Example : - Tourism etc.
 
ECGC SCHEMES

In order to provide export credit insurance support to Indian exporters, the Government of India set up the   ‘Export Credit Guarantee Corporation of India Limited (ECGC).

 Functions of ECGC

  • 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 obtain better facilities  from them,
  • provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in the form of equity or loan.

 ECGC Provides

  • 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
  • information on credit-worthiness of overseas buyers

The covers issued by ECGC can be divided broadly into four groups:
 
1.  Standard Policy
Shipments (Comprehensive Risks) Policy, which is 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. The policy covers both commercial and political risks from the  date of shipment. 
  
2.  Other Specific Policies 
Specific Policies are designed to protect Indian firms against payment risks involved in a) exports on deferred terms of payment b) services rendered to foreign parties and c) construction works and turnkey Projects undertaken abroad. These policies are issued separately for each specific contract, and cover risks normally from the date of contract.
ECGC provides for an insurance cover named as Construction Works Policy to provide cover to an Indian contractor who executes a civil construction job abroad.

3.  Financial Guarantees
Financial Guarantees are issued to banks in India to protect them from risks of loss involved in their extending financial support at pre-shipment and post-shipment stages. These also cover a host of non-fund based facilities that are extended to exporters.
Export Performance Guarantee
Export Performance Guarantee is an insurance cover for banks, which issues various kinds of guarantees on behalf of exporters in order to facilitate export transactions

4.  Special Schemes 
Transfer Guarantee meant to protect banks which add confirmation to Letters of Credit opened by foreign banks, Insurance cover for  Buyers Credit and Lines of Credit, and Exchange Fluctuation Risk Insurance.

ECGC Whole Turnover Post-shipment Guarantee Scheme

The Whole Turnover Post-shipment Guarantee Scheme of the Export Credit Guarantee Corporation Ltd. (ECGC) provides protection to banks against non-payment of post-shipment credit by exporters. Banks may, in the interest of export promotion, consider opting for the Whole Turnover Post-shipment Policy. The salient features of the scheme may be obtained from ECGC.
As the post-shipment guarantee is mainly intended to benefit the banks, the cost of premium in respect of the Whole Turnover Post-shipment Guarantee taken out by banks may be absorbed by the banks and not passed on to the exporters.
Where the risks are covered by the ECGC, banks should not slacken their efforts towards realisation of their dues against long outstanding export bills.

Overseas Investment Insurance 

ECGC has evolved a scheme to provide protection for Indian investments abroad. Any investments made by way of equity capital or untied loan for the purpose of setting up or expansion of overseas Projects will be eligible for cover under investment insurance.
The investments may be either in cash or in the form of export of Indian capital goods and services. The cover will be available for the original investment together with annual dividends or interest receivable.

The risks of war, expropriation and restriction on remittances are covered under the schemes. 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. For investment in any country to qualify for investment insurance, there should preferably be a bilateral agreement protecting investment of one country in the other. ECGC may consider providing cover in the absence of any such agreement provided it is satisfied that the general laws of the country afford adequate protection to the investments.

The period of insurance cover would not normally exceed 15 years. In case of Projects involving long construction periods, cover may be extended for a period of 15 years from the date of completion of the Project subject to a maximum of 20 years from the date of commencement of the investment. Amounts insured shall be reduced progressively in the last five years of the insurance period.

ECGC's SCHEMES FOR PROJECT EXPORTS

Export of capital goods on deferred payment terms and execution of turnkey Projects, construction works contracts as also rendering of services abroad are collectively referred to as Project exports. As these transaction are not of repetitive nature and they involve medium / long terms credit, ECGC's insurance cover for such transactions are provided on a case to case basis under Specific Policies. Normally these contracts are of very high value and involve longer credit period. The country / political risks involved in such transactions are unpredictable in view of long credit period involved. Although in' most cases the overseas buyers are the government or semi government organisations, there is a need for ECGC cover to safeguard the payment risks. In many cases these contracts are funded by International Financial Institutions and payments are secured under UC or bank guarantee. There are cases where even government or central bank guarantees are available safeguarding payments. However, the elements of political risk such as war, civil disturbances, exchange transfer delay etc. are existent in all these cases despite having payment security as stated above. In order to protect such exporters ECGC has the following types of covers.

1. For covering supply contracts and Turnkey Projects Specific Contract / Shipments Policy can be taken. This Policy can be for covering only political risks or for covering comprehensive risks i.e. both commercial and political risks.

