The Export Credit Guarantee Corporation (ECGC) has decided to withdraw cover for shipments to Russia effective Feb. 25, in a huge setback for exporters, industry body FIEO said on Saturday.
Amid the ongoing conflict between Russia and Ukraine, ECGC in a communication said ”Based on the short-term business outlook, it has been decided to change the country risk classification of Russia in the short term and in the medium and long term with effect from February 25.”
In revising its underwriting policy on Russia, the ECGC, a government-owned entity, has now placed the country in the restricted coverage category (RCC-I) from the former ‘open coverage’ category.
Open classes of coverage allow policyholders to obtain coverage on a more liberal basis. Federation of Indian Export Organizations (FIEO) chief executive Ajay Sahai said the ECGC had “suddenly” withdrawn cover for shipments to Russia effective Feb. 25.
”Such action is a huge setback to the fraternity of exporters as the fate of the cargoes which are in various Indian ports some after customs clearance as the shipments will not be covered as the ECGC has imposed the deadline of the bill of lading until February 25.
”Secondly, the policies in force no longer hold because the risks are removed. This immediate act of the ECGC is a setback for exporters as political risk is one of the major components covered by the ECGC,’ Sahai said.
ECGC Ltd, 100% owned by the Government of India, was established in 1957 with the aim of promoting the country’s exports by providing credit risk insurance and related services. Over the years, it has designed different export credit risk insurance products to meet the requirements of Indian exporters and commercial banks extending export credits.
Sharing similar views, Hand Tools Association President SC Ralhan said the ECGC will no longer cover export shipments to Russia and this is a major setback for the exporting community. In the current crisis between Russia and Ukraine, payments against exports made by Indian exporters are at risk because Russian importers cannot make payments in US dollars, Ralhan said.
If an importer in Russia is willing to pay the outstanding export bills in Indian rupees or Russian rubles, the Indian government should allow the export bills to be made in Indian rupees or rubles, he added.
“In such cases, export incentives should not be withheld as payment is received in Indian rupees or Russian rubles due to a crisis between two countries,” he said.
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Posted: Saturday, February 26, 2022, 2:14 PM IST