Monday, September 05, 2022

Aviation ministry pushes to increase airlines’ loan limit under ECLGS

Alarmed by the weak financial state of Indian airlines, the civil aviation ministry is pushing to enhance the credit limit to them under the government's Emergency Credit Line Guarantee Scheme (ECLGS).

Civil aviation secretary Rajiv Bansal last week wrote to the finance ministry, asking that under the scheme, airlines be allowed to avail of additional debt of up to 100% of their outstanding credit, subject to a cap of Rs 1,500 crore.

Reasoning why an enhanced credit line is important for airlines, Bansal said an unprecedented rise in jet fuel price and devaluation of the rupee against the dollar had increased their operating cost.

“Last three years have been very challenging for the civil aviation sector. Just when the aviation sector was returning to normalcy, the airlines have been hit by an unprecedented rise in jet fuel prices. Jet fuel is a major component in airline operation cost. Further, the devaluation of INR from USD 70 to USD 80 has further aggravated the situation,” Bansal wrote to finance secretary TV Somanathan, seeking to relax the rules for the sector.

ET has seen a copy of the letter. The ministries did not respond to ET’s request for comment.

The ECLGS scheme, announced in 2020, has been designed to provide collateral-free, government-guaranteed loans to mitigate the financial distress caused by Covid on businesses.

In March this year, the Centre modified the scheme to allow the cash-starved aviation sector to avail of 50% of their credit outstanding — a combination of their highest total fund and non-fund-based credit outstanding — under the scheme subject to a cap of Rs 400 crore per borrower.

05/06/22 Arindam Majumder/Economic Times

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