2. For covering construction contract, a Construction Works policy can be obtained. This policy can be for either Political Risks alone or for Comprehensive Risks. The Comprehensive Risks Policy provides protection against commercial risks such as Insolvency of Buyer, protracted default, non-acceptance of goods shipped in addition to covering political risk of war, civil war, exchange transfer delay etc. The political risk policy on the other hand provides protection against political risk policy.

3. For covering services contract, which involves only technical and / or professional services, a Services Policy can be obtained. This also can be either for political or comprehensive risks.

In addition to the policy covers, which are issued to exporters, ECGC also extends its guarantee support to banks in India against both funded and nonfunded facilities extended to Project Exporters. The types of guarantees issued by Indian bank are:

1]  Funded:­
[a]  Packing Credit
[b]  Post Shipment
[c]  Overdraft
[d]  Rupee Loan

2]  Non - Funded
[a] Bid Bond
[b] Advance payment
[c] Performance guarantee
[d] Retention Money guarantee
[e] Overseas Lending Finance guarantee

ECGC's counter guarantee can be obtained by banks in India to protect them against any loss that  they may sustain owing to invocation of the above guarantees.

Risk Covered             :      insolvency of the exporter/ protracted default of the exporter
Percentage of Loss    :      75% TO 90%  Covered
Rate of Premium        :      0.80 Paise per Rs.100/- p.a. & 0.95 paise per Rs.100% p. a.

As per RBI's recent directive, no pre-bid approval from authorised dealer, Exim Bank or Working Group is   required to be taken by Project exporters. Only post-award approval is required to be taken. However, it would be in the interest of Project exporters to obtain 'In - Principle' clearance from their bankers and ECGC assuring them of support in the event of their securing the contracts.

ECGC's approval of Project exports and services contracts is based on the following aspects :-

(i) The capacity of the Project exporter to carry out large value contracts - technical, professional and managerial, and their past experience in the line of business.
(ii) Country to which the exports are to be made - stability of political set-up / government, soundness of economy, payment records, relations with IMF, World Bank & other International Financial Institutions & Donor countries.
(iii) Overseas contract / Project - value, type of Project, whether cleared by local authorities, profitability.
(iv) Buyer / employer - private / government.
(v)  Payment terms & security, rate of interest for deferred receivables.
(vi) ECGC's underwriting policy on the country and its experience, whether any transfer delay experienced.
(vii) Berne union experience - whether the credit period offered is in line with Berne union understanding.
(viii) Reinsurance back-up available or not.
(ix) Whether need for covering the contract under National Export Insurance Account set-up by Government of India.

Buyer's Credit / Line of Credit cover:

Financial institution in India extend Buyer's Credit / Lines of Credit to overseas buyers / institutions to  facilitate export of goods & services from India. Institutions like Exim Bank, SIDBI etc. often seek ECGC for Buyers Credit / Line of Credit cover. Buyers Credit / Line of Credit cover can be obtained either for covering political risks or for comprehensive risks.

Factors weighing approval of Buyers Credit proposals are:
a) Competence and capacity of exporter in executing the contract.
b) Commercial justification of the contract.
c)  Economic viability of the overseas Project for which credit is required to be offered.
d) Credit worthiness, standing and financial position of foreign buyers and general economic conditions of the Buyers country.

Lines of Credit are generally extended by Exim Bank of India to Financial Institutions/Governments in   Overseas Countries facilitating export of consumer goods and capital goods.

Overseas Investment Insurance (OII) cover:
Oil provides cover for the investments made by Indian corporates abroad in Joint Venture or their wholly   owned subsidiary (WOS) either in the form of equity or loan. Government of India or RBI should approve the Joint Venture. The basic principle is that the investment should emanate from India and benefit of dividend / interest therefrom should accrue to India. The investment should not in any way conflict with the policy of both our government and the overseas government. Normally, there should be a bilateral agreement between India and the host country for promotion and protection of Indian Investment. In case there is no such agreement the Corporation should be satisfied that the existing laws of the host country adequately safeguard Indian Investment.

Types of Investment:
The overseas investment may be made either by way of equity or by way of loans

Equity
Any contribution made to the enterprise in return for shares either by cash remittances or by way of export of capital goods or services can be covered. Any fees payable towards technical know-how, consultancy or management services etc. and agreed to be converted into capital will be considered for cover at the discretion of the Corporation.

Loans:
Loans advanced by way of a formal agreement but not tied to export of goods and supplies are eligible for cover. Any 'suppliers / buyers' credits and lines of credit extended to support sale of goods or services from India may be covered under the appropriate insurance schemes of the Corporation and not under investment insurance.

