The Union Cabinet, chaired by Prime Minister Narendra Modi, approved the fifth edition of the Emergency Credit Line Guarantee Scheme (ECLGS 5.0) on May 5, 2026. According to Moneycontrol reports, the scheme included a dedicated ₹5,000 crore carve-out for India's aviation sector.
The scheme carries a total outlay of ₹18,100 crore and is expected to unlock additional credit flow of ₹2.55 trillion. It is aimed at supporting MSMEs, airlines, and other businesses facing rising working-capital pressures amid the ongoing West Asia crisis.
Markets responded immediately. IndiGo shares jumped 7.6 per cent, while SpiceJet shares were locked in the 5 per cent upper circuit on May 6, the first trading session after the announcement.
Under the scheme, the government will provide 90% guarantee coverage for the airline sector through the National Credit Guarantee Trustee Company Limited (NCGTC). Airlines can avail 100 per cent credit support, subject to conditions, which will be capped at ₹1,500 crore per airline, as per the reports by Moneycontrol.
The tenure of loans under the scheme would be seven years, with a 2-year moratorium for the airlines. No guarantee fee will be charged, and the scheme applies to loans sanctioned until March 31, 2027.
According to Business Standard, the Union minister Ashwini Vaishnaw told reporters that the scheme is based on the ECLGS framework that was rolled out during the Covid-19 pandemic. It aims to provide much-needed liquidity without causing any “moral hazard”.
The liquidity scheme does not tackle the root causes. SpiceJet has reduced its international flights by more than 60 per cent year-on-year, with currently 70 weekly flights in service compared to 176 last year.
IndiGo's international frequency has also been cut down by 150 flights to 1,687 per week.
Post Operation Sindoor, Pakistan's airspace has been closed to Indian carriers, and the war in West Asia has made the routes important for international flights longer, resulting in higher consumption.
Analysts at Ambit Capital have already lowered their FY27 earnings per share estimates for IndiGo by 22 per cent, assuming crude at $82/bbl and USD/INR at 93, according to reports by Business Standard.
While ECLGS 5.0 provides breathing space, the remaining path for Indian aviation is narrow till the fuel cost and airspace issues are sorted out.
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