New emergency lending programme aims to ease liquidity pressure caused by fuel price surge and airspace disruptions linked to West Asia tensions.
India’s IndiGo airline.
ECLGS 5.0 Scheme for Airlines: India’s Union Cabinet has approved a new phase of the Emergency Credit Line Guarantee Scheme (ECLGS), providing additional financial support to airlines and small businesses facing mounting economic pressure from rising fuel costs and operational disruptions linked to tensions in West Asia.
The programme, titled ECLGS 5.0, was cleared during a Cabinet meeting chaired by Prime Minister Narendra Modi and includes a dedicated ₹5,000 crore credit window for the aviation sector.
The government said the move was designed to help Indian airlines manage severe liquidity pressures caused by sharply rising aviation turbine fuel prices, airspace closures and reduced international operations, factors that have lowered aircraft utilisation and strained cash flows across the industry.
Officials said the broader scheme would facilitate an additional credit flow of ₹2.55 lakh crore across eligible sectors, including micro, small and medium enterprises and airlines.
Under the revised framework, loans extended under the scheme will receive sovereign-backed credit guarantee coverage through the National Credit Guarantee Trustee Company Limited, or NCGTC.
The guarantee coverage will amount to 100% for MSMEs and 90% for non-MSMEs and airline borrowers.
Aviation Sector Receives Dedicated Relief Package
The aviation industry has emerged as one of the biggest beneficiaries under the latest version of the scheme, with airlines eligible for loans of up to ₹1,000 crore per borrower.
An additional ₹500 crore may also be accessed if the borrower injects an equivalent amount of equity into the business.
The loans will carry a tenure of up to seven years, including a two-year moratorium on repayments, measures aimed at easing immediate liquidity stress and improving operational stability.
The government also said airlines would be allowed to convert up to 50% of interest liabilities into a Funded Interest Term Loan, or FITL, reducing near-term repayment pressure.
The scheme applies to loans sanctioned until March 31, 2027.
Officials said the support package is intended to shield airlines from a combination of global economic shocks, including rising fuel prices, exchange-rate volatility and continuing disruptions to international air routes caused by geopolitical instability in West Asia.
Several global carriers have faced route diversions, operational delays and increased fuel consumption in recent months due to regional security concerns and restricted airspace access.
India’s aviation sector, which has experienced rapid growth in passenger traffic and fleet expansion over the past decade, has also been grappling with mounting operational costs and tightening margins.
Government Says Measures Will Protect Jobs and Connectivity
India’s Civil Aviation Minister Ram Mohan Naidu described the scheme as part of a broader government strategy to protect the aviation sector during a period of international uncertainty.
“Indian airlines have remained steady, supported by timely measures,” Naidu said, referring to earlier government steps such as capping aviation turbine fuel prices and reducing airport landing and parking charges.
He said the approval of ECLGS 5.0 would help airlines navigate short-term financial stress while ensuring continuity of operations.
“It will provide strong financial backing to safeguard jobs, sustain connectivity and ensure resilience across the aviation ecosystem,” the minister said.
The government argued that easier access to guaranteed credit would improve lender confidence and encourage banks and financial institutions to continue extending support to the aviation sector despite elevated risks.
READ: Pratt & Whitney Supplies Engine for Northrop Grumman’s Uncrewed Combat Aircraft
MSMEs Also Included Under Expanded Scheme
Alongside airlines, MSMEs will continue to receive support under the latest ECLGS framework, which was originally launched during the Covid-19 pandemic to provide emergency liquidity assistance to businesses.
Eligible enterprises will be able to access additional credit of up to 20% of their peak working capital utilisation during the fourth quarter of the 2025–26 financial year, capped at ₹100 crore.
The government said the extension of the programme reflects continuing concern over economic pressures facing businesses amid global instability and volatile commodity markets.
Industry groups have repeatedly warned that higher energy prices, currency fluctuations and slowing global trade continue to weigh on business confidence and financing conditions.
READ: India, South Korea Partnership Will Boost Shipbuilding and Port Development
Aviation Sector Seen as Strategic Growth Engine
The latest intervention underscores the strategic importance India places on its aviation industry, which the government sees as a critical driver of economic growth, connectivity and employment.
India has become one of the world’s fastest-growing aviation markets, with airlines placing record aircraft orders and expanding both domestic and international networks.
However, the sector remains highly sensitive to fuel price fluctuations, currency movements and geopolitical disruptions, particularly because fuel expenses account for a substantial share of airline operating costs.
Officials said the new scheme is also intended to minimise the impact of rising costs on passengers by helping airlines maintain operational capacity without sharply increasing fares.
Don’t Miss: Navantia Signs Life-Cycle Support Contract for Turkish Navy’s Amphibious Ship Anadolu
Don’t Miss: India’s HAL Moves to Penalize GE Aerospace as Engine Delays Stall Tejas Mk-1A Production