India’s debt-laden airlines would be allowed to borrow up to $1 billion from overseas to meet their working capital requirements, the finance ministry said on Thursday.
The move will enable Indian carriers, which are likely to post a record loss of $2.5 billion in 2011-12, to get cheaper loans and provide an additional source of low-cost capital to the airline industry to help it tide over their current financial crunch.
“In order to increase access to ECBs, the Reserve Bank of India would consider relaxation in the average maturity period for ECBs above $20 million from five to three years,” the finance ministry said.
“The ECBs made under this provision would have a maximum ceiling of $1 billion for the entire civil aviation sector. The limit for individual airline companies would be $300 million. This limit can be availed either in a lump sum or in tranches depending upon the utilisation of the limit during the one year when the facility is available,” the ministry said.
It said that proposal of individual companies would be considered by the RBI under the approval route based on parametres such as cash flows and the capacity of individual companies to repay these loans from their foreign exchange earnings. The RBI is expected to issue relevant notification giving effect to the aforesaid budget announcement within seven days.