Amid disruptions, a timely lifeline, Pg12

Key Highlights:

• In May 2020, the Centre launched the Emergency Credit Line Guarantee Scheme (ECLGS) to support firms during the Covid-19 pandemic.
• The ECLGS benefitted 1.19 crore borrowers, with guarantees totaling Rs 3.61 lakh crore.
• The government has launched ECLGS 5.0 to address economic disruptions caused by the West Asia conflict.
• ECLGS 5.0 aims to provide additional credit of Rs 2.55 lakh crore, including Rs 5,000 crore for airlines.

Detailed Insights:

• ECLGS 5.0 offers credit to MSMEs and non-MSMEs (excluding aviation) up to 20% of their peak working capital, capped at Rs 100 crore.
• Airlines can receive credit up to 100%, capped at Rs 1,500 crore, with a moratorium period of two years.
• MSMEs are particularly vulnerable to disruptions due to limited capacity to absorb input cost surges and supply-chain issues.
• Rising energy prices and supply-side disruptions disproportionately affect the MSME sector, as highlighted in the last MPC meeting.
• Shortages of natural gas have impacted many MSMEs that rely on it as a fuel source.
• Airline companies are facing challenges due to the conflict, with reports of flight cuts and rising ticket prices globally.
• Oil marketing companies in India have increased aviation turbine fuel prices for international flights, while maintaining prices for domestic flights.

Key Concepts Involved:

• MSME: Micro, Small, and Medium Enterprises, which are businesses that fall below certain size limits.
• ECLGS: Emergency Credit Line Guarantee Scheme, a government initiative to provide credit to businesses during economic crises.
• MPC: Monetary Policy Committee, responsible for setting India's monetary policy, including interest rates.