Export Finance

Solution of Financing Problem of Export of Indian Pharmaceutical Products to Under Developed Countries including South African Nations through Exim Bank of India Lines of Credit:

By Ashok Agarwala

A.           Preamble:- India is a hub of Manufacturing of Pharmaceutical Products. The Products so manufactured are consumed domestically & having very Good Demand overseas. South African Countries are prominent where Human Health is a big concern hence huge demand & supply gap exists. These Countries are underdeveloped, with lower ratio of Literacy and lot many problems pertaining to human health.

Exporters are trying to take advantage of favourable conditions & are exporting Drugs in Bulk Quantity with Substantially higher Profit Margin in comparison to Domestic Sale. Problem left is of Regular Export financing: Normally Export is carried out on credit- no easy bank financing is available.  

B.           Problem Areas:- Indian Banks being risk averse are not ready to discount even LC opened by South African Banks & of other under developed Countries. Reason LC opening Bank is not on the Panel of RBI. Discounting is with many conditions including ECGC cover. Due to difficulties faced Small Exporter fears to trade in this Area of vast opportunities.

C.           Schemes of Govt. of India:-The Govt. of India under various UN Schemes has entered Agreements with Govt. of these South African  & other Under Developed Countries to extend finance through Lines of Credit.

D.           Lines of Credit:- The Exim bank of India has introduced Lines of Credits in various under developed Countries. These are famous for Export financing of Indian Goods to the Foreign Country designate. Helping poor masses, -Creation of Health facilities Medical hospitals etc. supply of Free Drugs.

A brief run- down of procedure involved in Exporting Pharmaceutical Products from India as follows:-

E.           Important Steps in Export of Pharmaceutical Products:-

1.            Identifying Specific Health related Problems whether pertaining to Orthopaedics, Dental, and Diabetic, Intestinal     etc. Identifying Molecule. Approval of Indian Manufacturing Plants by the concerned FDA Authority. Followed by Issue of IDF. 

2.            Ascertaining the health area where Indian Drugs can help in Cure Thereafter Product approval from the Countries FDA Authorities.

3.            Approval of the Products Export  by Drug Controller General Of India(DCGI)

4.            Inspection and Approval of the Manufacturing Plant by FDA Authorities.

F.           FLOW CHART OF EXIM BANK OF INDIA LINES OF CREDIT

G.  Regular Fulfilment of above Conditions by Indian Drug Exporter:-  Immediately before procurement of Products from India, Importer in South African Countries need to obtain Import Declaration Form(IDF) issued on the basis of Exporter’s Performa Invoice. Submission of a copy of IDF duly signed would fulfil most of above requirements of Exim Bank to permit operation of Line of Credit Once all these are completed means Export is on mutually accepted Terms and Conditions of Exporter and Importer genuine only. Therefore the Risk factor would be minimal after obtaining Buyers approval chances of finance loss is negligible..

H.           Exploring possibility of Agreement  between Indian Scheduled Commercials Banks  and The Exim Bank of India An agreement is possible between Indian Commercial Banks and Exim bank of India, whereby commercial Export of Drugs is financed immediately on Dispatch of Products to country designate under the Scheme of Lines of Credit.

I.              Conclusion:- The Exim Bank of India should work on above lines. Immediate payment or payment in tranches from Procurement of Raw Material till Export would provide Major relief to exporter. Liquidity of the Unit would improve. Help in ‘Make In India’ campaign. Increase Employment opportunities in the Country, Exporters would get support and Bankers would get good Customers. More SME for Export of Pharmaceutical Products would open and operate from India.  A Win Win situation All.

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