The Ministry of Tourism has expedited the process of granting infrastructure status to the hotel industry. “I have met the Union Finance Minister, P. Chidambaram recently, and have raised the issue of granting infrastructure status to the hotel and restaurant industry. I have also been discussing this with the Infrastructure Committee and promise that the anomalies present in the current status of infrastructure to the industry will be removed,” Union Minister of Tourism, Subodh Kant Sahai, announced recently at the inaugural session of the 47th Annual FHRAI Convention in Goa.
The statement received warm response from the industry. Kamlesh Barot, Ex-President, FHRAI opined, “Currently, the rate of interest on loans for us is 12-15 per cent with a repayment period of seven to eight years. Failure to repay the loan within the stipulated time terms the establishment a non-performing asset. The infrastructure status will decrease the interest rate, as well as increase the repayment period.” According to him, granting infrastructure status will also give the hospitality players access to the infrastructural lending list by RBI, which will allow hoteliers to develop new properties. “In addition, we will get 100 per cent lending capacity from external sources,” he added.
Dilip Puri, MD and Regional VP South Asia, Starwood Hotels & Resorts Worldwide echoed his sentiment, “Infrastructure status is very critical for the hospitality industry. The Government and supporting bodies need to address the fact that tourism and hospitality play very vital roles in a country’s economy, if catered to and treated properly,” and further stated that hotel chains are looking at expanding in metro cities. “Infrastructure status will give hoteliers a levy to extend the repayment period to 10-15 years, and also avail cheap loans with 3-4 per cent rate of interest. This will address the issue of credit crunch that the hospitality industry faces in the current economy,” he added.
Sanjay Sethi, Managing Director, Berggruen Hotels, said the question of whether to grant infrastructure status to hospitality industry or not has been under debate for over a decade now. “According to the Budget, only three-star or higher category properties located outside cities with a population of one million or more can avail infrastructure status. I personally feel this is unfair to a lot of small scale hoteliers as well as big chains who want to expand within city limits. The reach of the infrastructure status needs to be extended and limitless,” he said. FHRAI also speaks on similar line.
According to Barot, FHRAI wants the threshold to be removed to include all approved properties. “We have spoken to the National Tourism Advisory Council (NTAC) and are also persuading the Finance Minister to change this decision. The next NTAC meeting is in Maharashtra in the next three months, and the Tourism Minister has promised that an announcement will be made at the time on the government’s decision on this subject,” Barot revealed.
Speaking about the legal ramifications of this decision, Pradeep Shetty, – Legal Matters sub-committee, HRAWI said, “It has been our plea to the Centre for the last 10 years to give the hospitality sector the infrastructure status, to enable the achievement of the objectives as envisaged in the Harmonised Masterlist of sub-sectors. As an infrastructure sub-sector, laws pertaining to the industry will have to be eased. While the status so granted may ease lending norms and modalities for the hotel industry by financial institutions, other agencies like the local authorities will also have to relax unfriendly and archaic laws to compliment the objectives of the Masterlist i.e., to promote infrastructural development in an optimal manner. Initiatives like single window clearances of all permissions/sanctions, tax holidays, rationalisation of existing taxes etc. will have to be undertaken to ensure that all the agencies make a coordinated effort in the growth of hotel infrastructure. If the above initiatives are undertaken in the right spirit and coordinated by all agencies supporting the status, then we see no negative ramification in terms of ROI for Indian and foreign investments.”
At the recently concluded IATO Annual Convention in Mumbai, Prthviraj Chavan, Chief Minister, Govt of Maharashtra, addressed the issues brought to light by the industry and promised his support to bring about corrective measures to reduce the number of permissions and reduce the charges payable by hoteliers.
