Policies Issued by ECGC

Posted on 10 June 2022 Category : For Beginners

Policies Issued by ECGC

ECGC issues a number of policies which cover commercial as well as political risk associated with export trade:

(a) Construction Works Policy: Construction Works Policy is the comprehensive policy covering credit risk faced by Indian contractors executing civil contracts abroad, The Policy is designed to protect the Contractor from 85% of the losses that may be sustained by him due to the following risks:

Insolvency of the employer, when he is a non-Government entity:

Failure of the employer to pay the amounts due as per the terms of the contract, including any amount payable under an arbitration award;

Restrictions on transfer of payments from the employer's country to India after the employer has made the payments in local currency:

Failure of the contractor to receive any sum due and payable under the contract by reason of war, civil war, rebellion, etc;

Failure of the contractor to receive any sum that is payable to him on termination of the contract if such failure is due to war, civil war, rebellion etc;

Imposition of restrictions on import of goods or cancellation of authority to import or cancellation of export license, for reasons beyond his control;

Interruption or diversion of voyage outside India, resulting in his incurring of additional handling, transport or insurance charges, which cannot be recovered from the employer.

(b) Insurance Cover's for Buyer's Credit and Line of Credit: Buyers Credit is a credit extended by a bank in India to an overseas buyer in order to enable him to pay for machinery and equipment that he may be importing from India for a specific project. A Line of Credit is a credit extended by a bank in India to an overseas bank, institution or government for the purpose of facilitating import of a variety of listed goods from India into the overseas country.

ECGC has evolved policies for banks, which extend Buyers' Credit and Line of Credit to overseas buyers, or overseas bank, institution or government. This policy covers both political and commercial risks to the extent of 85% of the loss.

(c) Shipment Policy: Shipments (Comprehensive Risks) Policy, which is commonly known as the Standard Policy, is ideally suited to cover risks in respect of goods exported on short-term credit, i.e. credit not exceeding 180 days. This policy covers both commercial and political risks from the date of shipment. It is issued to exporters whose anticipated export turnover for the next 12 months is more than Rs. 50 Lakh. The Corporation normally pays 90% of the loss, whether it arises due to the commercial risks or political risks. Commercial Risks:

Insolvency of the buyer.

Failure of the buyer to make the payment due within a specified period, normally 4 months from the due date.

Buyer’s failure to accept the goods, subject to certain conditions.

Political Risks:

Imposition of restriction by the Government of the buyer's country or any Government action, which may block or delay the transfer of payment made by the buyer.

War, civil war, revolution or civil disturbances in the buyer's country.

New Import restrictions or cancellation of a valid import license.

Interruption or diversion of voyage outside India resulting in payment of additional freight or insurance, which cannot be recovered from the buyer.

Any other cause of loss occurring outside India, not normally insured by general insurers, and beyond the control of both the exporter and the buyer.

(d) Small Exporter's Policy: Small Exporter's Policy is specifically designed keeping in view the requirements of small exporters whose annual turn over does not exceed Rs. 50 lakhs. The Policy covers most of the risks faced by small exporters and provides the confidence to exporters to expand the business aggressively. Further it has been specifically designed keeping in view their requirements. The policy covers the same risks as are covered by the standard policy. The Corporation normally pays 95% of the loss arising due to commercial risks and 100% of the loss arising due to political risks.

(e) Specific Policy for Supply Contracts: Specific policy for Supply Contracts is suitable for contracts for export of capital goods or turnkey projects or construction works or rendering services abroad which are not of a repetitive nature and which involve medium or long-term credits. The different specific policies on offer are:

Shipment (Comprehensive Risks) Policy.

Specific Shipments (Political Risks) Policy.

Specific Contract (Comprehensive Risks) Policy.

Specific Contract (Political Risks) Policy.

Comprehensive policies cover both commercial as well as political risks while there are specially designed policies which cover only political risks.

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