The Union Cabinet, chaired by Narendra Modi, has approved the launch of the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 to provide financial relief to MSMEs and the aviation sector facing liquidity stress due to the ongoing West Asia crisis.
Under the scheme, an additional credit flow of ₹2.55 lakh crore has been proposed, including a dedicated allocation of ₹5,000 crore for airlines.
Why Was ECLGS 5.0 Introduced?
The government introduced the scheme due to:
- Sharp rise in Aviation Turbine Fuel (ATF) prices
- Airspace closures in West Asia
- Reduced international flight operations
- Lower aircraft utilisation
- Liquidity pressures on airlines and MSMEs
These disruptions have significantly impacted the financial health of businesses, especially airlines dependent on global operations.
Key Features of ECLGS 5.0
Credit Guarantee Coverage
The scheme provides:
- 100% guarantee cover for MSMEs
- 90% guarantee cover for non-MSMEs and airlines
The guarantees will be provided by:
- National Credit Guarantee Trustee Company Limited (NCGTC)
Special Package for Airlines
₹5,000 Crore Earmarked for Aviation Sector
The aviation sector has received a special allocation due to rising operational costs and global disruptions.
Loan Limits
- Up to ₹1,000 crore per borrower
- Additional ₹500 crore allowed if equivalent equity is infused by the borrower
Loan Terms Under the Scheme
Loan Tenure
- Maximum tenure: 7 years
Moratorium Period
- 2-year repayment moratorium
FITL Facility
Up to 50% of interest can be converted into:
- Funded Interest Term Loan (FITL)
This reduces immediate repayment burden and improves liquidity.
Eligibility & Coverage
MSMEs
Eligible borrowers can receive:
- Additional credit up to 20% of peak working capital utilised during Q4 FY26
- Maximum cap: ₹100 crore
Airlines
Can receive:
- Additional credit up to 100%
- Maximum limit: ₹1,500 crore per borrower
- Subject to specified conditions
Validity of the Scheme
The scheme will apply to loans sanctioned:
- From the date of issuance of NCGTC guidelines
- Till 31 March 2027
Government’s Statement
Ram Mohan Naidu stated that the scheme reflects the government’s commitment to:
- Protecting jobs
- Maintaining connectivity
- Supporting aviation resilience
- Ensuring uninterrupted airline operations during global uncertainties
He highlighted that India’s aviation sector has remained stable due to timely government intervention.
Importance of the Scheme
Support to Aviation Industry
Helps airlines manage:
- Fuel cost shocks
- Exchange rate volatility
- Operational disruptions
MSME Relief
Provides easier credit access during difficult economic conditions.
Employment Protection
The scheme aims to safeguard jobs across:
- Aviation
- MSMEs
- Ancillary industries
Passenger Benefit
By easing financial stress on airlines, the scheme may help reduce the burden of rising costs on passengers.
About ECLGS
The Emergency Credit Line Guarantee Scheme (ECLGS):
- Was originally launched during the COVID-19 pandemic
- Provides government-backed guaranteed loans to businesses
- Helps ensure liquidity and credit flow during crises
Conclusion
The approval of ECLGS 5.0 demonstrates the government’s proactive approach in supporting key sectors during periods of global instability. With special support for airlines and MSMEs, the scheme is expected to improve liquidity, sustain employment, and strengthen the resilience of India’s economy amid ongoing geopolitical and economic challenges.