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Oxygen generation: Finance Ministry enlarges scope of credit scheme for setting up plants

The ministry attributed the latest changes in the scheme to ‘disruptions caused by the second wave of COVID-19 pandemic to businesses across various sectors’. File   | Photo Credit: K. MURALI KUMAR

The Centre on Sunday enlarged the scope of the Emergency Credit Line Guarantee Scheme (ECLGS) to cover loans up to ₹2 crore for setting up on-site oxygen generation plants at healthcare facilities and brought in the ailing civil aviation sector under its ambit.

 

Industry captains appreciated the move but expressed concerns about its efficacy as the scheme’s allocation has not been enhanced beyond the original ₹3 lakh crore. The ECLGS was launched last year to help businesses tide over the national lockdown’s adverse effects and about ₹2.55 lakh crore has already been utilised.

 

Public sector banks said they were ready to implement the expanded scheme

 

However, just about ₹45,000 crore remains to cope with the demand from newly included beneficiaries as well as existing ones who have been offered some marginal respite.

 

Attributing the latest changes in the scheme to ‘disruptions caused by the second wave of COVID 19 pandemic to businesses across various sectors’, the Finance Ministry extended the scheme’s validity till September 30 from June 30 and permitted lenders to disburse credit till December 31, 2021.

 

FICCI president Uday Shankar hoped banks would begin lending quickly to the critical healthcare sector to help ramp up the health infrastructure to prepare for any future waves of the pandemic but added that a higher allocation would have helped even more.

 

“We had requested that the quantum under ECLGS should be doubled to ₹6 lakh crore. We hope the Finance Ministry will keep a close watch on the situation and appropriate enhancements willbe made in time, as required,” Mr Shankar said. Last week, CII president Uday Kotak had also urged the government to expand the ECLGS to around ₹5 lakh crore

 

Additional credit assistance of up to 10% of outstanding loans as on February 29, 2020, has been granted to existing borrowers under the scheme. The repayment tenure for such borrowers has also been reworked. The ELCGS originally provided additional working capital finance for 20% of a borrower’s outstanding credit as on February 29, 2020,in the form of a term loan at a concessional interest rate.

 

The changes announced constitute ‘no fresh stimulus’ and will only benefit firms that had already availed ECLGS help and are seeking restructuring, said K.E. Raghunathan, convenor of the Consortium of Indian Associations.

 

Terming the 10% additional credit line ‘peanuts’, he said that big concerns of majority of micro-enterprises remain unaddressed. “We await the next announcement with hope,” he added.

 

“ECLGS 4.0 (includes) 100% guarantee cover to loans upto ₹2 crore to hospitals, nursing homes, clinics,medical colleges for setting up on-site oxygen generation plants, interest rate capped at 7.5%,” the Ministry said in a statement.

Treatment loans

State Bank of India chairman Dinesh Khara and Indian Banks’ Association chief Rajkiran Rai, in a joint briefing, said banks are ready to implement the new ECLGS features and announced three new products designed to help fight COVID-19.

 

These include unsecured personal loans to individuals from ₹25,000 to ₹5 lakh to meet medical treatment costs for COVID-19, and business loans to healthcare facilities upto ₹100 crore. The latter could be availed by vaccine manufacturers and importers, hospitals, pathology labs, as well as producers or suppliers of oxygen,ventilators and Covid-related drugs logistics firms.

 

With the inclusion of the capital-intensive aviation sector, the government has also dropped the ₹500 crore loan outstanding limit for availing emergency credit. The maximum additional assistance to each borrower has, however, been limited to 40% of the outstandingamount, or ₹ 200 crore, whichever is lower.

 

Borrowers with an ELCGS loan of four years’ tenure, were required to only repay interest during the first 12 months and repay principal with interest in the next 36 months. Now, they will be able to avail a five years’ loan tenure with only interest repayments to reckon with for the first 24 months. The National Credit Guarantee Trustee Company is expected to issue detailed operational guidelines on the scheme soon.


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Printable version | Sep 18, 2021 9:29:38 PM | https://www.thehindu.com/news/national/finance-ministry-has-enlarged-scope-of-eclgs-scheme-for-setting-up-oxygen-generation-plants/article34681053.ece

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