Amid ATF Price Hike, Govt Releases Rs 5,000 Crore Emergency Credit To Airlines

New Delhi: Amid the surge of ATF fuel prices owing to the crisis in the Middle East crisis, the Centre has cleared Rs 5,000 crore emergency credit line to airlines, to help them overcome ongoing constraints related to “airspace closures” and “reduced operations.”

“In view of the financial stress faced by airlines due to the sharp increase in ATF prices, compounded by airspace closures and reduced operations, particularly on international routes, leading to lower aircraft utilisation and liquidity constraints, the Union Cabinet, chaired by Prime Minister Shri Narendra Modi, has approved the ECLGS 5.0 scheme to provide targeted credit support to Indian airlines,” a press statement from the Ministry of Civil Aviation read.

For the aviation sector, the scheme has specifically earmarked Rs 5,000 crore for airlines. The scheme provides structured financial relief with a maximum loan limit of Rs 1,000 crore per borrower, and an additional Rs 500 crore subject to equivalent equity infusion by the borrower. The loans will have a tenure of up to seven years, including a two-year moratorium on repayment, thereby easing short-term liquidity pressures.

The introduction of ECLGS 5.0 aims to provide additional credit support to MSMEs and airlines during the current challenging period. The longer seven-year loan tenure, along with the option to convert up to 50% of interest into a Funded Interest Term Loan (FITL), is expected to ease immediate repayment pressure and improve cash flows and liquidity.

“Under the decisive leadership of Hon’ble Prime Minister Narendra Modi Ji, India’s aviation growth story today stands out globally as a success story built on the foundation of reforms, resilience and resurgence. And in the present scenario of unpredictable and unprecedented times, when airlines across the world are struggling with operations, Indian airlines have remained steady, supported by timely measures, be it capping of ATF prices amidst global surge, reduction in airport landing and parking charges and now a bold decision has been taken by the Government. By approving the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, airlines will be enabled to navigate short-term liquidity challenges and maintain seamless operations amid global disruptions. It will provide strong financial backing to safeguard jobs, sustain connectivity and ensure resilience across the aviation ecosystem, while also supporting MSMEs,” Civil Aviation Minister Ram Mohan Naidu said.

The Scheme will provide additional credit up to 20% of peak working capital utilised during Q4 FY 26, capped at Rs.100 crore. For airlines up to 100%, capped at Rs.1,500 crore per borrower, subject to satisfying certain specific conditions. Maximum period of guarantee cover shall be co-terminus with the tenure of the loan. 

The scheme will also help mitigate the impact of rising Aviation Turbine Fuel (ATF) prices, exchange rate volatility and operational disruptions, which continue to affect the financial health of airlines. By enabling access to credit backed by sovereign guarantee, it will enhance lender confidence, improve credit flow to the sector and support operational stability. It is also expected to sustain employment, preserve sectoral capacity and help minimise the pass-through of increased costs to passengers, thereby supporting the continued growth and resilience of India’s aviation sector.

Airlines Cry For Help

The credit help from the Centre comes days after the domestic aviation industry expressed that it is on the verge of “stopping operations”, owing to high fuel prices. At least three airlines including Air India had pleaded the government to revise the price of aviation turbine fuel (ATF). ATF prices makes up for 40 per cent of any airline's operating cost.

"Any ad hoc pricing (domestic vs international) and/or irrational increase in the price of ATF will result in insurmountable losses for airlines and will lead to grounding of aircraft, resulting in cancellation of flights," the Federation of Indian Airlines (FIA), which represents Air India, IndiGo and SpiceJet, wrote in a letter to the Ministry of Civil Aviation.

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