Govt clears Rs 5,000 crore emergency credit scheme for airlines amid jet fuel price surge
Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the ECLGS 5.0 scheme to provide targeted credit support to Indian airlines.
In view of the West Asia situation, the government has announced a clearing of Rs 5,000 crore emergency credit line scheme to airlines amid the jet fuel price surge, the Ministry of Civil Aviation said in a statement on Wednesday. Notably, the Iran war has led to a sharp hike in operating costs along with a decrease in passenger numbers.
The Union Cabinet, chaired by Prime Minister Narendra Modi, on Tuesday approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, providing targeted financial relief to airlines grappling with a sharp increase in Aviation Turbine Fuel (ATF) prices and global disruptions.
ECLGS 5.0 scheme
"In view of the financial stress faced by airlines due to the sharp increase in ATF prices, compounded by airspace closures and reduced operations, particularly on international routes, leading to lower aircraft utilisation and liquidity constraints, the Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the ECLGS 5.0 scheme to provide targeted credit support to Indian airlines," it said.
The scheme aims to provide credit guarantee coverage of 100 per cent for MSMEs and 90 per cent for non-MSMEs as well as airline sector, to Member Lending Institutions (MLIs) by National Credit Guarantee Trustee Company Limited (NCGTC) for the amount in default under the additional credit facility extended to the eligible borrowers to tide over any short-term liquidity mismatches, against the backdrop of ongoing West Asia situation, it said.
Under ECLGS 5.0, airlines can avail loans of up to Rs 1,000 crore per borrower, with an additional Rs 500 crore allowed subject to equivalent equity infusion by the borrower. "The loans will have a tenure of up to 7 years, including a 2-year moratorium on repayment, thereby easing short-term liquidity pressures," it said.
The initiative will provide additional credit of up to 20 per cent of peak working capital utilised during Q4 FY26, with a cap of Rs 100 crore for most borrowers. For airlines, the limit can go up to 100 per cent, capped at Rs 1,500 crore per borrower, subject to conditions. The guarantee cover will remain valid for the entire loan tenure, and the scheme will apply to loans sanctioned until March 31, 2027.
Civil Aviation Minister welcomes decision
Union Civil Aviation Minister Ram Mohan Naidu said the decision reflects the government's commitment to strengthening the sector. He noted that despite global challenges, Indian airlines have remained resilient due to timely policy interventions, including ATF price management and a reduction in airport charges.
"By approving the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, airlines will be enabled to navigate short-term liquidity challenges and maintain seamless operations amid global disruptions. It will provide strong financial backing to safeguard jobs, sustain connectivity, and ensure resilience across the aviation ecosystem, while also supporting MSMEs," he said.
The ministry further said that the scheme will also help mitigate the impact of rising ATF prices, exchange rate volatility, and operational disruptions, which continue to affect the financial health of airlines.
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