Indian firms eye Sri Lanka projects using buyer’s credit

ECONOMYNEXT – Indian companies want to invest in Sri Lanka using buyer’s credit facilities from Indian Exim Bank where Sri Lankan firms can provide labour and up to a quarter of material, an official from a visiting business said.

“Sri Lanka is becoming a preferred destination for Indian investors due to its similar climate and close proximity to India,” said Praful Kumar Mutha, director of Mohan Mutha Exports Ltd, Chennai, who was leading a Confederation of Indian Industry (CII) delegation to Sri Lanka.

“We are interested in securing large scale projects in Sri Lanka such as refineries, IT parks, desalinisation plants, pharmaceutical zones, container terminals and vocational training facilities,”
Kumar said at a meeting the Minister of Industry, Commerce, Skills Development & Vocational Training Rishad Bathiudeen.

CII is India’s second largest industry chamber with more than 9,100 direct and over 300,000 indirect membership of firms from 291 national and regional bodies.

Kumar said many mechanisms are available in India for funding of such large projects overseas.

“We at CII can be a facilitator for such project funding in Sri Lanka as well. We can move in with funding from Indian Exim Bank. The Buyers’ Credit (BC) project funding mechanism of Indian Exim Bank is one such way.”

“Such funds are for Indian exporters entering into new foreign markets where deferred credit on medium or long term basis is more practical. Annual interest rates are also very low at LIBOR plus 1.25 percent for 8 years.”

In Buyers’ Credit, project execution is done by an Indian firm called the project exporter. Even though the fund recipient is an Indian company, from which 75 percent of the material for the project needs come, Sri Lankan contractors can supply the labour and also the 25 percent materials in the BC project, a statement said.

Average project length is three years and it takes about three to six months for initial background work.

High-value projects such as ports, bridges, highways, and IT parks are a good match for BC projects.

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The statement said that since March 2018, Sri Lanka has been placed in the Positive List of Countries for Buyer’s Credit under India’s National Export Insurance Account (NEIA) by India’s Export Credit Guarantee Corporation (ECGC).
(COLOMBO, 19 Sep, 2019)