The Cabinet Committee on Economic Affairs on Wednesday approved capital infusion of Rs 2,000 crore in the Export Credit Guarantee Corporation (ECGC) to enhance insurance coverage to micro, small medium enterprises exports. ECGC provides insurance cover on exports to around 200 countries and more than 85 per cent of its customers are MSMEs, the government said in a statement. The CCEA also approved higher price for ethanol and setting up of two strategic oil reserves in order to boost India’s energy security.
Funds to ECGC would be infused in the three financial years — Rs 50 crore in 2017-18, Rs 1,450 crore in 2018-19 and Rs 500 crore for 2019-20. “The infusion would enhance insurance coverage to MSME exports and strengthen India’s exports to emerging and challenging markets like Africa, CIS (Commonwealth of Independent States) and Latin American countries,” as per the statement. It said that with enhanced capital, ECGC’s underwriting capacity and risk to capital ratio will improve considerably. ECGC offers credit insurance schemes to exporters to protect them against losses due to non-payment of export dues by overseas buyers due to political and/or commercial risks.
The CCEA has also approved contribution of grant-in-aid of Rs 1,040 crore to National Export Insurance Account Trust (NEIA) to promote project exports from India that are of strategic and national importance. The corpus is to be utilised during three years from 2017-18 to 2019-20. “An amount of Rs 440 crore has already been received for the year 2017-18. Rs 300 crore each will be given to NEIA for the years 2018-19 and 2019-20,” the statement said.
In another decision aimed at boosting fuel blending programme, the government increased the price of ethanol, used for blending in petrol, to Rs 43.70 from Rs 40.85 per litre in a bid to cut India’s oil import dependence as well as give higher price for sugarcane. Higher price for ethanol extracted in the process of making sugar from sugarcane will incentivise higher ethanol production. The government has mandated blending of up to 10 per cent ethanol.
The higher price for this grade of ethanol produced from C-molasses will be for sugar marketing year starting December 2018 and ending November 2019, the government said. For the first time, the government also fixed the price of ethanol produced from intermediary or B-molasses at Rs 47.49 per litre — a move that would help mills divert cane juice for ethanol manufacturing during surplus years.
So far, the price was only fixed for ethanol produced from C-molasses or final molasses. The government is keen to move forward to 10 per cent blending of ethanol with petrol, which will help reduce India’s fuel import bill and help sugar industry as well as cane growers, Finance Minister Piyush Goyal was quoted as saying by the PTI at the Cabinet briefing. Goyal said ethanol supply has increased to 140 crore litre in 2017-18 marketing year from 38 crore litre in 2013-14.
Stating that the government intends to create more holistic framework for ethanol, he said the prices have been fixed based on estimated Fair and Remuneration Price (FRP) for sugar season 2018-19. The price will be modified by the oil ministry as per actual FRP, which is the minimum price that mills need to pay to cane growers for their produce.
Sugar mills are incurring losses as prices have fallen below production cost on account of record output of 31.5 million tonne in 2017-18 season as against the annual domestic demand of 25 million tonne.
“The sugarcane and sugar production in this sugar season is very high leading to dampening of sugar prices. Consequently, sugarcane farmers’ dues have increased due to lower capability of sugar industry to pay the farmers. Government has taken many decisions for reduction of farmer’s dues,” the government statement said, adding that this measure will support the sugar industry.
To further boost energy security, the CCEA decided to set up two more underground crude oil storages in Odisha and Karnataka to increase emergency stockpile cover by 12 days to 22 days. The Cabinet approved setting up of 4 million tonne(MT) storage at Chandikhole in Odisha and 2.5 MT storage at Padur in Karnataka, Goyal said. He, however, did not give details of the cost or the timelines, saying this is just an in-principle approval and detailed engineering will decide the two factors.
The storages will be additional to the existing rock caverns to store 5.33 MT of crude — Visakhapatnam (1.33 MT), Mangalore (1.5 MT) and Padur (2.5 MT). “The total 5.33 MT capacity under Phase-1 of the Strategic Petroleum Reserve (SPR) programme is estimated to supply approximately 10 days of India’s crude requirement according to the consumption data for 2016-17. Cabinet’s approval for establishing additional 6.5 MT SPR facilities will provide an additional supply of about 12 days and is expected to augment India’s energy security,” the government said.