The expansion of the Emergency Credit Line Guarantee Scheme (ECLGS) announced by the government on May 30, 2021, will help companies in sectors such as civil aviation, hotels and tour operators, where demand has been severely affected by the intense second wave of the Covid-19 pandemic. The scheme will also support build-up of healthcare infrastructure, mainly oxygen availability, in Tier 2 and beyond cities, and the hinterland.
The scope of the scheme, first announced on May 13, 2020, has been continuously expanded. The latest version will be valid up to September 30, 2021, or till the unutilised amount of Rs 3.0 lakh crore is exhausted, whichever is earlier. More sectors have been brought under the scheme’s ambit, some eligibility criteria have been relaxed, and micro, small and medium enterprises (MSMEs) have been allowed to avail of loans for longer tenures. The scheme has sanctioned ~Rs2.54 lakh crore of loans under the previous three versions as of mid-May.
The revised scheme has included the civil aviation sector – airlines and airport operators – and also eased the eligibility criteria1 for companies in the hospitality, travel and tourism, and leisure and sports sectors. All these have been hit hard by the second wave. In the current quarter, these sectors are expected to see a demand contraction of over 30% sequentially. Moreover, except for airport operators, many companies in the other stipulated sectors of the scheme have high leverage, which constrain their ability to withstand unexpected demand contraction.
Source: CRISIL Ratings
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