New Delhi, India: The Union Cabinet has approved a dedicated ₹5,000 crore emergency credit support window for Indian airlines under the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, as carriers grapple with mounting operational and financial pressure arising from the ongoing West Asia crisis.
According to the official release issued by the Press Information Bureau (PIB) and the Ministry of Civil Aviation, Indian airlines have come under severe financial stress following a sharp surge in Aviation Turbine Fuel (ATF) prices, airspace restrictions and operational disruptions linked to the geopolitical situation in West Asia.
The government said international operations have been particularly affected due to rerouted flight paths, longer flying times, lower aircraft utilisation and increased operating expenses, resulting in short-term liquidity mismatches for carriers.
Under ECLGS 5.0, scheduled passenger airlines will be eligible for additional emergency credit support of up to 100% of their peak working capital utilisation during the fourth quarter of FY2025-26, subject to a cap of ₹1,500 crore per borrower.
The loans sanctioned under the scheme will carry a seven-year tenure, including a two-year moratorium on principal repayment.
The scheme will provide a 90% government guarantee cover on loans extended to airlines and non-MSME borrowers through the National Credit Guarantee Trustee Company Limited (NCGTC), while MSMEs will receive 100% guarantee coverage.
The Cabinet said the move is intended to ensure continuity of operations, protect jobs, stabilise supply chains and maintain domestic economic activity amid rising geopolitical uncertainty and elevated crude oil prices.
Eligible borrowers under the scheme include MSMEs, non-MSMEs with existing working capital limits and scheduled passenger airlines with outstanding credit facilities as of March 31, 2026, provided their accounts remain standard and non-performing assets are excluded.
For MSMEs and other eligible businesses, additional borrowing will be capped at 20% of peak working capital utilisation during Q4 FY26, subject to a maximum of ₹100 crore. These loans will carry a five-year tenure with a one-year moratorium.
The government has also waived guarantee fees under the scheme in a bid to accelerate credit flow and encourage banks and financial institutions to lend despite heightened risk conditions.
The ECLGS 5.0 facility will remain open for sanctions until March 31, 2027.
Information and Broadcasting Minister Ashwini Vaishnaw said the scheme was designed to provide immediate liquidity relief to sectors directly affected by the West Asia conflict and to prevent disruptions to industrial activity and employment.
CAPA India described the measure as a major relief for the sector, noting that the government had already taken steps to secure ATF supplies and reduce operational costs before extending direct credit support.
Market reaction remained positive following the announcement. Shares of InterGlobe Aviation, parent company of IndiGo, and SpiceJet gained after investors responded favourably to the liquidity support package.
The latest ECLGS iteration marks the fifth version of the emergency credit programme originally introduced during the COVID-19 pandemic under the Atmanirbhar Bharat initiative to provide collateral-free, government-backed loans to stressed businesses.
While industry bodies welcomed the move, some economists and market observers cautioned that extended moratoriums and large-scale guaranteed lending could create future repayment and credit discipline risks if geopolitical instability persists longer than expected.
The announcement comes as India faces broader economic risks from volatile global oil prices, trade disruptions and reduced regional aviation efficiency linked to the escalating conflict in West Asia.
