The Hindu : Business : Insurance cover for medium and small exporters raised

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Saturday, Dec 27, 2008
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Insurance cover for medium and small exporters raised

Special Correspondent

10 per cent extension in risk cover will be limited to select products
Shortfall in export target may be between 5 per cent and 10 per cent

NEW DELHI: The Centre on Friday approved an allocation of Rs. 350 crore for increasing the insurance cover for micro, small and medium enterprise (MSME) exporters and also some other sectors facing slowdown amidst threats of defaults by overseas buyers.

In its meeting, the Cabinet Committee on Economic Affairs (CCEA) decided to fund Export Credit Guarantee Corporation of India (ECGC) from the National Export Insurance Account (NEIA) for providing higher risk cover to MSME exporters, enhancing it from the existing 85 per cent to 95 per cent.

Similarly, 10 per cent extension in risk cover for non-MSME exporters will be limited to textile (including handicraft and handloom), gems and jewellery, leather, engineering products, carpets, project goods, automobile components and chemicals.

Briefing journalists after the meeting, Union Home Minister P. Chidambaram said: “Exporters need additional cover in the face of slowdown. The additional risk cover would be available up to June 30, 2009, and would be reviewed thereafter.”

Banks would now continue to finance MSME exporters even if losses take place in one or two transactions by providing higher risk cover that would be made available to them under the Export Credit Insurance Scheme for banks operated by ECGC. The ECGC cover for the banks would go up to 85 per cent from 75 per cent, thus providing stronger support to exporters and banks.

The global financial crisis has begun impacting exports significantly and the export target of $200 billion for the current year is unlikely to be achieved.

The shortfall may be between 5 per cent and 10 per cent. Several export promotion councils have reported that there was a noticeable decline in export orders due to cancellation or re-negotiation of orders and prices by buyers and slowdown in export realisation, an official statement said.

The number of exporters not getting their dues from buyers in the U.S. and Europe would also rise.

After showing a handsome growth of 30.9 per cent for the first half of the current fiscal, exports slipped into the negative territory. Exports decelerated by over 12 per cent in October.

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