The finance ministry may consider increasing the equity base of EXIM Bank or allowing Central Power Sector Utilities to put in equity in the EXIM Bank. BHEL had been raising the issue of their difficulty in getting business abroad due to their inability to match their competitors in provision of finance and so losing business in spite of being competitive in price. In view of this, Ajay Shankar, Member Secretary, National Manufacturing Competitiveness Council convened a meeting to discuss the issue with all stakeholders.
At the meeting, BHEL officials stated that EXIM Bank had difficulty in providing sufficient funds for project exports of BHEL and its interest rates were high. At this juncture of downturn in the economy, augmentation of project exports was one of the areas which offered scope for generation of demand and employment, they averred.
The officials informed that about 70 per cent of their project exports were executed on cash basis and only 30 per cent with support from EXIM Bank. They informed that many export orders were lost due to lack of finances, although opportunities worth Rs.50,000 crore were available. BHEL was very often competitive in price and quality but lost only due to lack of competitive financing. They stated that now European countries were also entering Africa through soft financing seeing the success of China and growing market size.
EXIM Bank officials stated that the paid up capital of EXIM Bank was wholly subscribed by the Government of India and that the quantum of credit required by large project exports was very huge for which it was necessary to increase the capital base of EXIM Bank. Their borrowings have been capped by the RBI to Rs. 70,000 crore, and this naturally constrained them in the case of large export financing. The cost of funds and therefore, the interest rates offered is a major issue.
During the meeting, it was brought out that an infusion of about Rs.2000-3000 crores would suffice for the present to enable EXIM Bank to provide adequate credit lines for large project exports. It was noted that the issue of enhancing the capital of EXIM Bank was critical and could be addressed by government increasing the equity base of EXIM Bank by Rs. 2000 crores. Another option which was brought out was that BHEL and other interested CPSUs put in equity of Rs. 2000 crores in EXIM Bank. It was mentioned that in case there are legal difficulties in this, government could take additional dividend from such CPSUs and instead of treating it as normal revenue, use this to inject the requisite equity into EXIM Bank.
The Joint Secretary, Department of Financial Services of Ministry of Finance, Anurag Jain stated that the issue will be flagged in the Finance Ministry for consideration and decision.