Cabinet approves ECLGS 5.0; 5,000 crore earmarked for airlines in view of West Asia situation

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 Shri Narendra Modi, has approved the ECLGS 5.0 scheme to provide targeted credit support to Indian airlines.

Key Features of ECLGS 5.0
- Total Credit Flow: ₹2,55,000 crore across sectors.
- Airline Allocation: ₹5,000 crore earmarked specifically for Indian airlines.
- Reason: Airlines face financial stress due to sharp ATF (Aviation Turbine Fuel) price increases, airspace closures, and reduced international operations.

Guarantee Coverage:
- 100% for MSMEs
- 90% for non‑MSMEs and airlines

Loan Structure:
- Maximum loan limit: ₹1,000 crore per borrower
- Additional ₹500 crore possible with equivalent equity infusion
- Tenure: up to 7 years, with a 2‑year moratorium
- Option to convert up to 50% of interest into a Funded Interest Term Loan (FITL)

Impact on Aviation
- Helps airlines manage liquidity mismatches and sustain operations amid global disruptions.
- Supports employment, connectivity, and sectoral resilience.
- Mitigates effects of rising fuel costs, exchange rate volatility, and operational challenges.
- Ensures lenders’ confidence with sovereign guarantee backing.

Government’s Position
Minister Ram Mohan Naidu emphasized that this measure, alongside earlier steps like capping ATF prices and reducing airport charges, will help airlines navigate short‑term liquidity challenges while safeguarding jobs and connectivity.

This scheme is designed not just as a bailout but as a structured financial cushion to stabilize India’s aviation ecosystem during unpredictable global conditions.