Export Credit Guarantee Corporation (ECGC) and Export Promotion Council (EPC)

EXPORT INSURANCE

Goods

Receivables

Loss or Damage

Exchange Risk

Payment Risk

Marine Insurance

Hedging by Authorized Dealers

CREDIT INSURANCE

 ECGC is a company wholly owned by the government of India. Being essentially an export promotion organization, it functions under the administrative control of the Ministry of Commerce, Government of India. It is managed by a Board of Directors comprising representatives of the Government, RBI, Banking, Insurance and exporting community.

Role Of ECGC of India

ECGC was established in year 1957 by the Government of India to strengthen the export promotion drive by covering the risk on exporting credit. The goal of ECGC is to provide cost-effective insurance and trade related services to meet the needs and expectations of the Indian export market. ECGC also offers guarantees to banks and financial institutions to enable exporters to obtain better facilities from them.

COVERS ISSUED BY ECGC:

The covers issued by ECGC may be divided broadly into four groups as follows:
Standard policies issued to exporters to protect them against the risk of not receiving payments while trading with overseas buyers on short term credit. Specific policies designed to protect Indian Firms against the risk of not receiving payments in respect of Export on deferred payment terms Services rendered to foreign parties and Construction work-undertaken abroad.

Financial guarantees issued to banks against risks involved in providing credit to exporters.

A. RISKS COVERED UNDER STANDARD POLICIES: Under its policies to protect the exporters against overseas credit risks, ECGC bears the main impact of the risks and pays the exporter 90 percent of his loss on account of commercial and political risks. Commercial Risk: The insolvency of the buyer The buyer's protracted (lengthen) default to pay In some special circumstances specified in the policy, buyer's failure to accept the goods, when non-acceptance is not due to the exporter's actions.

Political Risk: Restriction on remittance in the buyer's country or any government action which may block or payment to the exporter. War, revolution or civil disturbances in the buyer's country Cancellation of export license or imposition of new export licensing restrictions in India (under contracts policy) New import licensing restrictions or cancellation of a valid import license in the buyer's country: Additional handling transport or insurance charges due to interruption or diversion of voyage which cannot be recovered from the buyer: and Any other cause of loss occurring outside India, not normally insured by commercial insurers. And beyond the control of both the exporter and the buyer.

RISKS NOT COVERED ECGC, however, does not cover risks of loss due to:
a. Commercial disputes, including quality disputes raised by the buyer unless the exporter obtains a declaration from a competent court of law in buyer's country in his favour. b. Causes inherent in the nature of goods: c. Buyer's failure to obtain import or exchange authorization from the appropriate authority: d. Insolvency or default of any agent of the exporter or of the collecting banks: .e.g. Loss or damage to goods which can be covered by general insurers: f. Fluctuations in exchange rates (except under Exchange Fluctuation Risk over Schemes)and e.g. Failure of the exporter to fulfil the term of contract or negligence on his part.

B. SPECIFIC POLICIES Contracts for export of capital goods or projects for construction works and for rendering (reproducing) services abroad are insured by ECGC on case to case basis under specific policies. C.SMALL EXPORTER'S POLICY The small exporter's policy is basically the Standard Policy, incorporating certain improvements in terms of cover, in order to encourage small exporters to obtain and operate the policy. It will be issued to exporters whose anticipated export turnover for the next 12months does not exceed Rs.25 lakes. The premium payable for a small exporter's policy is less than the standard policy.

D. FINANCIAL GUARANTEE TO BANKS Timely and adequate credit facilities, at the pre-shipment as well as post-shipment stage. These are essential for exporters to realize their full export potential. Exporters my not, however, be able to obtain such facilities from their bankers for several reasons. The Export Credit Guarantee Corporation, (ECGC) has designed a scheme of Guarantees to Banks with a view to enhancing the credit worthiness of the exporter so that they would be able to secure better and large facilities from their bankers. To meet the varying needs of exporters. The Corporation has evolved the following types of Guarantees; Packing Credit Guarantee: Export Production Finance Guarantee; Post-shipment Export Credit Guarantee Export Finance Guarantee Export Performance Guarantee: Export Finance (Overseas lending ) Guarantee

1. PACKING CREDIT GUARANTEE Any loan given to an exporter for the manufacture processing, purchasing or packing of goods meant for export against a firm order or letter of credit qualifies for packing Credit Guarantee. The Guarantee is issued for a period of 12 months against a proposal made for the purpose and covers all the advances that may be made by the banks during the period to a given exporter within an approved limit. 2. EXPORT PRODUCTION FINANCE GUARANTEE The purpose of this Guarantee is to enable banks to sanction advances at the pre-shipment stage to the full extent of cost of production when it exceeds the FOB value of the contract/order, the difference representing incentives receivable. The extent of cover and the premium rate are the same as packing Credit Guarantee.

