The Union Cabinet recently sanctioned the proposal for capital infusion in the Export Credit Guarantee Corporation (ECGC) and has also planned to go public through an initial public offering (IPO). The Indian government will be injecting a sum of Rs 4,400 crore in the ECGC over five years beginning from the fiscal year 2021-22. Furthermore, the Government has also prolongated the National Export Insurance Account (NEIA) scheme and approved a funding of Rs 1,650 crore as Grant-in-Aid over half a decade.
Understanding the ECGC
The ECGC is fully under the control of the Ministry of Commerce and Industry. Initially, the Government of India established the Export Risks Insurance Corporation in 1957. Later, after incorporating insurance covers to banks in the period 1962-64, the corporation’s name was altered to Export Credit & Guarantee Corporation Ltd in 1964 and finally, it was rebranded as ECGC Ltd in August 2014.
The principal objective of ECGC is to promote exports by providing credit insurance services to exporters to safeguard them from non-payment risks from overseas buyers due to commercial or political reasons.
The Impact of Capital Infusion
The capital infusion will enable ECGC to broaden its coverage in export-oriented industries, with a focus on sectors that generate extensive employment opportunities. ECGC presently dominates the export credit insurance market in India, with approximately 85% market share.
The organization supported exports worth Rs 6.02 lakh crore or 28% of total merchandise exports, in FY21. Micro, Small, and Medium Enterprises (MSMEs) account for 97% of ECGC’s client base.
With an aim to raise more funds, the process of listing ECGC on the stock market is also being initiated.
National Export Insurance Account (NEIA) Scheme
The NEIA Trust was established in 2006 to encourage project exports from India that hold strategic and national importance. In collaboration with ECGC Ltd., Exim Bank introduced a new initiative called Buyer’s Credit under the NEIA scheme in April 2011. Under this scheme, the Bank finances and supports project exports from India.
Recent Initiatives Linked to Exports
Several initiatives have been undertaken recently to improve export strategy and trade policies. The Foreign Trade Policy (2015-20) aims at doubling the overseas sales to $900 billion by 2019-20 and making India a all-embracing player in international trade while integrating foreign trade with “Make in India” and “Digital India Programme”.
Under the Remission of Duties and Taxes and Exported Products (RoDTEP) initiative, mechanisms for reimbursement of taxes/ duties/ levies which are currently not being refunded under any other mechanism have been created. The ROSCTL scheme has been extended till March 2024 to support the textiles sector by the remission of Central/ State taxes.
To provide an impetus to agricultural exports related to agriculture, horticulture, animal husbandry, fisheries, and food processing sectors, the Agriculture Export Policy is currently under implementation. ECGC introduced NIRVIK (Niryat Rin Vikas Yojana), a scheme to enhance loan availability and ease the lending process.
Other schemes such as Trade Infrastructure for Export Scheme (TIES), Market Access Initiatives (MAI) Scheme, and Transport and Marketing Assistance (TMA) have also been launched to enhance trade infrastructure and marketing.
