What changed
Exim Bank signed a Line of Credit agreement with Ethiopia on June 13, 2013, effective July 15, 2013, for USD 300 million to fund the Asaita-Tadjourah railway project. The circular outlines the 75% Indian content requirement, timelines for LC opening and disbursement (48 months for project exports, 72 months for supply contracts), and rules on agency commission.
What it means for you
Indian exporters can now tap this LOC for railway-related goods and services, with a mandatory 75% local sourcing clause boosting domestic industry. AD banks must ensure proper GR/SDF form declarations and restrict agency commission payments to post-realization from exporter's own resources or EEFC accounts.
What you must do
- Advise exporter clients about the LOC and direct them to Exim Bank for full details.
- Ensure shipments under this LOC are declared on GR/SDF forms as per RBI instructions.
- Allow agency commission remittance only after full contract value realization and from exporter's own resources or EEFC accounts.
- Monitor that at least 75% of contract value is sourced from India as per the agreement.
Who it affects
AD Category-I banks, Indian exporters of goods, machinery, equipment, and consultancy services, Exim Bank
What is the minimum Indian content requirement under this LOC?
At least 75% of the contract price must be supplied from India; the remaining 25% can be procured from outside India.
Can agency commission be paid under this LOC?
No agency commission is payable under the LOC itself. However, exporters may use their own resources or EEFC balances to pay commission in free foreign exchange after full payment realization.
What are the timelines for using this credit?
For project exports, LCs must be opened and disbursed within 48 months from scheduled completion. For supply contracts, the last date is 72 months (June 12, 2019) from the credit agreement execution date.