Page 245 - International Marketing

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BRILLIANT'S Export Management 247

3. Construction Works Policy: This policy covers civil construction
jobs as well as turnkey projects involving supplies and services. This policy
covers construction contracts both with private and foreign government.
This policy covers 85% of loss suffered on account of contracts with
government agencies and 75% of loss suffered on account of construction
contracts with private parties.
The following risks are covered in case of contracts with government
employers or if the payments are guaranteed by the employer's government:
(i) Default of the Government employer.
(ii) Delay in the transfer of payments to India.
(iii) War between India and the employer's country.
(iv) Imposition of import or export licensing for goods or materials manu-
factured or purchased by the contractor after the date of contract,
for use on the contract and for which on the date of loss the em-
ployer has no obligation to pay in terms of the contract.
(v) Civil war or similar disturbances in the employer's country.
(vi) Additional handling, transport or insurance charges due to inter-
ruption or diversion of voyage.
(C) Financial Guarantees
Exporters require adequate financial support from banks to carry out
their export contracts. ECGC backs the lending programmes of banks by
issuing financial guarantees. The guarantees protect the banks from losses
on account of their lending to exporters. Six guarantees have been evolved
for this purpose.
These guarantees give protection to banks against losses due to
non-payment by exporters on account of their insolvency or default. The
ECGC charges a premium for its services that may vary from 5 paise to
7.5 paise per month for Rs. 100/-. The premium charged depends upon
the type of guarantee and it is subject to change, if ECGC so desires.
1. Packing Credit Guarantee: Any loan given to exporter for the
manufacture, processing, purchasing or packing of goods meant for ex-
port against a firm order of L/c qualifies for this guarantee.
Pre-shipment advances given by banks to firms who enters contracts
for export of services or for construction works abroad to meet preliminary
expenses are also eligible for cover under this guarantee. ECGC pays two
thirds of the loss.
2. Export Production Finance Guarantee: This guarantee enables
banks to provide finance at pre-shipment stage to the full extent of the
domestic cost of production and subject to certain guidelines.