Govt modifies credit scheme for civil aviation sector
The government has modified the collateral-free emergency credit line guarantee scheme (ECLGS) extending the cheaper loan facility to the civil aviation sector to tide over their current cash-flow problems, an official statement said on Wednesday. Recognising that “an efficient and strong civil aviation sector is vital for the economic development” of the country, the department of financial services (DFS), an arm of the finance ministry, modified ECLGS on Tuesday, it said.It decided to enhance the maximum loan amount eligibility for airlines under ECLGS to 100% of their loan outstanding or ₹1,500 crore, whichever is lower, and of the above, ₹500 crore shall be considered, based on equity contribution by the owners, the statement added.“Keeping in view the high proportion of non-fund based credit in the overall credit of the civil aviation sector, the eligible borrowers were permitted to avail up to 50% of their highest total fund and non-fund based credit outstanding, subject to a maximum of ₹400 crore per borrower,” the statement said. Under the fund-based credit, a bank provides money directly to the borrower. But under the non-fund based credit, a bank provides a letter of credit to the borrower. Also Read | Hardeep Puri to co-chair US-India clean energy dialogue with Jennifer GranholmAll other criteria terms and conditions parameters prescribed under the operational guidelines of the ECLGS on August 30 shall be applicable as it is, it said. The modifications introduced are aimed to give necessary collateral-free liquidity at reasonable interest rates to tide over their present cash flow problems, it added. The ECLGS, initially launched in 2020 to provide cheaper loans to micro-small and medium enterprises (MSMEs) during the pandemic period was to expire on March 31, 2022. In the Budget 2022-23, finance minister Nirmala Sitharaman not only extended the scheme for one more year till March 2023 but also extended its corpus and scope. “Emergency Credit Line Guarantee Scheme (ECLGS) has provided much-needed additional credit to more than 130 lakh MSMEs. This has helped them mitigate the adverse impact of the pandemic. The hospitality and related services, especially those by micro and small enterprises, are yet to regain their pre-pandemic level of business. Considering these aspects, the ECLGS will be extended up to March 2023 and its guarantee cover will be expanded by ₹50,000 crore to total cover of ₹5 lakh crore, with the additional amount being earmarked exclusively for the hospitality and related enterprises,” the finance minister said in her Budget speech on February 1.In lines with the Budget announcement, the Union cabinet in August enhanced the corpus of the sovereign-guaranteed credit facility for small enterprises from ₹4.5 lakh crore to ₹5 lakh crore, exclusively for the hospitality sector. So far, loans of about ₹3.67 lakh crore had been sanctioned under ECLGS till August 5. ECLGS was one of the key components of the ₹20.97 lakh crore economic stimulus package under the Atmanirbhar Bharat Abhiyan (self-reliant India scheme) launched in May 2020 that offers additional working capital finance in the form of a term loan to MSMEs and professionals. Initially, its corpus was ₹3 lakh crore, which was raised to ₹4.5 lakh crore in June last year when Sitharaman announced another stimulus package worth ₹6.29 lakh crore. Deepak Sood, secretary general of Associated Chambers of Commerce and Industry of India (Assocham), called it a “pragmatic” move.“Given the volatility in the foreign exchange rates, high fuel prices and the recessionary fears in some of the key economies of the world, the aviation sector continues to remain under extreme pressure despite India doing exceedingly well in terms of reopening the economy after the Covid-19 induced lockdowns,” he said adding that the decision would go a long way to restore the financial stability of the airlines.
