Grape exporters get ECGC compensation

Pays Rs 60 lakh as buyers default payment

Export Credit Guarantee Corporation of India (ECGC) recently settled claims of around Rs 60 lakh in favour of grape exporters in Pune and Nashik after buyers abroad defaulted on payment for their crop.

Releasing the cheques in a meeting of grape exporters and bankers in Pune today, M Kumar, regional manager (west) of ECGC stated that the corporation was keen to provide its best support to exporters of grape, pomegranate and other fruits and vegetables in order to promote export.

There is tremendous potential for export of these agro-products from western India, particularly, Pune and Nashik areas, given the suitable soil and weather conditions, marketing facilities and infrastructure.

However, since exporters here are the farmer themselves, they concentrate primarily on production of the crop. There is thus precious little time for them to learn about the contractual and commercial procedures of export.

Often buyers abroad take advantage of weak and vague sale contract terms and refuse payment citing quality problems and poor market conditions. Perishable nature of the fruits and vegetables and seasonal availability further complicate the problem.

In a recent case, one particular buyer from the Netherlands defaulted on payment of almost Rs 2 crore to five grape and pomegranate exporters from Pune and Nashik.

ECGC, on its part, is compensating those exporters who had covered their exports under its policy by obtaining suitable credit limits on the buyer and by paying a premium.

Fruits and vegetables export from the Pune-Nashik belt is estimated at Rs 400 crore per annum. These products are often exported on certain patterns of credit terms, including a consignment basis, to buyers mainly in Europe. The realisation of the final amount is on the basis of the prices fetched in the market.

Fortification of the export contracts with exact specifications of quality, payment terms and obligations of sellers and buyers would minimise the confusion in the event of any dispute. This was explained in detail by ECGC officials to the participants in the meetings.

On demand of the Grape Exporters Association for risk cover for fruits and vegetable exports, the officials assured that the ECGC is aware of the needs of the exporters and is keen to further refine its export credit insurance products.

Such an effort would also be dependent on the size of the covers obtained by exporters and it would be possible to evolve exclusive credit insurance covers provided a majority of the association's members obtain ECGC policy, thereby creating an adequate business with corresponding premium income that would encourage such new covers.

As of now, the claim to premium ratio of ECGC in respect of this industry is very high which needs to be reduced by increasing the spread of the risks and customer base.

In the last three years, the Pune branch of the ECGC has paid claims of Rs 1.10 crore as against premium of Rs 11 lakh received from grape exporters under its policies.

ECGC also hopes the grape exporters and their association takes collective action, including filing of legal suits against the defaulting buyers, for recovery of precious foreign exchange.

ECGC is an export promotion organisation under the ministry of commerce, providing export credit insurance and other related services to exporters and bankers in India. During the last financial year the corporation had paid claims worth Rs 352 crore and earned a premium of Rs 516 crore.