BANGALORE: The Chairman and Managing Director of the Export Credit Guarantee Corporation (ECGC), A. V. Muralidharan, said that there had been a spate of requests by corporates seeking protection from risks while operating in international markets. Mr. Muralidharan told The Hindu that corporates in varied businesses such as IT, automobiles and airlines have sought insurance coverage from the ECGC in recent weeks. He was speaking on the sidelines of a seminar on the stimulus package for small and medium enterprises, organised by the Associated Chambers of Commerce and Industry of India (Assocham).
The ECGC chief said there had been requests from Indian auto component suppliers to Chrysler, Ford and General Motors. He said the ECGC “cannot provide protection at a time when they are in the process of being wound up”. However, he said the ECGC “may consider, on a case-by-case basis similar requests made by component suppliers to subsidiaries of the three companies located outside the U.S”. “Approvals of such requests will be subject to satisfactory financials,” he added. He said the corporation was not refusing cover to Indian component suppliers to Japanese automobile companies such as Honda, Toyota and Mitsubishi.
The ECGC chief said Jet Airways had also sought cover for its move to lease four of its aircraft to Turkish Airlines. He said the airline had also sought cover for its domestic transactions with Indian Oil Corporation for the supply of aviation turbine fuel (ATF). He clarified that the ECGC, since last year, had been providing insurance cover for domestic transactions to corporates that earned at least 25 per cent of their overall revenues from exports. The CMD said only eight per cent of the country’s total exports were insured against defaults by overseas buyers. He pointed out that despite the increased risk, the corporation had refrained from increasing the insurance premia on exports. “Insolvencies, protracted defaults and bankruptcies have increased the risks for exporters in recent months,” he said.
During 2008-09, ECGC’s overall business was worth Rs. 745 crore. It settled Rs. 225 crore against claims of Rs. 450 crore. ECGC’s “exposures were relatively high in textiles, garments and gems and jewellery”. The corporation recently settled “its largest-ever single claim from an exporter of carpets,” he added.
Asked if the mounting claims would necessitate capitalisation, he said, “We will approach the Government if necessary”.
Large IT companies such as Wipro have also sought insurance cover from the ECGC. The CMD said the corporation’s exposure to the sector was “less than 0.5 per cent.” It has also provided cover worth Rs. 500 crore to Hyundai Motor for its exports, he said.
Source : The Hindu