3. POST -SHIPMENT EXPORT CREDIT GUARANTEE Post-shipment finance given to exporters by banks through purchase, negotiations or discount of export bills or advances against such bills qualifies for the Guarantee. It is necessary however, that the exporter concerned should hold suitable policy of ECGC to cover the overseas Credit risks. The percentage of loss covered under the individual post-shipment Guarantee is 75%. 4. EXPORT FINANCE GUARANTEE This guarantee covers post-shipment advance granted by banks to exporters against export incentives receivable in the form of duty drawback, etc.

5. EXPORT PERFORMANCE GUARANTEE An exporter who desires to quote for a foreign tender may have to furnish a bank guarantee for the bid bond. If he wins the contract, he may have to furnish bank guarantees to foreign buyers to ensure due performance or against advance payment or in lieu of retention money or to a foreign bank in case he has to raise overseas finance for his contract. 6. EXPORT FINANCE (OVERSEAS LENDING) GUARANTEE If a bank financing an overseas project provides a foreign currency loan to the contractor, it can protect itself from the risk of nonpayment by the contractor by obtaining Export Finance Guarantee. Premium rate will be 0.09% per annum for 75% cover and 1.08% per annum for 90% cover. Premium is payable in Indian Rupees. Claims under the guarantee will also be in Indian rupees.

EPC

 The Export Promotion Council was established in 1992 under the Companies Act. Each Council is responsible for the promotion of a particular group of products, projects, and services. The EPCs keep abreast of the trends and opportunities in international markets for goods and services and assist their members in taking advantage of such opportunities in order to expand and diversify exports.

Present Position of EPCs

Presently there are twenty EPCs under the administrative control of the Department of Commerce. These councils deal with various commodities like basic chemicals and allied products, cotton textiles, handlooms, apparels, silk , Marine product, carpets, gems and sports goods, tobacco, handicrafts, computer software and so on.

FUNCTION
To provide commercially useful information and assistance to their members in developing and increasing their exports

To offer professional advice to their members in areas such as technology up gradation, quality and design improvement, standards and specifications, product development, innovation, etc. To organize visits of delegations of its members abroad to explore overseas market opportunities.
To organize participation in trade fairs, exhibitions and buyerseller meets in India and abroad. To promote interaction between the exporting community and the Government both at the Central and State levels.

Role
Trade Information . Development of Exporting Skill . Export credit, Insurance & Finance . Trade Policy Facilitation . Market Analysis Tools Export Readiness Assessment

Trade Information
Up-to-date, relevant and timely delivery of export trade information and market intelligence to the exporting business community. Networking with information generating bodies and business support organizations both local and international to facilitate acquisition of information for exporters.

Development of Exporting Skill

Training needs analysis of the export community and identify priority areas for which capacity building is needed;

Creation of a database of institutions and resource persons to conduct exporters training; Exporters training modules and training materials development in collaboration with identified training institutions;

Export Credit, Insurance & Trade Finance

These are services that are supposed to assist exporters to reduce the costs of production to be able to offer competitive products in the international market. All the information regarding the Export credit, insurance policies and finance related to trade is provided by these institutions.

Trade Policy Facilitation

Trade Policy Division offers the following services: Internal and external trade policy environment review and recommendation of policy review to enhance export production and competitiveness. Input to governments macro-economic, trade and other sectoral policy formulations. Sector specific surveys on export related activities. Trade flow analysis using the various market analysis tools to identify export opportunities.

Market Analysis Tools

Providing information on trade barriers in target markets to assist trade officials and policy-makers in negotiations. Assist trade support institutions identify and prioritize export sectors, target markets, and develop strategies for export promotion.

Assist exporting firms access relevant information on global, regional or individual country markets and opportunities for market diversification for their products.

Export Readiness Assessment

The Export Fitness Checker takes a firm through five dimensions of business management in its revision of preparations to export. These are : Strategy Marketing Production Distribution Finance Under Business The tool enables the company to identify possible gaps as you prepare to enter a foreign market.

If the company has already started exporting or is in other export development activities, the tool enables them to discover some useful tips