The Ministry of Finance has given a much-needed boost to the Aviation Sector. Recognising that an efficient and strong civil aviation sector is important for the economic development of the country, the Department of Financial Services (DFS) modified Emergency Credit Line Guarantee Scheme (ECLGS) on Tuesday. Under ECLGS 3.0, airlines can now avail of up to Rs 1,500 crore loan, a move that will help airlines to tide over their present cash flow problems; The earlier limit was Rs 400 crore.
In a statement on Wednesday, the finance ministry said:
The Emergency Credit Line Guarantee Scheme (ECLGS) is modified to enhance the maximum loan amount eligibility for airlines under ECLGS 3.0 to 100% of their fund-based or non-fund-based loan outstanding as on the reference dates or Rs. 1,500 crore, whichever is lower; and of the above, Rs. 500 crore shall be considered, based on equity contribution by the owners.
All other criteria terms and conditions parameters prescribed under the operational guidelines of the ECLGS on 30 August 2022 shall be applicable as it is.
The modifications introduced are aimed to give necessary collateral-free liquidity at reasonable interest rates to tide over their present cash flow problems.
Earlier in March 2022, the Emergency Credit Line Guarantee Scheme (ECLGS) was extended beyond March 2022, till March 2023, to implement the announcement made in the Union Budget 2022-23 by Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman.
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 per cent of their highest total fund and non-fund-based credit outstanding, subject to a maximum of Rs. 400 crore per borrower.
The Removal of Airfare Bands by the Aviation Ministry from 31st August is also a move to support Aviation Industry to tide over the crisis caused by the pandemic and jet fuel prices. You can read the story by clicking the link below.
Also Read: Ministry of Civil Aviation to Remove the Airfare Bands
Conclusion:
Civil Aviation Ministry wrote to the Finance Ministry to increase airlines' loan limit under ECLGS in September 2022, and the Finance Ministry has supported the same by modifying ECLGS. This move will give the much-required boost to SpiceJet. SpiceJet shares leapt after the news, and at the time of this writing, the shares were trading at Rs 40.75 on NSE.
