Centre Likely To Roll Out Relief Package For Sectors Hit By Iran War

Amid disruption in exports and imports due to the ongoing Iran war, the Centre is likely to roll out a relief package for the most-impacted sectors. According to a government source, this package will be under a broader Rs 2.5 lakh crore ECLGS (Emergency Credit Line Guarantee Scheme) framework being worked out for multiple affected sectors. Follow Live Updates

Under the package, an airline credit scheme, worth Rs 5,000 crore, is under consideration. Also, airlines may get access to Centre-backed credit line via ECLGS route. Besides, there could be a provision of up to Rs 1,000 crore credit cap per airline. The scheme may run for five years with possible extension. Notably, the airline relief package could be a part of the broader crisis support framework.

Apart from this, the government may offer up to 90 per cent credit guarantee cover. 

Earlier in March, Central Board of Indirect Taxes and Customs (CBIC) had extended relief measures for exporters in view of the Middle East crisis.

What Is Emergency Credit Line Guarantee Scheme?

In May 2020, the Union Finance Ministry had launched the Emergency Credit Line Guarantee Scheme (ECLGS). The aim was to support the economy during the Covid-19 crisis. 

The scheme was designed to reduce the financial stress caused by lockdowns. ECLGS helped them access quick funds without additional security.  The main features of ECLGS include:-

• Collateral-free loans
• Government-backed loans
• Extended loan tenure
• Interest rate is capped
• No additional guarantee fee

Due to the Iran war fallout, stocks across sectors are witnessing one of their sharpest corrections in recent years. In March, over 400 stocks witnessed a double-digit fall in their valuation. The sectors most affected by the war include:-

• Energy & Oil Marketing
• Airline and Automobiles
• Textiles & Manufacturing
• Financials & Banking
• Consumer Goods & Logistics

In the latest development, Iran has offered the United States a new proposal through Pakistani intermediaries seeking an agreement to reopen the Strait of Hormuz, according to an Axios report.

This route is critical for India's energy needs. A disruption in the movement of oil tankers through this route has raised the prices of jet fuel, raising the input cost for airlines. A rise in fuel prices hurts all sectors in India, which is largely dependent on imports for its energy needs.