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The Central government’s latest move to modify the Emergency Credit Line Guarantee Scheme (ECLGS) is expected to bring some relief to the hard-hit multiplex and hospitality sectors as they grapple with the impact of the second pandemic wave.
On Sunday, the Finance Ministry brought in key changes in ECLGS 3.0. This includes removal of the ceiling of ₹500 crore of loan outstanding as on February 29, 2020 to be eligible to get credit under the scheme. However, it will be “subject to maximum additional ECLGS assistance to each borrower being limited to 40 per cent or ₹200 crore, whichever is lower.”
A senior government official told BusinessLine that many big players in the multiplex or hotel sectors, who had taken loans from overseas and domestic institutions,were not eligible on account of the ₹500 crore cap. “Now, they should not have any problem and will get guaranteed loan up to ₹200 crore,” he added.
Industry players’ reaction
Reacting to government’s announcement, Nitin Sood, Chief Financial Officer, PVR Ltd said, “This will go a long way in providing additional liquidity to various companies in the Indian multiplex industry which has been one of the worst hit sectors in the pandemic and provide them with much needed liquidity support to tide through these troubled times.”
Cinemas across the country are currently shut as the State governments have imposed lockdown-like restrictions to curb the spread of the second pandemic wave.
Kailash Gupta, Chief Financial Officer, INOX Leisure Ltd said, “The expansion of the Emergency Credit Line Guarantee Scheme by the Finance Ministry will provide vital assistance to a sectors like ours, which have been under tremendous financial stress. The new provisions would take care of the apprehensions of banks, which were showing resistance towards the stressed sectors, thanks to the guarantee offered by the Central government at lower interest rates with existing security.”
Filing recommendations
Earlier this month, various hotel industry bodies had also submitted recommendations to the Finance Ministry to bring changes in the ECLG scheme.
Pradeep Shetty, Joint Secretary, Federation of Hotel & Restaurant Associations of India (FHRAI) said, “This announcement of modifications in the ECLGS scheme 3.0 and the proposed 4.0 are most welcome and will bring in the desperately needed changes in this scheme. We are indeed thankful to the government in heeding to our requests. We will now need to see the operational circular.” He added that the industry hopes the issues of banks not implementing this scheme get adequately addressed.
Shetty said that the stringent lockdown orders by various state governments have severely impacted and affected the Indian hospitality industry. “Businesses of a majority of hotels and restaurants have come to a complete standstill making even survival a challenge. The Indian hotel industry’s total revenue in FY 2019-20 stood at ₹1.82-lakh crore. As per industry estimates, in FY 2020-21, approximately 75 per cent of the industry's revenues got wiped off. That is more than ₹1.30-lakh crore revenue hit,” he added.
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