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ECGC.CHAIRMAN.jpg Export credit insurer expects more claims as EU crisis continues

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Namrata Kath Hazarika | 29 Aug, 2012
State-owned export credit insurer ECGC has expressed concern that the number of claims against insurance cover is likely to rise in the coming months due to the ongoing Eurozone crisis, resulting in higher costs.

The Export Credit Guarantee Corporation paid out 728 claims, amounting to Rs 713 crore during FY 2011-12, which is the highest till now. During 2010-11, the total claims were Rs 621 crore.

"This year the Eurozone affect is still there and we have to pay higher claims in the current year or year after that. So far, in the last five months it (the claims) is not very high. But in the coming six months we have to pay higher claims," he said in the sidelines of an export summit organized by CII.

The sectors such as agri-commodities, gems and jewellery, textiles, readymade garments, pharmaceuticals, etc have claimed insurance, he said.

ECGC operates in two important areas. One, they provide direct insurance cover to exporters that covers risk on the overseas buyer. And second is the cover to banks in India which provides line of credit to exporters.

Shankar also added that insolvency cases among foreign buyers are just 10 percent of the total claims that ECGC has paid and the cases of nonacceptance of goods are also 10-12 percent of the claims that they have paid.

Moreover, observing the increasing claims, ECGC is also working out a rating system to score the foreign buyers, he said and added that this will be based on proper quantitative and qualitative information.

Further, on providing insurance cover to exporters doing business for Iran, ECGC's chief added that they have started to provide risk insurance cover to the Indian exporters for Iran. "We have provided credit cover worth Rs 300 crore to exporters for Iran in last three months. But, this is limited to rupee-denominated exports only," Shankar added.

Earlier, ECGC did not provide risk insurance coverage to Iran as the country has been on the restricted category. Now, both the countries have worked out a mechanism where it has been decide that about 45 percent of India's imports from Iran would be paid via UCO Bank. It was then the Ministry of Commerce and Industry has directed ECGC to provide insurance cover to the firms exporting to Iran.

Further, the Federation of Indian Exports organization (FIEO), Director General, Ajay Sahai said that the government is taking risky steps of rupee payment back to Iran which is much to the dissatisfaction of the US and EU. But still there is none of the insurance companies that is providing marine insurance to these Indian firms (exporters).

In an Assocham function same day, Sahai also said that the issue has been taken up with Commerce Ministry for providing insurance cover on the consignments to sanction hit Iran. According to his understanding the issue is being discussed with the Finance Ministry at the moment

India is Iran's second-largest crude buyer, importing about 3,52,000 barrels per day (bpd), or 13.5 percent of Iran's 2.6 million bpd of exports.
 
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