Chennai:

Set up recently by the government of India and operated by Export Credit Guarantee Corporation of India Limited (ECGC) the NEIA offers credit insurance covers for projects (long- and medium-term) executed by Indian companies overseas.

Normally ECGC offers export insurance cover against payment default by overseas buyers, insolvency, political risks and other risks for overseas projects executed by Indian companies. For some projects ECGC is unable to provide risk cover due to reasons like an extended payment period, political and economic situations prevailing in that country, inordinately large-value contracts, etc. But as such projects have to be insured in national interest, the government decided to set up NEIA to provide insurance covers to Indian exporters.

The two telecom projects, worth $35 million, are being implemented by Telecommunications Consultants of India Limited (TCIL) in Sudan, while the Rs180 crore, 741km petroleum pipeline project (Khartoum to Port of Sudan) is being executed by ONGC Videsh Limited (OVL). The fourth project, a 2 x 250 MW power plant will be executed by Bharat Heavy Electricals Limited (BHEL) in Indonesia and is valued at $450 million.

According to ECGC chairman and managing director A V Muralidharan, in principle approval for insurance cover has been given for all the projects barring OVL''s pipeline project.

"Except OVL''s project, final contracts are yet to be signed between the Indian exporters and the overseas buyers. The total value of the projects may differ slightly when the parties sign the final contract."

ECGC had issued a credit insurance policy for OVL''s project in April 2005 to cover five payment installments at a time, on a rollover basis. Once payment for one installment was received, the credit insurance cover was extended for the next installment.

According to Muralidharan, OVL wanted cover only up to 10 installment payments out of 18. "OVL has received payment for first two installments. So at present the risk cover exists for the third to the seventh installments. These are covered under ECGC''s own account."

It was decided to offer risk cover under NEIA for installments 8-10. "We have called for premium from OVL for installments 8 to 10," he adds.

Currently the government has contributed Rs246 crore and by the end of XI Plan period the corpus is expected to touch a figure of Rs2,000 crore. As per the guideline at any point of time risks up to 10 times of the corpus could be covered. Apart from the government''s contribution, the corpus consists of premium income, investment income and claims recovery.

Projects should fulfill the following criterion to qualify for support under NEIA:

• Only medium/long term exports are eligible for cover
  
• Projects should be commercially viable
  
• Exporter should have proven track record
  
• ECGC is not in a position to cover the risk on its own
  
• Reinsurance is not available or inadequately available