Dividend and Profit
In case of equity the investor can choose to cover the original investment as well as his share of retained earnings and dividends declared, to the extent they are eligible for repatriation. Cover on account of original investment, retained earnings, dividend receivable and any additional investment will be subject a ceiling of 150% of the original investment calculated as in the proceeding paragraphs. In case of loan, the insurance will cover the principal as well as interest actually earned.

Portfolio Investment:
Any investment in shares of overseas concerns not related to setting up, development and expansion of overseas Projects will not be eligible for cover under the investment insurance.

Additional Investment:
Additional investment can be covered subject to a ceiling of 50% of the original investment. Any additional investment out of retained earnings should have been made by formal capitalization and for the purpose of expansion for development of the enterprise. If the additional investment is made out of retained profits, which are not eligible for repatriation such as investment will not be eligible for cover. Initially cover is issued for 3 years. On expiry of the 3 years it is at the option of the exporter to renew the cover / review of the JV / WOS by ECGC. The duration of insurance cover shall not normally exceed 15 year but extension can be given upto 20 years for longer Projects. The amount of investment eligible for cover shall be to the full extent during the first 10 years of cover. Percentage of cover is 90 - can be reduced. The amount of investment eligible for cover will be reduced to 90%, 80%, 70%, 60% and 50% respectively of the original investment during the 111", 121", 13th, 14th and 15th years of insurance. OII provides cover for original investment retained earning, dividend receivables and additional investment upto 50% of the original investment. Cover for dividend receivables may not be given in case of risky countries; cover only for original investment. Oll covers only political risks of war, expropriation and restrictions on remittances.

Premium Rate
Base rate 2.5% of the investment value. Actual premium rate will be depend on size of Investment, country   of the investment, previous experience of the Importer etc.

The exporter has to furnish proposal form alongwith fee of Rs.01 % of the investment amount subject to ceiling of Rs.25,000/- if cover is agreed application fee paid shall be adjusted towards premium payable. In case, the application for insurance is rejected, half the fee paid shall be refunded. Premium is taken up front. Income from the premium is allocated over the tenor of the cover extended. Installment facility is provided by ECGC for collecting premium after analyzing and approving the proposal.

ECGC enters into agreement with the exporters for providing cover mentioning the terms and conditions alongwith the maximum liability. The exporters have to submit annual report about the progress and working of the Project.

NEW INITIATIVES
ECGC has since revised its premium structure providing substantial reduction in the rates both for short term as well as for medium and long term contracts. This will go a long way in providing cost effective credit insurance support to Project exporters which in turn will enable them to compete effectively for international tenders.

In order to increase Project exports and to encourage Project exporters Govt. of India have initiated various steps. Institutions like ECGC and Exim Bank are being strengthened to provide adequate support to Project exporters. The National Export Insurance Account (NEIA) has been set up by the Government of India to provide credit insurance support to exporters where ECGC is not in a position to do so due to its own underwriting constraints and where the export is strategically important in the long term interests of the country.

Construction Works Policy
Construction Works Policy is designed to provide cover to an Indian contractor who executes a civil construction job abroad.
Two types of policies have been evolved to cover contracts with
(i) Government buyers and (ii) Private buyers. The former covers political risks in respect of contracts with Overseas Governments or where Government and the latter comprehensive risks guarantee the payments.  In case of  contracts with private employers, the policy may be issued to cover only political risks if the payments are guaranteed by a bank or covered by L/C.
The distinguishing features of a Construction Contract are that (a) the contractor keeps raising bills periodically throughout the Contract period for the value of work done between one billing period and another ; (b) to be eligible for payment, the bills have to be certified by a consultant or supervisor engaged by the Employer for the purpose and (c) that, unlike bills of exchange raised by suppliers of goods, the bill raised by the contractor do not represent conclusive evidence of debt but are subject to payment in terms of the Contract which may provide, among other things, for penalties or adjustments on various counts. The scope for disputes is very large. Besides, the Contract value itself may only be an estimate of the work to be done, since the Contract may provide for cost escalation, variation contracts, additional contracts, etc. It is, therefore, important that the Contractor ensures that the Contract is well drafted to provide clarity of the obligations of the two parties and for resolution of disputes that may arise in the course of execution of the contract. Conditions of Contract (International) prepared by the Federation International Des Ingenious Conseils (FIDIC) jointly with the federation International du Batiment et des Travaux Publics (FIBTP).

