(Financial Express, Delhi, 22 October 2024) Apart from higher costs and other difficulties, the disruption caused by the two war zones in the world has added to the liquidity woes of India’s exporters as they deal with longer payment schedules and the impact of the situation on export credit which is falling consistently since 2022. At the end of March 2022 quarter the outstanding export credit was at Rs 2.27 lakh crore and by the end of March this year it was down to Rs 2.17 lakh crore. While exports grew 15% between 2021-22 and 2023-24, export credit has fallen by 5%. On top of falling credit, the Red Sea disruptions have added to the liquidity pressures on exporters as payments are taking more time. All this has increased the time period of payment from less than 90 days to 120-150 days. Exporters now require more credit for a longer period and costs for them have increased. Despite the Export Credit Guarantee Corporation (ECGC) increasing the coverage of default in payment against exports to 90%, many of the banks have not reduced the collateral requirements which is also reducing the credit off-take by the sector.
India
European ECAs reach out to Indian companies, banks
(Economic Times, Delhi, 24 October 2024) The Export Credit Agencies (ECA) of Germany (Euler Hermes), Austria (OeKB) and Switzerland (Swiss Export Risk Insurance SERV), together with the Swiss Business Hub India and Switzerland Global Enterprise, on Thursday reached out to Indian companies, banks and government institutions for opportunities for investment and cooperation.
Critical Minerals Security Partnership may not be enough for Australia
(Australian Strategic Policy Institute, Canberra, 25 September 2024) Fourteen countries this week took what they intended to be a big step in countering China’s dominance of critical minerals supply. But it’s unclear whether the initiative will restore competitiveness of Australian production and investment in the face of massive subsidies offered by China and, in response, the United States. The Minerals Security Partnership, a coalition of 14 countries, including the G7, Australia, India, South Korea, and European Union members, announced plans for a finance network to boost investment in critical metals. The initiative will tap into domestic export credit agencies and development finance institutions to attract private sector capital to produce, extract, process and recycle critical minerals, especially in riskier markets. The partnership seeks to lower investment risks and drive global supply chain resilience by providing guarantees and concessional financing. Australia’s economic prosperity and national security are intrinsically linked to the exploitation of its abundant resources, notably critical minerals. These minerals are the new oil. They’re the building blocks for everything from emerging technology to energy transition. Although Australia has vast reserves, its critical mineral mining and processing are still threatened by the intense subsidy war between the US and China.
India’s RIL secures over $7 billion in offshore finance
(Hindu Business Line, Mumbai, 7 August 2024) Reliance Industries (RIL), India’s largest private sector company, secured over $7 billion in various offshore financing initiatives in FY24, and it would continue to monitor financial markets to seize suitable opportunities for capital raising to support its growth plans.. It obtained $4.45 billion in syndicated term loans facilities offshore. RJio also secured $2.2 billion to finance equipment and services for its pan-India 5G rollout comprising first-ever Finnish Export Credit Agency (Finnvera) supported facilities of $1.6-billion equivalent and $600-million equivalent facilities from Canadian Export Credit Agency. It also tied up $625 million with Korean Export Credit Agency to finance the purchase of floating, production, storage and offloading vessel in the oil and gas business.
Five-yr extension expected for Indian export credit scheme
(India Times, New Delhi, 26 June 2024) India is expected to extend a key support scheme for export credit to boost its export sector, which has been hit hard by a slowdown in developed countries. The commerce and industry ministry has proposed an extension of the interest equalisation scheme beyond June 30, providing a 3% benefit for manufacturer micro, small and medium enterprises (MSME) and a 2% incentive for exporters of 410 identified tariff lines. The Centre is likely to extend a key support scheme for export credit to enhance competitiveness of India’s export sector, which was hit hard by slowdown in the developed countries, said people familiar with the matter.
India mulls overhaul of trade finance market
(Global Trade Review, London, 5 June 2024) India’s government has commissioned a wide-ranging review of the country’s trade finance sector, including examining the role of export credit agencies and the possible introduction of laws recognising digital trade documents. The Ministry of Commerce and Industry believes a lack of trade finance is holding India back from achieving its target of exporting US$2tn-worth of goods and services by 2030, more than double last year’s figure of US$765.6bn.
Gaza/Red Sea crisis: Export credit availability called to limit impact on Indian exports
(Business Standard, Delhi, 11 April 2024) The Ministry of Finance has written to the Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority of India (Irdai) to monitor export credit availability, and insurance premium increases to help Indian exporters deal with trade disruptions in the Red Sea due to Houthi attacks on cargo ships.
REC Ltd Secures Japanese Green Loan from Italy’s SACE
(GK Today, India, 27 April 2024) REC Ltd, a Maharatna Central Public Sector Enterprise (CPSE) and leading Non-Banking Financial Company (NBFC) under the Ministry of Power, Government of India, has successfully availed a green loan of Japanese Yen (JPY) 60.536 billion (approximately Rs 3,200 crore) to finance eligible green projects in India. The green loan facility benefits from an 80% guarantee by SACE under their innovative Push Strategy programme. It makes SACE’s first JPY-denominated loan transaction and first green loan in India. The loan saw participation from banks across Asia, US and Europe, including Crédit Agricole CIB, Bank of America, Citibank, KfW IPEX-Bank and Sumitomo Mitsui Banking Corporation as Mandated Lead Arrangers. Credit Agricole CIB is acting as the ECA Coordinator, Green Loan Coordinator, Documentation Bank and Facility Agent.
Geopolitical Tensions might Threaten India’s Export Growth, FIEO Urges Government Action
(Business Outlook India, New Delhi, 29 April 2024) Escalating geopolitical tensions may have implications for India’s exports in the first quarter of 2024-25 as it is likely to impact global demand, says the Federation of Indian Export Organizations. The global uncertainties caused by continuing war between Russia and Ukraine has impacted India’s outbound shipments in 2023-24, which recorded a decline of 3.11% to US$437 billion. Imports too dipped by over 8% to US$677.24 billion. Re the impact of the Israel-Iran war certain exporters from engineering sector have stated that the demand for goods that are going to the UAE and then to Iran has come down. “If the global situation continues to be like this, it will impact global demand. In the first quarter numbers, the demand slowdown may be visible,” FIEO Director General Ajay Sahai said. Further he asked for continuation of interest equalisation scheme which helps exporters from identified sectors and all MSME manufacturer exporters to avail of rupee export credit at competitive rates at a time when the global economy is facing headwinds. Exporters get subsidies under the ‘Interest Equalisation Scheme for pre- and post-shipment rupee export credit. “The rates should be enhanced to 3% & 5%” he said. “Due to demand slowdown, offtake of goods will be low so foreign buyers will also take a longer period to make payments. So we require funds for longer period. Exporters also need interest subvention support,” Sahai said.
India directs ECGC to maintain moratorium on insurance rates for exporters
(India Times, Gurugram Haryana, 7 February 2024) The Indian government on Wednesday said it has directed the Export Credit Guarantee Corporation (ECGC) to maintain a moratorium on insurance rates for Indian exporters in the wake of the Red Sea crisis. State-owned ECGC is an export promotion organisation, seeking to improve the competitiveness of Indian exports by providing them with credit insurance covers. Minister of State for Commerce and Industry Anupriya Patel said that the ECGC continues to provide insurance coverage to exporters. She said that the corporation has not refused cover for export shipments routed through the Red Sea and the credit risk cover is being provided based on the risk assessment and creditworthiness of overseas buyers and terms of payment.
