NEWS | FHRAI submits presentation for industry revival to Tourism & MSME Minister

Tourism Ministry acknowledged the industry’s concerns and assured that necessary help will be extended to support the hospitality industry.

Senior delegates of the Federation of Hotel & Restaurant Associations of India (FHRAI) met the Hon’ble Tourism Minister Prahlad Singh Patel and Minister of MSME Nitin Gadkari to discuss the deteriorating state of the Hospitality and Tourism industry and to recommend immediate fiscal measures to save it from imminent collapse. The Association submitted representations suggesting key policy changes for the revival of the sector.

The Association representatives also met and submitted the representation to Arvind Singh, Secretary, Ministry of Tourism, and Rakesh Kumar Verma, Jt. Secretary, Ministry of Tourism. The Association recently also held a virtual meeting with the Principal Economic Advisor, Ministry of Finance Sanjeev Sanyal with recommendations specific to the Hospitality sector.

The Tourism Ministry acknowledged the industry’s concerns and assured that necessary help will be extended to support the hospitality industry. It has also reassured that the sector’s issues and recommendations offered by the FHRAI delegates will be raised with the Prime Minister and the Finance Ministry. The Tourism Ministry is closely following up with the Ministry of Finance on the SEIS scheme and other concerns will be addressed on a one-on-one basis with the respective Ministries. The MSME Minister too has expressed that they are aware of the hardships the industry is going through and that will look into the industry’s concerns favorably with regards to the ECLGS scheme and the RBI’s Resolution Framework. Mr. Sanyal too has expressed that they will consider the industry’s demands favorably and at the earliest.

The Association has thanked Prahlad Patel, Nitin Gadkari, Sanyal, Singh, and Verma for their valuable time and for understanding the industry’s concerns.

“The pandemic has devastated the hospitality sector, businesses are steadily closing and NPAs are rising. In our meeting with the Ministers, we recommended a well-made sector specific stimulus package that addresses the most critical aspects of reducing financial loss, mobilizing loans and retention of employment. The recommendations include complete waiver of interest on loans beginning March 2020 till business normalcy resumes, announcement of special measures for the industry and the interest burden of loans borne by the Government for a fixed period, monthly basic salaries paid directly to tourism, travel and hospitality employees who have lost their jobs due to the pandemic, provision of a moratorium of 3 years on the principal loan amount, working capital support at interest on fixed deposit rate plus 2 percent or MCLR rate, the urgent release of SEIS pending payments, removal of secondary condition in EPCG and introduction of a long term financing scheme for at least 10 years back with a guarantee from Central Government to Banks and NBFCs,” says Gurbaxish Singh Kohli, Vice President, FHRAI.

The industry’s total revenue in FY 2019-20 stood at Rs.1.82 lakh Cr and as per our estimates, in FY 2020-21, approximately 75 per cent of the industry's revenues got wiped off. That is more than Rs.1.30 lakh Cr revenue hit for the Indian economy. The total loan outstanding to the hospitality industry is over Rs.60,000 Cr today.

“Since April 2021 the revenue hasn’t even crossed 8-10 percent. Our right to conduct business was taken away but the right to recover loans and charge interest by our lenders is being allowed. The Hospitality industry is under tremendous cash flow pressure to meet its operating expenses including payment of salaries and wages, repayment obligation to banks and financial institutions, and funding its capital expenditure plans. We request timely payment of cash flows under the SEIS scheme and refund of income tax payment that is due to the Hospitality sector. This will make a big difference to the ability of hotels to pay the workforce employed in the sector, meet the operational expenses and mange loan repayment obligations,” says Pradeep Shetty, Jt. Hon. Secretary, FHRAI.

The Association has suggested waiver or relaxation under the EPCG scheme. With regards to the average Foreign Exchanges Earnings (FEE), it has stated that the industry does not have any FEE to redeem the license as there has been no foreign travel in this pandemic. Even prior to the pandemic, the arrivals and spending of foreigners was dismal and the EPCG conditions were impossible to adhere to and hence the condition should be completely waived off and the conditions be deemed as adhered to and fulfilled. It has also suggested that foreign tourists visiting India, and staying and spending in hotels should be deemed as foreign exchange earned by hotels for the purpose of redemption of EPCG license. The Association has also requested waivers or reliefs to Greenfield Hotel Projects and expansion of existing hotels during the pandemic by releasing the Bank Guarantees and corresponding FDRs and IGST.

Due to financial losses, 40 percent of hotels and restaurants in the country have shut down permanently and about 20 percent haven’t opened fully since the first lockdown. The remaining 40 percent continue to run in losses. The financial institutions have marked the industry on the negative list.

“The industry is grappling with indescribable financial issues. It is imperative to make some additional provision of funds under the ECLGS and align the tenure and moratorium facilities of ECLGS 1.0 and 2.0 in line with ECLGS 3.0 to support the survival efforts of the sector. We have requested provisioning a special window for restructuring for the sector without any cap on loan exposure. We have also asked for the setting up of a redressal forum by the Government or the RBI to address issues faced by the Hospitality industry in availing loans for restructuring. Being the worst hit amongst other industries, the Association has suggested several steps in aiding the revival of the sector which will be crucial in the long-term health of both the sector and the country’s economy,” concludes D V S Somaraju, Treasurer, FHRAI.