Centre raises credit guarantee limit to help stressed airlines

The Department of Financial Services (DFS) has modified the Emergency Credit Line Guarantee Scheme (ECLGS) for the aviation sector, raising the scheme’s cheaper loan limit to ₹1,500 crore from ₹400 crore to help the sector tide over cash-flow problems.

Recognizing that “an efficient and strong civil aviation sector is vital for the economic development” of the country, the DFS, an arm of the finance ministry, modified ECLGS on Tuesday, the ministry said.

As per the modified ECLGS, an airline would be eligible for 100% of its fund- based or non-fund-based loan outstanding or ₹1,500 crore, whichever is lower.

The move is aimed at giving the necessary collateral-free liquidity at reasonable interest rates to the aviation industry.

Under the scheme, banks provide additional loans to existing borrowers without any collateral in a bid to help businesses survive the liquidity crunch post the pandemic.

It was earlier extended beyond March 2022 to March 2023. Previously, the civil aviation sector were allowed to borrow up to 50% of their highest fund-based credit outstanding, subject to a maximum of ₹400 crore per borrower.

Low-cost airline SpiceJet welcomed the changes made to the ECLGS but asked the government to extend support on jet fuel as well.

“This will provide a tremendous boost for airlines. I request the government once again for its support for including Aviation Turbine Fuel under GST, which would be a game changer for the entire sector,” Ajay Singh, chairman and managing director, SpiceJet said.

The airline expects to receive an additional ₹1,000 crore as part of the modified ECLGS, a company official said on condition of anonymity. The airline is in need of funds to sustain heavy costs and pay pending dues. The airline has also been in discussions with bankers to raise $200 million, the official added.

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