Lifeline: Government clears Rs 5,000-cr emergency credit scheme for airlines

NEW DELHI: Indian carriers have got a Rs 5,000-crore lifeline during the debilitating Iran war that has led to a sharp hike in operating cost along with a decrease in passenger numbers. The Union Cabinet chaired by PM Modi on Tuesday approved the emergency credit line guarantee scheme (ECLGS) 5.0 to provide credit guarantee coverage to several sectors, including airlines. Targeting an overall additional credit flow of over Rs 2.5 lakh crore for various sectors, this will allow “eligible borrowers to tide over any short-term liquidity mismatches in view of West Asia crisis.”

An airline can get upto Rs 1,500 crore under this move. For airline sector, the tenor of this loan will be seven years from the date of first disbursement including moratorium of two years.

While IndiGo and Tata Sons’ Air India group have the resources to weather the perfect storm — sharp rise in jet fuel price and the rupee crashing with a significant part of their operating costs being dollar-denominated, — many other weaker players are struggling to survive. One airline, for instance, is unable to pay salaries, PF or even TDS on time for a long time now. This ECLGS could provide them some liquidity and avert a shutdown for now.

“Eligible borrowers: MSMEs and non-MSMEs with existing working capital limits and scheduled passenger airlines having outstanding credit facilities, as of March 31, 2026, provided their accounts are standard…. Additional credit up to 20% of peak working capital utilised during Q4 FY 26 (capped at Rs 100 crore). For airlines up to 100% (capped at Rs 1,500 crore per borrower, subject to satisfying certain specific conditions),” said a government statement.

“The scheme aims to enable businesses to tide over the challenges arising from the West Asia conflict. Additionally, this is expected to help businesses maintain their operations, protect jobs, and sustain supply chains. The proposed credit guarantee scheme is a major step to help businesses, particularly MSMEs and airline sector, to ensure their additional working capital needs, are catered by the banks & financial institutions. By providing timely liquidity, the scheme will sustain the businesses and prevent job losses,” the statement added.
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