The Exchange Fluctuation Risk Cover Scheme of ECGC

The Exchange Risk Credit Policy of the ECGC affords protection to exporters on deferred payment terms against fluctuations in exchange rates. It is offered under two schemes: (1) Exchange Fluctuation Risk (Bid) Cover; and (ii) Exchange Fluctuation Risk (Contract) Cover. Under the schemes, the ECGC will reimburse the exporter the loss due to exchange rate fluctuations over and above 2% and up to 35% of the rupee value.

Any gain within this range will be owned by the Corporatio.  It goes witho that any gain or loss up to 2% and above 35% of the rupee value should be borne by the exporter. The cover is available for contracts expressed in US dollars, pound-sterling, Japanese yen, Duetsche mark, French franc, Swiss franc, Australian dollar, and UAE dinar.

The bid cover is available in respect of exchange risk on bids tendered in approved foreign currencies stated above between the date of the bid and date of contract to the Indian exporter provided there is provision in the tender document to permit price adjustment on account of exchange fluctuation. The cover is avail-able for a maximum period of 12 months; beyond this period the cover may be extended by ECGC.

The export contract should provide for payment in India in the approved foreign currencies. Contracts executed in India but paid for in foreign currency with assistance from international financial institutions which are treated as export contracts are also eligible for cover.

The exporter should take up the contract cover if the contract is given to him. He may choose the exchange rate as on the date of his bid or of his gaining the contract, whichever is suitable for him, as the reference rate for the purpose of indemnification by the ECGC. If the bid is not won 75% of the premium will be refunded.

The contract cover is available for periods from 12 months to 15 years. This period coincides with the period allowed under the revised guidelines for exports on deferred payment terms. Protection under this scheme is available to those contractors/exporters who obtain appropriate policy covering the export credit risk involved in such transactions.

The scheme has been extenclpd to cover export-linked import transactions and advance payments for exports tin terms similar to the above. The cover is issued for the entire period of transaction subject t,o a maximum of 10 years.

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