The Construction Works Policy of ECGC is designed to protect the Contractor from 85% of the losses that may be sustained by him due to the following risks:

1. insolvency of the Employer (when he is a non — Government entity);
2. failure of the Employer to pay the amounts that become payable to Contractor in terms of the Contract,  including any  amount payable under an arbitration award;
3. restrictions on transfer of payments from the Employer’s country to India after the Employer has made the payments in local currency;
4. failure of the Contractor to receive any sum due and payable under the Contract by reason of war, civil war, rebellion etc;
5. the failure of the Contractor to receive any sum that is payable to him on termination or frustration of the Contract if such failure is due to its having become impossible to ascertain the amount or its due date because of war,  civil war, rebellion etc;
6. imposition of restrictions on import of goods or materials (not being the Contractor’s plant or equipment) or cancellation of authority to import such goods or cancellation of export licence in India,  for reasons beyond his control; and
7. interruption or diversion of voyage outside India, resulting in his incurring in respect of goods or materials exported from India,  of additional handling,  transport or insurance charges which cannot be recovered from the Employer.

Risks not covered
The Construction  Work Policy excludes from its purview losses which may be sustained due to the following causes:
1. failure of the Contractor and/ or the Employer (where the Employer is not a government) to obtain,  issue or deliver any authority necessary under the law of India or the Employer’s country for execution of the Project and to make payment thereof;
2.  risks which can normally be insured with commercial insurers;
3.  insolvency, default or negligence of any agent,  seller or sub-contractor;
4. execution of any works or incurring of any expenses by the Contractor after the Employer has been in default in making any payment for a period of 120 days unless, on an application made by the Contractor for the purpose within 90 days of such default,  the Corporation has agreed to his continuing execution of the contract despite the said default of the Employer;
5. execution of any works or incurring of any expenses by the Contractor after the estimated date for completion of the contract unless,  at the request of the  Contractor, the Corporation has agreed to a change in such date.

Premium
Premium rate will be dependent on the classification of the Employer’s country and the payment terms and will be quoted by the Corporation on request.  The rate will be applied on the Estimated Contract value to arrive at the amount of premium payable to the  Corporation and this amount of premium is payable in advance.  The Contractor is obliged to notify the Corporation if the estimated contract  value undergoes any change and the premium will be adjusted accordingly.

Declaration
The Contractor is required to submit to the Corporation such periodical declarations as may be prescribed by it relating to the execution of the  contract and the position of payments thereunder.

Ascertainment of Loss
When a loss arises due to any of the risks insured,  the amount of loss shall be ascertained by the Corporation, after the Contractor files a claim under the Policy, in accordance with the provisions of clause 16 of the Policy.  It should,  however, be noted that,  where the Contractor has been  simultaneously executing certain other contracts also for the same Employer,  all amounts paid by the Contractor shall be  allocated to the amounts outstanding under all the Contracts in the chronological order of the due dates of payment of those amounts,  irrespective of whether such other contracts have been insured by the Corporation or not.

Payment of Claim
If a claim is admitted under the Policy,  the Corporation shall make payment of the amount direct to the Contractor’s bank in India which may have a right or lien over the  receivables under the Contract.  The payment shall be subject to the Contractor giving the Corporation an undertaking to the effect that he will take all steps,  including such steps as may be suggested by the Corporation,  to recover the dues from the Employer and to pass on the Corporation its share of the amounts so recovered.  The  Contractor shall,  if required to do so,  support such an undertaking with a bank guarantee for an amount equal to the amount of claim.  The amount of claim paid by the Corporation shall become refundable to the Corporation with interest if the Contractor fails to take steps for effecting recovery.

Exchange rate for the purpose of Cover, Claim and Recovery
The liability of the Corporation under the  Policy will be in terms of Indian Rupee.  If the contract value is expressed in a foreign  currency,  it shall be converted into Indian  Rupees at the rate specified in the Policy,  the rate being approximately the same as the Bank Buying  Rate of Exchange on the date of contract,  for the purpose of determining the amount covered and the Maximum Liability of the Corporation under the Policy.

