Government amends credit scheme to help airlines stay afloat

NEW DELHI: In a lifeline for struggling-to-survive Indian carriers, the government has modified the emergency credit line guarantee scheme (ECLGS) to enhance the maximum loan amount eligibility for them to 100% of their outstanding loans or Rs 1,500 crore, whichever is lower, subject to certain conditions. Hit by Covid, airlines here had been reeling under high jet fuel prices and rupee’s free-fall — with a large part of airlines’ expenses being dollar-denominated.
Sources in SpiceJet — which has for months not been able to pay employees’ PF or deposit their tax deducted at source with authorities due to a paucity of funds — say the budget airline may get an additional Rs 1,000 crore under the amended scheme. This will “rejuvenate SpiceJet, help clear all statutory dues, lower payments, induct new Boeing 737 MAX aircraft and settle the survivability debate once and for all,” they added.
The finance ministry said in a statement on Wednesday: “… (on October 4) modified the ECLGS 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. Of (this), Rs 500 crore shall be considered, based on equity contribution by the owners…. The modifications are aimed to provide necessary collateral-free liquidity at reasonable interest rates to tide over their present cash flow problems. ”
Most airlines, however, say systemic changes are required, which are related mainly to aviation turbine fuel (ATF) pricing. “ATF in India is among the most expensive globally for domestic flights. Many states have reduced tax rates but those housing the biggest hubs like Delhi and Mumbai are yet to do so. Our request to the Center for excise relief on jet fuel is pending for months,” said officials of multiple airlines.
They point out financially weak Indian carriers’ ability to expand international network remains limited and due to this, foreign airlines account for a majority of traffic flown in and out of the country. “It is in no one’s interest to have financially weak domestic airlines. Now that there are big players like Tatas in airlines and IndiGo, a cost-friendly environment will enable them to grow quickly and garner a greater share of international traffic for Indian carriers. Modifying ECLGS only means highly leveraged airlines take on more loans and become even more vulnerable,” said officials.

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