● ECGC
is essentially an export promotion organization, seeking to improve the
competitiveness of the Indian exports by providing them with credit insurance
covers.
Supports provided by ECGC:
● It
offers insurance protection to
exporters against payment risks.
● It
provides guidance in export-related activities.
● It
makes available information on
different countries with its own credit ratings.
● It
makes it easy to obtain export finance from banks/financial institutions.
● It
assists exporters in recovering bad
debt.
● It
provides information on the creditworthiness of overseas buyers.