The same exchange rate shall be used by the Contractor for the purpose of submitting periodical declarations to the Corporation.  However,  if the  currency in which the Employer has to pay been devalued before a claim is paid by the Corporation,  the amount claimed by the Contractor in Indian Rupees  shall be based on the devalued rate.  Recoveries will be reckoned,  net of recovery expenses at the actual rate at which the amounts recovered were converted by the receiving bank into Rupees and such amounts shall be divided between the  Corporation and the Contractor in the same ratio in which the loss was originally borne by the two,  irrespective of whether or not such division results in the Corporation retaining an amount greater or lesser then the amount paid by to as claim.
Note : The services offered by ECGC are in the nature of credit insurance products. It would be necessary for the interested persons to consult ECGC for ascertaining specific terms of cover.

SPECIFIC POLICIES FOR SUPPLY CONTRACTS
The Standard Policy is a whole turnover policy designed to provide a continuing insurance for the regular flow of an exporter's shipments for which credit period does not exceed 180 days. Contracts for export of capital goods or turnkey Projects or construction works or rendering services abroad are not of a repetitive nature and they involve medium/long-term credits. Such transactions are, therefore, insured by ECGC on a case-to-case basis under specific policies.
All contracts for export on deferred payment terms and contracts for turnkey Projects and construction works abroad require prior clearance of Authorised Dealers, EXIM Bank or the Working Group in terms of powers delegated to them as per exchange control regulations (Kindly refer to 'Projects Exports Manual' of Reserve Bank of India. For further details go to http://www.rbi.org). Applications for the purpose are to be submitted to the Authorised Dealer (the financing bank), which will forward applications beyond its delegated powers to the EXIM Bank. Proposals for Specific Policy are to be made to ECGC after the contract has been cleared by the Authorised Dealer, EXIM Bank or the Working Group, as the case may be.

The different policies are:
1. Specific Shipment (Comprehensive Risks) Policy;
2. Specific Shipments (Political Risks) Policy;
3. Specific Contract (Comprehensive Risks) Policy; and
4. Specific Contract (Political Risks) Policy.
Specific Shipments (Comprehensive Risks) Policy provides cover against all the risks covered under the Standard Policy for shipments to be made under the contract in question (For details of risks, click here). It is, therefore, the appropriate policy for an exporter to take if the payments are open to both commercial and political risks. Where the Commercial risks are absent, e.g. where the payments are guaranteed by a bank or by the Government of the overseas country, the exporter may opt for the Specific Shipments (Political Risks) Policy for which the premium rate will be lower than that for the Comprehensive Risks Policy.

Specific Contract Policy (which also can be for comprehensive or political risks) differs from Shipments Policy in that the former provides the exporter not only with the post-shipment cover like the latter but also with some pre-shipment cover from the date of contract. In case shipments could not be made due to any of the risks covered or due to restriction on export of the goods from India, the loss in respect of unshipped goods will also be covered under Contract Policies. Premium rates for Contract Policies will be higher than that for Shipment Policies.

Terms of payment
To be eligible for cover under specific policies, the terms of payment for the export contracts should be in line with customary practices in the international markets. At least, 15% of the contract value should be payable before shipment including an advance payment of at least 5%. The balance amount should be repayable in equal semi-annual instalments commencing six months after the date of shipment. Where the contract provides for supply and erection of a complete plant, the first instalment may fall due after six months from the date of commissioning of the plant. The credit period should not normally exceed 5 years. Longer credit period may be approved only in the case of exceptionally large Projects if the circumstances of the case justify it. Adequate security should be obtained in the form of government guarantee or bank guarantee.

Applicable premium rates
The premium rates will depend on the country to which exports are to be made and the repayment period. To find out the premium payable for any particular contract, In order to be sure about the availability of the cover, exporters are advised to get in-principle approval of ECGC and obtain the premium rates well before concluding contracts. If the terms and conditions of the contract undergo any change subsequently, ECGC should be informed of the same, so that changes, if any, in the applicable premium rates can be ascertained.

When is the premium to be paid?
The entire premium is normally payable in advance. Instalment facility may be granted for payment of a part of the premium if the contract value is very large and if the shipments are spread over a relatively long period, but the entire premium will have to be paid by the time the last shipment is made. Interest will be charged for the instalment facility.

Export Performance Guarantee
Exporters are often called upon to execute bonds duly guaranteed by an Indian  bank at various stages of export business.  An exporter who desires to quote for a foreign tender may have to furnish a bank guarantee for the bid bond.  If he wins the contract,  he may have to furnish the bank guarantees to the foreign buyers to ensure due performance or against advance payment or in lieu of retention money or to a foreign bank in case he has to raise overseas finance for his contract.  Further,  for obtaining import licences for raw materials of capital goods,  exporters may have to execute an undertaking to export goods of specified value within a stipulated time,  duly supported by bank guarantees.  Bank guarantees are also furnished by exporters to the Customs, Central excise or  Sales tax authorities for the purpose of  clearing goods without payment of duty or for exemption from tax for goods procured for export.  Exporters also furnish Guarantees in support of the export obligations to Export Promotion Councils,  Commodity Boards,  the State Trading  Corporation of India,  the Minerals and Metals Trading Corporation of India or recognised Export Houses.

