Government approves Rs. 4,400 crore investment in ECGC Ltd. in 5 years to provide support to exporters as well as banks

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Sonali Maity | Sep 30, 2021 | Views 453252

Government approves Rs. 4,400 crore investment in ECGC Ltd. in 5 years to provide support to exporters as well as banks

Government approves Rs. 4,400 crore investment in ECGC Ltd. in 5 years to provide support to exporters as well as banks

Under the leadership of Hon’ble Prime Minister Shri Narendra Modi, the government has taken a number of steps to enhance the export sector. In accordance with this, the government today approved a capital infusion of Rs 4,400 crore to ECGC Ltd. (previously known as Export Credit Guarantee Corporation of India Ltd.) for a five-year term, spanning FY 2021-2022 to FY 2025-2026. The approved infusion, combined with efforts to properly coordinate with ECGC’s listing process via the Initial Public Offering, would expand ECGC’s underwriting ability to support more exports.

The Government of India established the ECGC under the Companies Act in 1957 to promote exports by providing credit insurance services to exporters against nonpayment risks by overseas buyers due to commercial and political reasons. It also protects banks against risks associated with export credit lending to exporter borrowers. With its experience, expertise, and underlying commitment to the advancement of India’s exports, ECGC strives to support the Indian export industry.

The ECGC plays a broader role in promoting labor-intensive exports and encouraging bank lending to small exporter enterprises, resulting in their revitalization. The infusion of capital into ECGC will allow it to expand its coverage to export-oriented industries, particularly labor-intensive sectors. The approved amount will be infused in instalments, increasing the capacity to underwrite risks up to 88,000 crore, allowing ECGC to issue covers that can support an additional 5.28 lakh crore in exports over the five-year period, in line with the current pattern.

Furthermore, according to the World Bank and the International Labour Organization’s research “Export to Jobs,” 5.28 lakh crore in exports will result in the formalisation of 2.6 lakh workers. According to the research, the overall number of workers (both formal and informal) will rise by 59 lakhs.

Highlights of the ECGC’s performance

1. ECGC is the market leader in India’s export credit insurance business, with an estimated 85 percent market share.

2. In 2020-21, the ECGC assisted exports totaled Rs.6.02 lakh crore, or around 28% of India’s merchandise exports.

3. As of March 31, 2021, 7,372 and 9,535 separate exporters had benefited from Export Credit Insurance for Banks, with 97 percent of them being small exporters.

4. The ECGC guarantees around half of all bank export credit disbursements, with 22 banks covered (12 Public Sector Banks and 10 Private Sector Banks)

5. ECGC maintains a database of over 500,000 international buyers.

6. In the last decade, it has settled claims worth more than Rs.7,500 crore.

7. It has put $ 11.7 million into Africa Trade Insurance (ATI) to help Indian exports to the African market.

8. For the past 20 years, ECGC has maintained a consistent surplus and paid dividends to the government, covering 22 banks (12 Public Sector Banks and 10 Private Sector Banks)

Various Export-Related Schemes and Initiatives Launched by the Government in Recent Years

1. Due to the COVID-19 pandemic, the Foreign Trade Policy (2015-20) has been extended until September 30, 2021.

2. In September 2021, Rs 56,027 crore will be released to liquidate all pending arrears under all script-based Schemes in order to provide liquidity in the COVID-19 times.

3. Implementation of a New Scheme – Remission of Duties and Taxes on Exported Goods (RoDTEP). The Scheme has been allocated Rs 12,454 crore for the fiscal year 2021-22. It is a WTO-compliant mechanism for reimbursing taxes/duties/levies that are currently not refunded through any other mechanism at the central, state, and local levels.

4. The ROSCTL scheme, which has now been extended until March 2024, has increased support for the textiles sector by remission of Central/State taxes.

5. A Common Digital Platform for Certificates of Origin has been launched to facilitate trade and increase exporters’ use of FTAs.

6. A comprehensive “Agriculture Export Policy” is being implemented to boost agricultural exports in the agriculture, horticulture, animal husbandry, fisheries, and food processing sectors.

7. Promoting and diversifying services exports through the implementation of detailed action plans for each of the 12 Champion Services Sectors.

8. Districts are being promoted as export hubs by identifying items with export potential in each district, eliminating obstacles in exporting these products, and assisting local exporters/manufacturers in creating jobs in the area.

9. Indian missions abroad are now playing a more active role in promoting India’s trade, tourism, technological, and investment interests.

10. In light of the covid epidemic, a package was announced to boost domestic industry through different banking and financial sector relief measures, particularly for MSMEs, which account for a large share of exports.

11. To boost trade infrastructure and marketing, the Trade Infrastructure for Export Scheme (TIES), Market Access Initiatives (MAI) Scheme, and Transport and Marketing Assistance (TMA) Schemes have been established.

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