Revised ECLGS will help hotels, aviation sector, tour operators: Crisil

Businesses like hotels, civil aviation and tour operators, which are the hardest hit by the second wave of COVID-19, will get help through the expanded Emergency Credit Line Guarantee Scheme (ECLGS), a report said on Wednesday.

It will also support build-up of healthcare infrastructure, mainly oxygen availability, in tier-2 and beyond cities and the hinterland, the report by leading credit ratings agency


The scheme was first announced in May last year, when the deep economic impact of the pandemic was becoming evident. The latest version of the scheme is valid till end September 2021 or till the Rs 3 lakh crore outlay gets exhausted.

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, it said, pointing out that loans of Rs 2.54 lakh crore have been sanctioned under the scheme as of May.

The revised scheme has included the civil aviation sector — airlines and airport operators — and also eased the eligibility criteria for companies in the hospitality, travel and tourism, and leisure and sports sectors, the agency said, adding that these segments are set to show a 30 per cent sequential demand contraction in the June quarter.

Its chief ratings officer Subodh Rai said the civil aviation sector, in particular, has been severely dented by the current embargo on international flights and very weak domestic demand.

Passenger traffic is expected to more than halve this quarter sequentially and it will take six months for the demand to revive to the levels seen in January-March 2021, he added.

“The move to include civil aviation in the scheme will provide the sector much-needed liquidity support amid materially constrained cash generation ability due to several localised lockdowns,” he noted.

Pointing out that the revised schemes includes funding of up to Rs 2 crore for oxygen generating plants for capacity enhancement at 7.5 per cent interest, the agency said it will benefit mid-sized and small hospitals, especially in tier-2 and beyond cities, and the hinterland, which have a constrained credit profile.

“Our study shows utilising Rs 1,000 crore can provide oxygen support to nearly 1 lakh beds and go a long way in preparing the country’s health infrastructure for future pandemic waves,” its director Nitin Kansal said.

While the terms of the scheme are attractive, hospital companies will have to carefully evaluate spending, keeping in mind the sustainability of demand and overall viability of investments, the agency warned.

The revised scheme will also benefit MSME borrowers that availed of the ECLGS 1.0 scheme, provided they are eligible under the Reserve Bank of India’s restructuring 2.0 framework.

Now, the moratorium on principal repayment and overall loan tenure have both been extended by a year, which will provide much-needed support to tide over the ongoing volatility in the business environment, it said.

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