EXPORT PROMOTION

Sunil Kr Ahirwar

BBA-IB

Enrollment No- A1833312026

Amity International Business School 2012-2015

Concept

• Export development is important to the firm and to the economy as a whole.

• Export promotion is designed to help firms enter and maintain their position in international markets and to match or counteract similar efforts by other nations.

How export promotions ?• Various approaches toward export promotion include:

• Knowledge transfer• Direct or indirect subsidization of export activities• Reducing governmental red tape for exporters.• Export financing and mixed aid credits to exporters• Altered tax legislation for nationals living abroad.• Tax benefits to export oriented units.• Exports Promotion Zones.• Establishing special institutes for export promotions.

How export promotions ?

Export Promotion for MSME:

The capability of Indian MSME products to compete in international markets is reflected in its share of about 40% in national exports.

In case of items like Readymade garmentsLeather goodsProcessed foodsEngineering items, the performance has been

commendable both in terms of value and their share.

Export Promotion Programs • MARKETING ASSISTANCE AND EXPORT PROMOTION SCHEME

Plan Scheme ‘Training and Manpower Development' consists of the following Components :-

•  Participation in the International Exhibitions/ Fairs.

•  Training Programmes on Packaging for Exports

•  Marketing Development Assistance Scheme for MSME exporters (MSME-MDA)

•  National Award for Quality Products.

What is ECGC?• Export Credit Guarantee Corporation of India Limited, was

established in the year 1957 by the Government of India to strengthen the export promotion drive by covering the risk of exporting on credit.

• it functions under the administrative control of the Ministry of Commerce & Industry, Department of Commerce, Government of India.

• It is managed by a Board of Directors comprising representatives of the Government, Reserve Bank of India, banking, insurance and exporting community.

What does ECGC do?

• Provides a range of credit risk insurance covers to exporters against loss in export of goods and services

• Offers guarantees to banks and financial institutions to enable exporters to obtain better facilities from them

• Provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in the form of equity or loan

How does ECGC help exporters?

• Offers insurance protection to exporters against payment risks

• Provides guidance in export-related activities• Makes available information on different countries

with its own credit ratings• Makes it easy to obtain export finance from

banks/financial institutions• Assists exporters in recovering bad debts• Provides information on credit-worthiness of

overseas buyers

Need for export credit insurance

• Payments for exports are open to risks even at the best of times.

• The risks have assumed large proportions today due to the far-reaching political and economic changes that are sweeping the world.

• An outbreak of war or civil war may block or delay payment for goods exported.

• Economic difficulties or balance of payment problems may lead a country to impose restrictions on either import of certain goods or on transfer of payments for goods imported

Need for export credit insurance• In addition, the exporters have to face commercial

risks of insolvency or protracted default of buyers. • The commercial risks of a foreign buyer going

bankrupt or losing his capacity to pay are aggravated due to the political and economic uncertainties.

• Export credit insurance is designed to protect exporters from the consequences of the payment risks, both political and commercial, and to enable them to expand their overseas business without fear of loss.

Products and services

SCR or Standard PolicyShipments (Comprehensive Risks) Policy, commonly

known as the Standard Policy, is the one 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 lacs. (The appropriate policy for exporters with an anticipated turnover of Rs.50 lacs or less is the Small Exporter's Policy, described separately).

What are the risks covered under the Standard Policy?

a. Commercial Risks Insolvency of the buyer. Failure of the buyer to make the payment due within a

specified period, normally four months from the due date. Buyer's failure to accept the goods, subject to certain

conditions.b. 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 in the buyer's country.

Interruption or diversion of way outside India resulting in payment of additional freight or insurance charges which can not be recovered from the buyer.

Small Exporters Policy

• The Small Exporter's Policy is basically the Standard Policy, incorporating certain improvements in terms of cover, in order to encourage small exporters to obtain and operate the policy.

• It is issued to exporters whose anticipated export turnover for the period of one year does not exceed Rs.50 lacs.

In what respects is the Small Exporter's Policy different from the Standard Policy?

• Period of Policy: Small Exporter's Policy is issued for a period of 12 months, as against 24 months in the case of Standard Policy.

• Declaration of shipments: Shipments need to be declared quarterly (instead of monthly as in the case of Standard Policy).

• Declaration of overdue payments: Small exporters are required to submit monthly declarations of all payments remaining overdue by more than 60 days from the due date, as against 30 days in the case of exporters holding the Standard Policy

• Percentage of cover: For shipments covered under the Small Exporter's Policy ECGC will pay claims to the extent of 95% where the loss is due to commercial risks and 100% if the loss is caused by any of the political risks (Under the Standard Policy, the extent of cover is 90% for both commercial and political risks).

