Modified ECLGS: SpiceJet hopes to get Rs 1000 cr; CMD says ‘settles survivability debate once and for all’ – Times of India
NEW DELHI: The government’s modified emergency credit line guarantee scheme (ECLGS) for airlines could throw a lifeline to struggling-to-survive SpiceJet. Sources in the budget airline claim SpiceJet may get about Rs 1,000 crore under the amended scheme that will help it clear “all statutory dues, lessor payments and induct brand new Boeing 737MAX planes.”
A younger fleet means more efficiency- both operational and in terms of fuel savings. Cash-starved SpiceJet has for several months not been able to deposit TDS with authorities, give PF to employees and is yet to give Form 16 of last fiscal to staffers.
“The additional funding of more than $100 million into SpiceJet settles the survivability debate once and for all. It will provide an impetus to the existing fund raise of $200 million being undertaken by the airline,” said airlines sources.
SpiceJet CMD Ajay Singh said: “…(The modified ECLGS) will provide a tremendous boost to airlines. I request the government once again for its support for including aviation turbine fuel (ATF) under GST, which would be a game changer for the entire sector.”
The government on Tuesday modified the “emergency credit line guarantee scheme” (ECLGS) to enhance the maximum loan amount eligibility for them to 100% of their outstanding loans or Rs 1,500 crore, whichever is lower, subject to certain conditions, throwing a vital lifeline for struggling-to-survive Indian carriers. Ravaged by Covid, airlines here had been reeling under record jet fuel prices for past several months which recently started cooling down. But now the rupee’s free-fall — with a large part of airlines’ expenses being dollar-denominated — is hurting them badly.
“… ministry of finance (on Oct 4) modified the ECLGS to enhance the maximum loan amount eligibility for airlines under ECLGS 3.0 to 100% of their fund based or non-fund-based loan outstanding as on the reference dates or Rs. 1,500 crore, whichever is lower. Of (this), Rs 500 crore shall be considered, based on equity contribution by the owners…. The modifications are aimed to give necessary collateral-free liquidity at reasonable interest rates to tide over their present cash flow problems,” finance ministry said in a statement on Wednesday.
Most airlines, however, say systemic changes are required related mainly to jet fuel pricing. “ATF in India is among the most expensive globally for domestic flights. Many states have reduced tax rates but those housing the biggest hubs like Delhi and Mumbai are yet to do so. Our request to the Centre for excise relief on jet fuel is pending for months,” said officials of multiple airlines.
They point out financially weak Indian carriers’ ability to expand international network remains limited and due to this, foreign airlines account for a majority of traffic flown in and out of the country. “It is in no one’s interest to have financially weak home airlines. Now that there are big players like Tatas in airlines and IndiGo, a cost-friendly environment will enable them to grow quickly and garner greater share of international traffic for Indian carriers. Modifying ECLGS only means highly leveraged airlines take on more loan and become even more vulnerable,” said officials.
ATF pricing started inching up post Russia’s war on Ukraine earlier this year just when air travel was beginning to pick up post Omicron. As a result, Covid-ravaged airlines did not get any relief and now a weaker rupee is compounding their woes.
While not yet acceding to airlines’ demand for excise cut of ATF, the finance ministry had in March 2022 extended ECLGS further. “Keeping in view the high proportion of non-fund based credit in the overall credit of the civil aviation sector, the eligible borrowers were permitted to avail up to 50% of their highest total fund and non-fund based credit outstanding, subject to a maximum of Rs. 400 crore per borrower,” the fin min statement on Wednesday added.
A younger fleet means more efficiency- both operational and in terms of fuel savings. Cash-starved SpiceJet has for several months not been able to deposit TDS with authorities, give PF to employees and is yet to give Form 16 of last fiscal to staffers.
“The additional funding of more than $100 million into SpiceJet settles the survivability debate once and for all. It will provide an impetus to the existing fund raise of $200 million being undertaken by the airline,” said airlines sources.
SpiceJet CMD Ajay Singh said: “…(The modified ECLGS) will provide a tremendous boost to airlines. I request the government once again for its support for including aviation turbine fuel (ATF) under GST, which would be a game changer for the entire sector.”
The government on Tuesday modified the “emergency credit line guarantee scheme” (ECLGS) to enhance the maximum loan amount eligibility for them to 100% of their outstanding loans or Rs 1,500 crore, whichever is lower, subject to certain conditions, throwing a vital lifeline for struggling-to-survive Indian carriers. Ravaged by Covid, airlines here had been reeling under record jet fuel prices for past several months which recently started cooling down. But now the rupee’s free-fall — with a large part of airlines’ expenses being dollar-denominated — is hurting them badly.
“… ministry of finance (on Oct 4) modified the ECLGS to enhance the maximum loan amount eligibility for airlines under ECLGS 3.0 to 100% of their fund based or non-fund-based loan outstanding as on the reference dates or Rs. 1,500 crore, whichever is lower. Of (this), Rs 500 crore shall be considered, based on equity contribution by the owners…. The modifications are aimed to give necessary collateral-free liquidity at reasonable interest rates to tide over their present cash flow problems,” finance ministry said in a statement on Wednesday.
Most airlines, however, say systemic changes are required related mainly to jet fuel pricing. “ATF in India is among the most expensive globally for domestic flights. Many states have reduced tax rates but those housing the biggest hubs like Delhi and Mumbai are yet to do so. Our request to the Centre for excise relief on jet fuel is pending for months,” said officials of multiple airlines.
They point out financially weak Indian carriers’ ability to expand international network remains limited and due to this, foreign airlines account for a majority of traffic flown in and out of the country. “It is in no one’s interest to have financially weak home airlines. Now that there are big players like Tatas in airlines and IndiGo, a cost-friendly environment will enable them to grow quickly and garner greater share of international traffic for Indian carriers. Modifying ECLGS only means highly leveraged airlines take on more loan and become even more vulnerable,” said officials.
ATF pricing started inching up post Russia’s war on Ukraine earlier this year just when air travel was beginning to pick up post Omicron. As a result, Covid-ravaged airlines did not get any relief and now a weaker rupee is compounding their woes.
While not yet acceding to airlines’ demand for excise cut of ATF, the finance ministry had in March 2022 extended ECLGS further. “Keeping in view the high proportion of non-fund based credit in the overall credit of the civil aviation sector, the eligible borrowers were permitted to avail up to 50% of their highest total fund and non-fund based credit outstanding, subject to a maximum of Rs. 400 crore per borrower,” the fin min statement on Wednesday added.
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