The Union Finance Minister allowed airlines to avail of up to Rs 1,500 crore loan under the Emergency Credit Line Guarantee Scheme (ECLGS). The ECLGS will help them to recover their cash flow problems. Earlier, an airline could only avail of a loan of not more than Rs 400 crore under the ECLGS. In 2020, the Centre started to provide collateral-dree and government-guaranteed loans to businesses affected by the Covid-19 pandemic.
Key Points related to FinMin Allowing Airlines to Avail Rs 1,500 crore loans
- The Finance Minister’s decision will likely benefit the financially affected airlines.
- It is a positive approach for the airlines to secure their working capital and funds for operation.
- The Department of Financial Services has informed that it has enhanced the maximum loan amount eligibility for airlines under the ECLGS to 100 percent of their total credit outstanding.
- The modification in the policy aims to give necessary collateral-free liquidity at reasonable interest rates
- Due to the Covid-19 pandemic, the Aviation sector was affected significantly.
- The halt in domestic and international travel made it more difficult for the airlines to run consistently.
- Amid the Russia-Ukraine war, the prices of Aviation Turbine Fuel (ATF) have shown immense volatility in the past several months.
- The cost of ATF forms around 40 percent of the total operating cost of Airlines impacting their financial viability.