In a move to help the cash-strapped aviation sector, the government has modified the norms to allow airlines to avail themselves of loans up to 100 per cent of their requirement under the Emergency Credit Line Guarantee Scheme (ECLGS).

Version 3.0 of the scheme has been modified to enhance “the maximum loan amount eligibility for airlines to 100 per cent of their fund-based or non-fund-based loan outstanding as on the reference dates or Rs 1,500 crore, whichever is lower; and of the above, Rs 500 crore shall be considered, based on equity contribution by the owners,” the finance ministry statement on Wednesday said.

Previously, civil aviation companies were allowed to borrow up to 50 per cent of their highest fund-based credit outstanding, subject to a maximum of Rs 400 crore per borrower, as against 40 per cent of their credit outstanding as part of earlier iterations of the ECLGS scheme.

Earlier in March 2022, the Emergency Credit Line Guarantee Scheme (ECLGS) was extended beyond March 2022, till March 2023.

“The modifications introduced are aimed to give necessary collateral-free liquidity at reasonable interest rates to tide over their present cash flow problems,” the statement said.

Under the ECLGS, banks provide additional loans to existing borrowers without asking for extra collateral to help them cope with the liquidity crunch resulting from Covid curbs.

These loans are also fully guaranteed by the government against credit losses. Most Indian airlines are still facing issues such as high fuel costs and limited domestic passenger operations, and have not yet restored the salaries of their employees to pre-Covid levels.

While, IndiGo is expected to restore salaries of its pilots, cabin crew, and ground handling staff to pre-Covid levels by September, SpiceJet’s employees have been struggling with delayed payments. In August, the Cabinet had approved an enhancement in the ECLGS limit by Rs 50,000 crore — from Rs 4.5 lakh crore to Rs 5 lakh crore.