Know All About Govt's ECGC-Backed Relief Scheme to Shield Exporters from Strait of Hormuz Crisis

New Delhi: The Indian government has launched a targeted relief scheme under the Export Promotion Mission to support exporters amid severe disruptions in maritime trade routes caused by the closure of the Strait of Hormuz and related challenges in the Persian Gulf region. The conflict in West Asia, stemming from escalating tensions involving Iran, the US, and Israel, has led to suspended transit through the strait, higher war-risk premiums, emergency surcharges by shipping lines and insurers, longer rerouting of vessels, and congestion at key ports and trans-shipment hubs.

Lav Agarwal, Chief of the Directorate General of Foreign Trade (DGFT), emphasized the critical importance of this trade corridor for India.

"The intervention is necessary because this corridor matters for India, for our industry, and for our bilateral trade," he stated. He noted that trade through this route totals around USD 178 billion, including approximately USD 56 billion with the GCC countries and USD 36 billion with the UK--accounting for nearly 15% of India's global trade.

The scheme, implemented through the Export Credit Guarantee Corporation of India (ECGC), addresses these disruptions by providing enhanced insurance coverage for export risks. It extends beyond standard non-payment protection to include contract repudiation, distress sales, war risks, hostilities, payment delays, moratoriums, and voyage diversions.

The initiative features three key components:

-Immediate enhanced coverage for exporters already insured under ECGC, ensuring stability for ongoing policies.
Support for new exporters over the next three months, with no premium increases.

-Special assistance for MSMEs whose consignments were in transit without ECGC coverage when the conflict escalated.

-Shipments with loading or relevant dates between February 14 and March 15 qualify for 100% coverage without additional premiums, applicable to deliveries in GCC countries, Iran, Iraq, Israel, Yemen, and related trans-shipments.

Agarwal highlighted the broader challenges: "Persian Gulf port geography and the Strait of Hormuz created certain challenges. Hormuz is the exit corridor for Gulf cargo and energy flows."

Key ports such as Jebel Ali, Hamad, Bandar Abbas, and Fujairah faced parallel disruptions, affecting Europe- and US-bound cargo due to mandatory long rerouting. Both maritime and air cargo were impacted, with flights from the Middle East suspended or curtailed, leading to cargo accumulation, particularly affecting perishable and refrigerated goods.

MSMEs have been especially vulnerable, facing working capital stress and limited ability to absorb or pass on surging logistics costs.

To coordinate a response, the government formed an inter-ministerial group that began daily meetings from March 3 at 10 a.m., engaging with industry stakeholders and relevant ministries to monitor and mitigate the issues.

This time-bound scheme aims to stabilize export flows, protect businesses, particularly smaller enterprises, from financial distress, and safeguard India's trade interests in a vital global corridor during this period of geopolitical uncertainty.