FAITH has requested the Governments of India to rapidly deploy a ‘Survival & Revival’ financial package to the Indian hotels and resorts, travel agents and tour operators, tourist transporters on term loans from financial institutions, working capital from financial institutions, statutory obligations to be made to central, state and local Governments as well as advisory to other stakeholders. T3 reproduces here the communication sent by FAITH.
OVID-19 has alarming implications for the Indian Tourism, Travel & Hospitality industry. There is a risk that most of the companies in this industry would be unable to service their financial obligations and will most possibly get distressed. It is thus requested to the Government of India to consider on an IMMEDIATE BASIS an overall relief package for this industry across all its subsectors to prevent large scale bankruptcy/insolvencies & large-scale unemployment.
Indian tourism, travel & hospitality industry is highly diverse. There are micro, small, medium and large enterprises across the whole spectrum. All these tourism enterprises exist both across the organised and the unorganised space. There are roughly estimated to be more than 53,000 travel agents, 1,15,000 Tour Operators (in inbound, domestic & outbound segments), 15,000 Tour Operators in the Adventure Tourism business, over 2700 businesses in meetings, industries, conferences and exhibitions business , 19,11,000 Road Tourist Transporters (tourist cars & tourist coaches), 53,000 hospitality establishments & 5 lakhs+ restaurants in India. Together these 26 lakhs+ tourism, travel & hospitality enterprises across India are estimated to impact the employment of almost 5.5 crore Indians.
EXPOSURE TO THE INDIAN BANKING SECTOR OF TOURISM, HOTELS & RESTAURANTS
As of September 2019, the outstanding gross bank credit for the tourism, hotels & restaurants sector was Rs. 56,766 crores. This was just 0.58% of the total deployment of Gross Bank Credit of Rs. 95,57,487 crores (SOURCE-1). This was also just 2.2% of the total deployment of Gross Bank Credit to the services sector which was Rs. 25,30,553 crores (SOURCE-1).
Over the 18 months period from March 2018 till September 2019, the Gross Bank Credit deployed in the tourism, hotels & restaurants sector went up by just Rs. 4,671 crores i.e. from Rs. 52,095 crores to Rs. 56,766 crores (SOURCE-1). This was an increase of around 9%.
During the same time period, the total Gross Bank Credit increased by Rs. 11,58,291 crores i.e.from Rs. 83,99,196 crores in March 2018 to Rs. 95,57,487 crores in September 2019 (SOURCE-1). This was an increase of 14%.
While the total gross bank credit has increased in the country, the share of tourism, hotels &restaurant sector has come down from 18-month period from 0.62% to 0.43% during this period.
The tourism sector of India is not a risk to the Indian banking system and thus needs to be protected at all costs to prevent its assets from becoming non-performing.
GLOBAL EXAMPLES OF SUPPORT TO THE INDUSTRY DURING COVID-19
Globally it is being estimated that more than 100s of millions of jobs in tourism travel and Hospitality are at very high risk with hundreds of thousands of employees in this industry being asked to go on leave without pay almost every day. Countries around the world are rapidly putting up support & relief measures for the tourism, travel & hospitality industry as part of their overall economic support to their businesses as a response to COVID-19.
· In UK, tourism, travel & hospitality has been identified as a key frontline industry. The business rates taxes for this sector have been completely abolished for 12 months which are the highest overheads for this sector there. As part of their £ 300 bn support, the businesses have been given access to fully guaranteed, unlimited loan by the Government to meet their working capital requirements. Their COVID-19 business continuity scheme guarantees interest free loans for 12 months. Their VAT & taxes have been deferred. They are estimating their total Government aid to their businesses to go upto 15% of their GDP and have aimed at being bold and not conventional in their support to the industry during this epidemic. The Corona Job Virus scheme covers upto 80% of salaries of all their employees upto a pay of £ 2500 per month.
· In Australia, two safety packages worth AU$ 89 bn have already been announced in addition to an AU$100 bn banking facility. Additionally, the Australian Government has promised to look after all affected frontline employees by giving them a COVID-19 supplementary support of AU$ 550 each fortnightly till the time it is required. This will be in addition to their planned salary support (SOURCE-2.2).
· In Indonesia, immediate tax relief was announced to the tourism industry. To hotels & restaurants tax breaks have been given, to airlines & travel agents, financial incentives have been given, to domestic tourists for visiting domestic destinations, incentives have been announced and VAT discounts have been given to airlines. They are also compensating their states for losses from tax breaks given to tourism, travel & hospitality industry. Their initial stimulus package is estimated at almost a billion dollars. (SOURCE-2.3).
· In Thailand, their Finance & Tourism Ministries are working together to deploy a tourism relief package. They are laying out tax reliefs from the Government, support from the banks at reduced cost of funding and soft loans for working capital to prevent job losses in the tourism industry. Additionally, they have also planned to revive of the domestic tourism economy through incentives for events & seminars and tax incentives for domestic travel within the country (SOURCE 2.4).
