The Union Cabinet of India has approved a 5,000-crore rupee (around $600 million) emergency credit scheme to support airlines and other sectors hit by rising costs and weakening demand linked to tensions in West Asia.

The decision expands the Emergency Credit Line Guarantee Scheme (ECLGS 5.0), allowing eligible borrowers — including scheduled passenger airlines — to access additional liquidity to manage short-term financial stress, the government said.

Under the scheme, airlines can secure up to 1,500 crore rupees each in guaranteed loans, with a tenure of seven years, including a two-year moratorium period. The facility is designed to help carriers cope with higher operating costs, particularly fuel expenses, and a decline in passenger traffic amid the regional crisis.

The move comes as India’s aviation sector faces mounting pressure despite strong long-term demand. Larger carriers such as IndiGo and Air India are considered relatively well-capitalised, but smaller and financially weaker airlines are struggling to sustain operations.

Eligible borrowers include both MSMEs and non-MSMEs with existing working capital limits and standard loan accounts as of March 31, 2026. Businesses can access additional credit of up to 20 percent of their peak working capital utilisation in the fourth quarter of the 2025–26 fiscal year, capped at 100 crore rupees. For airlines, the limit extends up to 100 percent, subject to a maximum of 1,500 crore rupees per borrower and other conditions.

The government said the scheme aims to help companies manage liquidity constraints, maintain operations, and safeguard employment during the ongoing geopolitical uncertainty in the region.

Industry observers say the measure could help prevent potential shutdowns among smaller carriers by ensuring access to working capital while also stabilising supply chains and supporting broader economic activity.

Source: TOI