• Waiting period for claims: The normal waiting period of 4 months under the Standard Policy has been halved in the case of claims arising under the Small Exporter's Policy.

• Specific Shipment Policy - Short Term(SSP-ST)• Export Turnover Policy• Buyer Exposure Policies• Construction Works Policy:

Construction Works Policy is designed to provide cover to an Indian contractor who executes a civil construction job abroad.

ECIB to BanksExport Finance (Overseas Lending) GuaranteeIf a bank financing an overseas project provides a

foreign currency loan to the contractor, it can protect itself from the risk of non-payment by the contractor by obtaining Export Finance (Overseas Lending) Guarantee.

What are the premium rates applicable? The premium rate is 0.90% per annum for 75% cover

and 1.08% per annum for 90% cover. Premium is payable in Indian Rupees. Claims under the Guarantee will also be paid in Indian Rupees.

Special SchemesTransfer Guarantee When a bank in India adds its confirmation to a foreign Letter of Credit,

it binds itself to honour the drafts drawn by the beneficiary of the Letter of Credit without any recourse to him provided such drafts are drawn strictly in accordance with the terms of the Letter of Credit.

The confirming bank will suffer a loss if the foreign bank fails to reimburse it with the amount paid to the exporter. This may happen due to the insolvency or default of the opening bank or due to certain political risks such as war, transfer delays, which may delay or prevent the transfer of funds to the bank in India. The Transfer Guarantee seeks to safeguard banks in India against losses arising out of such risks.

Transfer Guarantee is issued, at the option of the bank to cover either political risks alone, or both political and commercial risks. Loss due to political risks is covered upto 90% and loss due to commercial risks upto 75%.

What are the applicable premium rates? The premium rates depend on the country of export and the tenor of

L/C.

Special Schemes

Overseas Investment Guarantee ECGC has evolved a scheme to provide protection for Indian

Investments abroad. Any investment made by way of equity capital for the purpose of setting up or expansion of overseas projects will be eligible for cover under investment insurance. The investment may be either in cash or in the form of export of Indian capital goods and services.

The cover would be available for the original investment together with annual dividends or interest receivable.

The risks of war, restriction on remittances are covered under the scheme. As the investor would be having a hand in the management of the joint venture, no cover for commercial risks would be provided under the scheme.

Export promotion councils

• There are a no. of export promotion councils under the administrative control of Ministry of commerce.

• These councils are registered as non profit organisations under the co. act.

• The councils perform both advisory and executive functions.

• Production , development, and export.

Export Promotion Councils underDepartment of Commerce ENGINEERING EXPORT PROMOTION COUNCIL:

Way back in 1955-56, the nascent Indian engineering sector was in the process of diversifying and restructuring the narrow export base of the industry and it needed a strong push - the EEPC INDIA (Formerly Engineering Export Promotion Council) was set up in 1955 under the sponsorship of Ministry of Commerce, Govt. of India, for export promotion of engineering goods, projects and services from India.

Initially started with a few hundreds of engineering units as a small outfit, with a passage of time it has grown to be the largest Export Promotion Council having membership of nearly 12,000 from amongst large Corporate Houses, Star Trading Houses, Small & Medium Scale Units (SME), Trading Houses, etc. Out of the total membership of the Council, 60% constitutes the SMEs.

Export Promotion Councils underDepartment of Commerce

CHEMICALS & ALLIED PRODUCTS EXPORT PROMOTION COUNCIL

COUNCIL FOR LEATHER EXPORTSSPORTS GOODS EXPORT PROMOTION COUNCILGEM & JEWELLERY EXPORT PROMOTION

COUNCIL CASHEW EXPORT PROMOTION COUNCIL PLASTICS  EXPORT PROMOTION COUNCIL

Export Promotion Council for EOUs & SEZ Units

Export Promotion Councils underMinistry of Textiles

• APPAREL EXPORT PROMOTION COUNCIL• CARPET EXPORT PROMOTION COUNCIL• COTTON TEXTILE EXPORT PROMOTION COUNCIL• EXPORT PROMOTION COUNCIL FOR HANDICRAFTS• HANDLOOM EXPORT PROMOTION COUNCIL• SYNTHETIC & RAYON TEXTILE EXPORT PROMOTION

COUNCIL• WOOL & WOOLENS EXPORT PROMOTION COUNCIL

Thank You

• Sunil Kr Ahirwar• BBA-IB• Amity International Business School• Mo: 09871836819• Email: neal_404@rediffmail.com