A deep dive into the government's Emergency Credit Line Guarantee Scheme

ECLG 3.0 has even fewer takers. Specifically designed for sectors such as civil aviation, hospitality, travel and tourism, sports and leisure. This was first announced in March 30, 2021, almost a year after the nationwide lockdown, but before the disastrous Delta wave.

However, off-take under ECLGS 3.0 has been almost negligible and less than 4 percent. The Finance Minister has increased allocation for this scheme by around Rs 50,000 crore in the Budget. However, total off-take stands at less than Rs 12,000 crore.

The reason for the poor off-take under this window — The COVID waves have become less life-threatening, especially with the vaccination drive gaining momentum. So businesses and cash flow for these sectors has been picking up, even if their recovery has been little sluggish. But restaurants and hotels have asked the government to simplify the application process and tweet the eligible criteria to make it less restrictive.

Now, the ECLGS 1.0 was announced in May 2020 and subsequently enhanced by over Rs 1 lakh crore in June last year as a response to the Delta wave. A whopping 76 percent of the government guaranteed loans under the overall ECLGS have been registered under this window, with government guarantees touching almost Rs 2.7 lakh crore. Interestingly, most of the beneficiaries under this scheme are from the trader community and entities that belong to the textiles, service sector and food processing.

The key reason for the success of ECGS 1.0 is that it was announced at the height of the nation-wide COVID-19 lockdown. And it specifically targets micro and small enterprises. Now, with Rs 1.5 lakh crore worth of guarantees still available, there has been some speculation as to another extension of this scheme. But this may not be on the cards.

The government is genuinely of the opinion that despite the economic recovery being slow and uneven there is still a recovery. And so, keeping this key beyond the financial year-end may not be warranted. The final call, of course, will be taken by the Finance Minister, in the next Budget.