The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, offering a financial lifeline of Rs 5,000 crore to Indian airlines. This move comes as the ongoing Iran war has sharply increased operating costs and reduced passenger numbers for domestic carriers.
Scheme Details
ECLGS 5.0 aims to provide credit guarantee coverage to several sectors, including scheduled passenger airlines. The scheme targets an additional credit flow of over Rs 2.5 lakh crore across various industries. Eligible borrowers can use this support to address short-term liquidity mismatches arising from the West Asia crisis.
Under the scheme, an airline can receive up to Rs 1,500 crore. The loan tenor is set at seven years from the first disbursement, including a two-year moratorium period.
Impact on Airlines
While major carriers like IndiGo and the Tata Sons-owned Air India group have sufficient resources to withstand the perfect storm of rising jet fuel prices and a depreciating rupee, weaker players are struggling to survive. One airline has been unable to pay salaries, provident fund contributions, or tax deducted at source (TDS) on time for an extended period. ECLGS 5.0 could provide these struggling airlines with necessary liquidity, potentially averting a shutdown for now.
The government statement outlined eligibility criteria: MSMEs and non-MSMEs with existing working capital limits, and scheduled passenger airlines with outstanding credit facilities as of March 31, 2026, provided their accounts are standard. Additional credit up to 20% of peak working capital utilized during Q4 FY26 is allowed, capped at Rs 100 crore for general businesses. For airlines, the cap is up to 100%, with a maximum of Rs 1,500 crore per borrower, subject to specific conditions.
Government's Objective
The scheme aims to enable businesses to overcome challenges arising from the West Asia conflict. It is expected to help maintain operations, protect jobs, and sustain supply chains. The credit guarantee is a major step to ensure banks and financial institutions cater to the additional working capital needs of businesses, particularly MSMEs and the airline sector. By providing timely liquidity, the scheme aims to sustain businesses and prevent job losses.
