Indian Cos may Get More Subsidy to Invest Abroad: The government may increase the subsidy it gives to Indian companies to invest overseas to help them compete with Chinese companies that are on a statebacked plan to acquire resources and exports markets, especially in Africa and SAARC region. It is considering a proposal to increase the interest subvention by 100 basis points on financing project exports through the Exim Bank. “It is still being debated; the idea is to provide impetus to project exports from India, specially the infrastructure sector,” said a senior government official, requesting anonymity. At present, the government provides 2% interest equalisation support (IES) or subsidy on the credit facility extended by Exim Bank to overseas buyers for financing their project imports from India. In 2012-13, the bank had given an inprinciple commitment for supporting 51 projects with an aggregate value of $ 5.14 billion. “Typically, such loans are extended towards large infrastructure projects which require financing over a period of time. If the interest subvention is increased, it will make the whole package more attractive and Indian companies will have a competitive edge,” said a senior official with Exim Bank. Developing countries generally look for a full or partial finance package for large projects such as power projects or water treatment plants, along with technical and consultancy service contracts. The Indian companies offer their services along with a funding plan which is mostly financed by Exim Bank. “We have identified around 15 African countries, including Egypt, Kenya, South Africa and Nigeria, as good investment destinations. We will encourage projects from these nations,” the above quoted Exim bank official said. “Credit is not cheap in the current scenario, so in that sense any initiative to provide financing at a cheaper rate makes Indian exporters more competitive, and enhance their ability to take on bigger projects,” said Amit Jain, partner, BMR Advisors. These investments also help increase engineering exports because of the capital goods component in the project. India’s engineering exports to Africa grew by 12.24% at the end of September 2013 to $722 million against $643 million the corresponding month last year. The country exported $129 billion worth of capital goods in 2012-13, up 1.32% in the year before. The government hopes to double India‘s share in global trade by 2020 and has chalked out a strategy to increase its market share in emerging markets to achieve that target.
Posted on: Mon, 03 Feb 2014 11:16:01 +0000