REQUEST FOR IMMEDIATE RELIEF
· Extend immediately a blanket moratorium of 12 months on repayments of interest and principal amounts. This moratorium can be reviewed for a further increase if the situation deteriorates. For micro & small enterprises, explore a waiver period of interest beyond one year.
· Reduce the interest cost by 400 basis points and ensure immediate transmission through the banking & financial system.
· Advise all credit rating agencies to suspend all corporate ratings during this period and to not issue any ‘outlook’ statements which can adversely impact the credit risk profile of companies and, therefore, their cost of funding.
· IIFCL to issue tax free bonds for distress funding of COVID-19 revival which are guaranteed by the Government.
· For micro & small enterprises in tourism, travel & hospitality, explore the waiver of term loans below Rs. 20 lacs completely. Enhance the definition of micro & small enterprises liberally.
· Advise financial institutions (banking & non-banking) to take a highly liberal view and to relaxall stringent debt covenants (for example, focused around measuring their debt exposures against companies’ ebitda levels).
· Advise banks to relax the non-performing asset (NPA) criteria for the next 24 months.
· Advise banks to retain a long-term perspective on funding without disrupting the ongoing disbursement flow.
· Extend an instant approval of new loans without any collaterals.
· Immediately double the working capital limits for all the tourism, travel & hospitality companies.
· Guarantee all new working capital loans raised by micro, small & medium enterprises during this period.
· Interest on working capital which is raised during this period to have deferred payment schedules beyond 12 months.
· Make available long-term working capital loans secured against revenue.
· Additional liquidity facility on the lines of SBI facility - Provide 10% of funded exposure (not restricted to working capital facility as SBI has done) for a period of 1 year on the same security @ 7.25% pa
· RBI circular DBR.BP.BC.No.12/21.04.048/2018-19 on working capital limit utilization first 60% in the form of WCDL has caused hardship upon Hospitality industry and exemption from this circular should be provided to hotels.
· Offer specific bank guarantees at highly reduced collateral value or guaranteed by the Government.
· It is important to reduce cash outflows from tourism, travel & hospitality industry which will reduce the need for working capital and will thus reduce the pressure on the banking system. It is roughly estimated that actions on this front may immediately add almost Rs. 2,000 crores++ to the tourism, travel & hospitality industry without stressing the banking system. The following measures must be taken:
· Waive off all statutory, financial and non-financial obligations falling due from an immediate effect. These will include items such as Provident Fund, ESI contribution, GST payments, adjustments of advance tax, property taxes, excise & VAT and levies on utilities such as power & water.
· Immediately set up a Government corpus to support the sustenance salaries of all the affected employees in the tourism, travel & hospitality sector.
· The ESI corpus can be utilised to support 50% of the lost wages of the ESI paying employees who will miss their work during this period.
· Enable the GST & VAT already collected to be used by companies as working capital and to be deposited post 12 months without attracting penal interest.
· Amount blocked in Income tax refunds, should be released immediately with due interest.
· Deferral of deposit of GST can be effective only if the requirement of matching with GSTR 2A is done away with. The restriction of 10% of GST input credit due to non-reporting by vendors is blocking working capital tremendously. Claiming of input credit should be allowed as per books of accounts and reversed in case the credit is not available in the next one year.
· Address immediately the Property Tax issues across cities, for example, as going on in Mumbai for the past 10 years. Several crores paid under protest by Mumbai hotels is stuck. Request for a quick resolution and release of the amount thus paid along with interest.
· In UP as per excise law imported liquor needs to be consumed within specified time period from the date of purchase. If stock exists, that becomes useless. Such restrictions need to be abolished or at least made inactive for one year.
· Waiver of Custom and GST requested on Imported Liquor, Cigars for next one year.
· GST cess should be allowed to be adjusted for inter head i.e. payment of CGST, SGST or IGST.
· Extension of all subsidies which were due on 31st March to the industry.
ADVISORY TO OTHER STAKEHOLDERS
· Advise credit card companies to waive off interest payments for one year.
· Advise credit card companies to issue agency corporate cards without collaterals upto Rs. 50 lakhs and, thereafter, 30% collaterals on additional limits with a minimum credit of 35 days and to be accepted by all airlines at no additional costs.
· Advise all stakeholders, especially Government Departments, embassies & public sector units to fast track outstanding payments to this industry. Additional payments made to MSME vendors beyond due dates should not attract penal interest.
· VISA/ Master card may be requested to rationalize the commission % on credit card collections.
· Advisory to IATA (International Air Transport Association) to move the airline payments settlement cycle for travel agents from a weekly to a fortnightly basis with no further increase in financial security.
· Advise power utility companies to reduce the fixed charge on tariff and defer the payments of the fixed charge tariff by six months.
· Advise to insurance companies to defer all renewals.
· Advise insurance companies to retain a liberal view of the impact on revenue & profit coverage resulting from this epidemic. The Government could even look at setting up a fund to underwrite the losses emerging from this unprecedented revenue disruption to the Indian tourism, travel & hospitality industry.