FHRAI urges govt to include hotel tourism sector in NIP

Hospitality industry apex body FHRAI on Tuesday said it has asked the Finance Ministry to include hotels and tourism related sectors in the National Infrastructure Pipeline (NIP) so as to enable the COVID-19 hit sector to avail of funds with extended repayment periods at a low rate of interest.

In its recommendations to the ministry for the Union Budget 2022-23, Federation of Hotel & Restaurant Associations of India (FHRAI) also put forth a series of demands, including modification in infrastructure funding for hotels, allowing business losses to be carried forward for up to 12 years and granting infrastructure and industry status to the hospitality industry, besides a special tax incentive for domestic travel.

''We are requesting that hotels and tourism related sectors be included in infrastructure projects listed in the National Infrastructure Pipeline (NIP) set up under the Development Financial Institution (DFI) by the Ministry of Finance for promoting infrastructure funding. This will enable the COVID hit hospitality sector to avail funds with extended repayment periods at a low rate of interest,'' FHRAI Vice-President Gurbaxish Singh Kohli said in a statement.

Stating that the hotel industry is a long gestation industry which incurs losses in the initial years of operations and profitability improves only after a few years, he said as a result most hotels carry forward business losses with the expectation to set them off over the coming years. However, the industry's profitability took a massive hit due to the unprecedented pandemic conditions and expects businesses to post losses for the next few years. This may result in hotels being unable to set off past business losses within a period of eight years, adversely impacting cash-flow and return on investment, he added.

''Hence, we request that business losses be allowed to be carried forward from the existing 8 years to 12 years,'' Kohli said.

Reiterating the industry's long standing demands of receiving infrastructure status and industry status, he said, ''We request the government to classify hospitality under the RBI Infrastructure lending norm criteria for access to long term funds to enhance quality accommodation supply. This will stimulate higher global and domestic travel demand.'' Currently, hotels built with an investment of Rs 200 crore or more have been accorded infrastructure status. ''This threshold has to be brought down to Rs 10 crore per hotel to give fillip to hotels in the budget segment. This will enable hotels to avail term loans at lower rates of interest and also have a longer repayment period,'' he added.

Kohli also pointed out that under the prevailing conditions, the post-pandemic business environment strongly demands facilitative measures from the government to provide enough incentives to encourage the 28 million plus people who travel out of India to stay back and holiday in India. ''Since opening up of foreign travel remains a matter of contention, we had requested that the government induces domestic travel by promoting local destinations. Incentivising domestic travel through tax cuts or by way of tax deductions for a pre-agreed duration, say 2 to 3 years, will fill the void and help local tourism survive until international travel resumes,'' he said.

Highlighting that the hospitality industry is facing an existential crisis due to the lockdowns and restrictions imposed on it due to the on-going pandemic, FHRAI said the sector is ''relying heavily on the support and favourable policies of the government for its recovery''.

The association pointed out that hotels under service sectors witnessed a high decline in business scenarios post-2007. Occupancy dropped to 40 per cent and the decline of foreign exchange earnings during this period had been in excess of 5 per cent on a year-on-year basis.

In this backdrop, FHRAI asked the ministry to let the sector avail the SEIS/EPCG (Service Exports from India Scheme/Export Promotion Capital Goods) benefits without any capping and rate reductions.

''Increasing SEIS entitlement from existing 3 per cent to 10 per cent of the net foreign exchange earnings for the next three to five financial years will help the industry mitigate some of the damage inflicted on it due to the pandemic,'' FHRAI Joint Honorary Secretary Pradeep Shetty said.

In view of the volatile economic environment, he said the timeline for meeting export obligations (EO) should also be extended by at least four years for all the EPCG licenses which have EO period falling from February 2020 onwards. ''The granting of export status to the hospitality industry with tax incentives and benefits would enable the sector to be more competitive and help the sector to jumpstart its growth,'' Shetty said.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)