The Federation of Indian Airlines has requested government intervention to speed up the release of ECLGS 5.0 funds. Domestic carriers are facing a severe cash crunch due to high fuel prices and geopolitical tensions, making the timely disbursement of this government-backed support critical for operational stability.
The Federation of Indian Airlines (FIA), which represents major carriers like Air India, IndiGo, and SpiceJet, has formally approached Civil Aviation Minister K Rammohan Naidu to address delays in the disbursement of funds under the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0. In a communication dated October 1, 2026, the industry body highlighted that while the scheme was designed to provide a vital financial cushion, the actual release of funds has been slower than expected.
The core issue stems from the hesitation of lending institutions to process the sanctioned relief. Although the government provides a 90% guarantee cover for the loans, banks and financial institutions are reportedly exercising caution before releasing the capital. This bottleneck is creating a difficult situation for airlines that are already struggling with severe financial and operational pressures.
Domestic carriers are currently battling a combination of challenging factors, including the impact of the ongoing conflict in West Asia, which has increased operational risks and fuel costs. Aviation Turbine Fuel (ATF) prices remain high, hovering around ₹137 per litre as of early October 2026. Additionally, the depreciation of the rupee and costs associated with flight diversions have further strained the working capital of many airlines. For companies operating with tight profit margins, the delay in receiving sanctioned liquidity support directly impacts their ability to meet daily operational expenses.
Specific instances illustrate the pressure on the sector. For example, SpiceJet has reportedly received an initial tranche of ₹150 crore under the scheme but is still waiting for subsequent funds. Such delays make it harder for airlines to manage cash flow and ensure consistent service quality. The ECLGS 5.0 scheme, which provides up to ₹1,500 crore per eligible airline, was meant to act as a buffer against these exact market disruptions.
For investors and market observers, the key risk lies in the continuity of operations. If lenders continue to be risk-averse, the intended benefits of the government’s support will not reach the carriers in time, potentially leading to service disruptions. The primary monitorable in the coming weeks will be whether the Ministry of Civil Aviation can facilitate an agreement with the banking sector to expedite the pending disbursements. Investors should track official updates on the release of these tranches, as they are crucial for the short-term financial health of the more vulnerable players in the industry.