ECGC to Stop Cover on Exports to Iran

There is a move to stop export cover to shipments to Iran. This is following pressure on India by US and EU to cut trade relations with Iran. India is a major exporter to the region with major shipments of food and engineering goods to the country. Iran is the gateway to Indian exports to Iran as well as Central Asia and also the Caucasus region. Bandar Abbas in the Persian Gulf region is the major entry point through the sea route.

The exact situation on this is yet to be confirmed with ECGC sources noncommital on the situation.

In the earlier dispensation, “Full insurance cover given to any particular transaction (to Iran) would be approved on a case by case basis” Rohit Pandya GM (underwriting) at ECGC

“Full insurance cover given to any particular transaction (to Iran) would be approved on a case by case basis. The terms and conditions for a credit insurance cover would vary for each transaction,” added Pandya.

Following sanctions from the US and new prohibitions from the European Union on Iran, the country's largest credit insurer Export Credit Guarantee Corporation of India (ECGC) will be reviewing its underwriting policy on Iran.

A credit insurance cover taken by a domestic exporter covers his loss due to the political risks in a country and the commercial risk of the buyer.

The review of the underwriting policy for exports to Iran would be complete by April 1, 2012 and depend on the mechanism that will be put in place for Indian exporters to receive payments for shipments made to Iranian buyers, said Pandya.

“In case of Iran, we offer cover to those exporters who have availed whole turnover policies and where the exporter offers a fair spread of risk. In addition, shipments invoiced in US dollar, Euro and Japanese Yen is not being covered. Also ECGC is not offering cover for letter of credit (LCs) opened by Iranian banks such as Bank Sepah and Bank Refah,” said Pandya.

“Our relationship with Iran is very strong. We try our best to facilitate exports to Iran in a manner which is appropriate,” said Pandya. ECGC has an underwriting policy for each country. There are 237 countries that are covered. So far, Iran has been placed in Restricted Cover category - II (RCCII), where specific approval is given for a period of six months or period of the contract/LC whichever is earlier, on a case to case basis, for each contract or shipment as the case may be.

Although Iran is in RCC2 category as it carries a high political risk, the commercial risk on its buyer is not very high and therefore Iran's buyers enjoy a very good rating on B1 (3/7).

The risk value covered by ECGC during 2010-11 amounted to Rs 716 crore and grew at a Compounded Average Growth Rate (CAGR) of 10 per cent during the period 2006-07 to 2010-11. The risk value for shipments to Iran was 1.27 per cent of the total risk value of ECGC in 2010-2011.