The government on Sunday announced extending the Emergency Credit Line Guarantee Scheme to the civil aviation sector, a move that is expected to provide a liquidity solace for the pandemichit segment. Civil Aviation Minister Hardeep Singh Puri said airlines, airports, air ambulances and airports can avail additional funding facility under the ECLGS which will help alleviate their "stressed cash flows".
The government on Sunday announced extending the Emergency Credit Line Guarantee Scheme to the civil aviation sector, a move that is expected to provide a liquidity solace for the pandemic-hit segment. Civil Aviation Minister Hardeep Singh Puri said airlines, airports, air ambulances and airports can avail additional funding facility under the ECLGS which will help alleviate their ”stressed cash flows”.
Referring to the ECLGS (Emergency Credit Line Guarantee Scheme) 3.0 wherein aviation sector was included on Sunday, the minister said that it can help civil aviation meet their working capital term loan and additional term loan needs. Industry players said the ”timely” decision to include the aviation sector under the Emergency Credit Line Guarantee Scheme (ECLGS), which was announced in May last year, will ease the pressure and provide the much-needed liquidity.
The civil aviation sector has been facing strong headwinds due to the coronavirus pandemic and looking at possible help from the government. Recently, the civil aviation ministry allowed domestic airlines to reduce the capacity to 50 percent from June 1 in the wake of the second wave of the pandemic. Air travel demand has been impacted due to the lockdowns and strict restrictions by various state governments to deal with the pandemic.
Last month, domestic airline companies had reportedly sought reduction in capacity besides financial assistance to tide over the cash burn amid the nose-diving demand. In a statement, the finance ministry on Sunday said that on account of the disruptions caused by the second COVID-19 wave to businesses across various sectors of the economy, it has been decided to enlarge the scope of ECLGS.
The civil aviation sector will be eligible under ECLGS 3.0, it added. In a series of tweets, the civil aviation minister said, ”To alleviate stressed cash-flows of scheduled & non-scheduled airlines, chartered flight operators, air ambulances & airports, an additional funding facility of upto 40percent of their total credit outstanding, subject to a cap of Rs 200 crore extended under ECLGS 3.0.” In March, ECLGS 3.0 was introduced to cover business enterprises in hospitality, travel and tourism, leisure and sporting sectors.
The ministry has also removed the current ceiling of Rs 500 crore of loan outstanding for eligibility under ECLGS 3.0, subject to maximum additional ECLGS assistance to each borrower being limited to 40 percent or Rs 200 crore, whichever is lower. Budget carrier SpiceJet on Sunday said the inclusion of the aviation sector in ECLGS will help the domestic aviation industry, which has been impacted the most by the pandemic.
The inclusion of the civil aviation sector under the ECLGS is a welcome and timely move by the government that should help the sector that has been the most severely impacted by the pandemic, SpiceJet Chairman and Managing Director Ajay Singh said. ”World over, we have seen governments come to the rescue of their airlines multiple times over the last one year. Airlines in India have been at the very forefront of this war against COVID-19 and the government’s recognition of the difficulties being faced by our industry is certainly a move in the right direction,” he said.
Bird Group Executive Director Ankur Bhatia said the extension for the scheme will ease the prolonged strain on the employment-intensive sector. ”The move will bolster the much-needed liquidity to these sectors which employ a large number of people,” he said.
It is appreciated that despite the revenue constraints faced by the government and its impact on the widening fiscal deficit, the government has taken cognisance of the strain the aviation sector is going through, he noted. Further, Bhatia said the latest move would help the sector tide over the cash crunch and working capital issues.
”One of the key challenges faced by the stressed sectors is a severe liquidity crunch in the wake of low demand, and the ECLGS could help provide interim liquidity support till demand recovers,” Bhatia said.