The central government has stepped in to throw a ₹5,000 crore lifeline to the country’s embattled aviation sector, launching the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0. This significant intervention arrives as Indian carriers find themselves caught in a financial pincer movement, squeezed by the fallout of the West Asia crisis which has sent aviation turbine fuel prices soaring and caused havoc with international flight paths.
The geopolitical instability in Iran has not only made fuel more expensive but has also triggered currency volatility and forced airlines to navigate around vast swathes of restricted airspace. The impact is already being felt on the tarmac; Air India has already begun scaling back its international schedules for June and July, admitting that several long-haul routes have simply become "unviable" under current conditions.
Under the new provisions, eligible airlines can tap into loans of up to ₹1,000 crore, with a further ₹500 crore available to those willing to match the amount with an equity infusion. Importantly, however, the loans will come with seven years of tenure along with two years of grace period for repayment, offering a much-needed buffer for firms that have been fighting hard to maintain their positive cash flows. In order to mitigate the impact, however, the government has decided to allow for conversion of up to 50 per cent of interest into a funded loan.
As noted by Civil Aviation Minister Ram Mohan Naidu, the decision was essential because of the hostile international environment and in order to prevent the fall of national connectivity in such conditions. While the government pointed out that local carriers have shown a certain level of grit so far — thanks in part to earlier caps on airport charges — this latest credit facility is an acknowledgement that without state support, the rising costs of fuel and the fluctuating rupee could leave the industry permanently grounded.
Also read: Iran imposes new transit permit rules in Strait of Hormuz
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