An export proposition may be frustrated if  the exporter’s bank is unwilling to issue the guarantee.  The Export Performance Guarantee is aimed at meeting such situations.
Export Performance Guarantee is an insurance cover for banks,  which issues various kinds of guarantees on behalf of exporters in order to facilitate export transactions.  The insurance is provided by ECGC with the objective of enabling exporters to obtain the required guarantee facility from banks on easy terms.  The Guarantee,  which is in nature of a counter guarantee to the bank,  is issued to protect the bank against losses that it may suffer on account of guarantees given by it on behalf  of export purposes.

Export Performance Guarantee (EPG) may be issued to a bank to cover any guarantee that it may issue in connection with an export transaction.  A list of  such guarantees is listed below.
•  Bid Bond or Bid Guarantee,  which is required to be submitted along with bids for export contracts.
•  Performance Bond or Performance  Guarantee which is issued to the foreign buyer for due performance of the contract.
•  Advance Payment  Guarantee, which is issued to the foreign  buyer against advance payment,  received from the buyer.
•  Retention Money Guarantee issued to the foreign buyer in lieu of his retaining a portion of each payment as Retention Money.
•  Guarantee issued to an overseas bank for the purpose of enabling the foreign bank to extend foreign currency loan/ advance to the Indian exporter for the purpose of executing an export contract.
•  Guarantee issued to the Customs Authorities in India in lieu of Customs duty payable on imported raw material or components meant for manufacturing goods for export.
•  Guarantee issued to Import Control Authorities in India in support of export undertakings given by the exporter who gets advance import licence.
•  Guarantee issued to Sales Tax Authorities in lieu of payment of sales tax on goods meant for export.
•  Guarantee issued to Export Promotion Council  against allotment of export quota.

EPG provides cover to the bank against the risk of loss involved in issuing the above types of guarantees.  For the purposes of EPG, a loss will be deemed to have arisen when the bank is unable to recover from the exporter the money that it has had to pay to the beneficiary of the guarantee on his invoking it. The bank will have to ensure that:

1. The guarantee was invoked by the beneficiary
2. The amount demanded by the beneficiary was paid by it strictly in accordance with the guarantee
3. The exporter was called upon to reimburse the bank with the said amount and,
4. The exporter has failed to discharge the debt  so created

The risk insured under the EPG are the insolvency of the exporter and its protracted default.  Normally a cover is extended upto 75% of loss but in the case of guarantees in connection with bid bonds, performance bonds advance payment and local finance guarantees and guarantees in lieu of retention money, the cover may be increased upto 90% subject to proportionate increase in premium.

While the premium rate for Guarantee issued to cover bond relating to exports on short-term credit is 0.90% p.a. for 75% cover and 1.08% p.a. for 90 % cover, it is lower for bonds, relating to exports on deferred credit and Projects.  The rate of premium is 0.80% p.a. for 75% cover and 0.95% for 90% cover. In case of  Bid Bonds relating to exports on medium/long term credit, overseas Projects, and Projects in India financed by international financial institutions as well as supplies to such Projects, ECGC is agreeable to issue Export Performance Guarantee on payment of 25% of the prescribed premium. The balance of 75% becomes payable to the Corporation by the bankers if the exporter succeeds in the bid and gets the contract.

In  order to reduce the cost of participating in global tenders for export of capital goods or Projects, EPG to cover the related Bid Bond Guarantees are issued on payment of 25% of the premium due.  No further premium is payable if the exporter is not declared successful in the bid.  The balance amount of the premium will have to be paid only if the exporter succeeds in the bid.

EPG can be obtained either to cover a specified single guarantee or for all the guarantees that may be issued during a period  of 12 months on account of a specified exporter.  Where EPC is taken for a single guarantee, the bank is required to pay the full premium in advance.  EPG for covering all the guarantees that may be issued over a 12 month period on behalf of a single exporter will be issued on payment of small Guarantee Fees.  Thereafter,  the bank will have to pay premium on the value of each guarantee, as and when it is issued. Exporters and Bankers can obtain proposal forms from the  nearest branch of the Corporation.