What changed
Exim Bank signed a credit agreement with the Government of Lao PDR on August 27, 2008, effective October 14, 2008, for a USD 33 million line of credit. The credit supports three projects: a transmission line, a hydropower project, and rural electrification equipment. Last date for opening LCs and disbursement is 48 months from project completion or 72 months (August 26, 2014) for supply contracts.
What it means for you
Indian exporters can now access this credit line to supply goods and services to Lao PDR, with a mandatory 85% local sourcing requirement. AD Category-I banks must facilitate LCs and remittances under this facility, ensuring compliance with FEMA and RBI guidelines. No agency commission is payable under the LOC, but exporters can use their own resources for commissions after full payment realization.
What you must do
- Inform exporter customers about the USD 33 million line of credit to Lao PDR and direct them to Exim Bank for full details.
- Ensure all shipments under this LOC are declared on GR/SDF forms as per RBI instructions.
- Allow remittance of agency commission only after full contract value realization and compliance with prevailing guidelines.
- Verify that at least 85% of contract value is sourced from India for exports under this credit.
Who it affects
AD Category-I banks, Indian exporters of equipment, goods, and services, Exim Bank
What is the minimum Indian content required for exports under this line of credit?
At least 85% of the contract price must be supplied from India; the remaining 15% can be procured from outside India, excluding consultancy services.
Can exporters pay agency commission under this LOC?
No agency commission is payable under the LOC. However, exporters may use their own resources or EEFC balances to pay commission in free foreign exchange after full payment realization.
What is the deadline for opening Letters of Credit under this facility?
For project exports, LCs must be opened within 48 months from the scheduled completion date of the contract. For supply contracts, the deadline is 72 months from the credit agreement execution date, i.e., August 26, 2014.