Centre looks to boost export credit disbursal through Rs 8,000 crore insurance scheme

The Central Government is considering a special scheme for exporters under which a premium subsidy of up to Rs 8,000 crore will be provided on export credit insurance, sources said. This will help exporters get easier and cheaper credit.

A proposal to this effect is at the final stage and could be part of the next stimulus package, a source added.

Under the proposed scheme, 90 percent of the export credit will be insured, said the sources. Currently under the Export Credit Insurance for Bank (ECIB) facility, 60 percent of the export credit is insured by the ECGC (Export Credit Guarantee Corporation).

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The Central Government will provide the increased cost of the premium as a premium subsidy. The subsidy rate will vary from sector to sector. The highest premium subsidy has been proposed for agro product exports such as tea and rice, followed by Engineering Products and others.

New exporters will get an additional benefit as a higher premium subsidy compared to existing exporters.

For the next five years, the total cost of premium subsidy has been estimated at around Rs 8,000 crore. The total export credit disbursement supported over the five-year period under this scheme, is estimated to be at around Rs 26 lakh crore.

Sources said the main purpose of this scheme is “to revive export credit disbursement and to ensure flow of adequate and affordable export credit to exporters”.

Due to the Covid pandemic, there has been a sharp decline in export credit disbursement by banks. The major reason for the decline is the risk of NPAs. Expanding the insurance support to banks will help exporters get easy credit.