SIGNS OF OUR TIMES
The Cabinet Committee on Infrastructure recently approved the harmonised list of infrastructure sub-sectors. The list extends benefits only to 3star or higher category. Vivek Nair, honarary secretary, FHRAI and vice chairman & managing director, The Leela Palaces, Hotels and Resorts talks about the concerns.
Infrastructure Status for Hotel Industry
ANOTHER BUDGET AND ANOTHER MISS FOR HOTELS Tell us how the infrastructure status will help the industry
VIVEK NAIR HONORARY SECRETARY, FHRAI AND VICE CHAIRMAN & MD, THE LEELA PALACES, HOTELS AND RESORTS
Tourism is India’s largest employment generator at 53 million i.e. 9.2% of the total employment workforce. The government’s target is to double our Foreign Tourists Arrivals from the present 6 mn to 12 mn for which additional 1,80,000 guest rooms is to be set-up at a cost of about Rs 72,000 crore. 30
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HOTELSCAPES April 2012
The hotel industry is greatly disappointed with the fact that the Cabinet Commitee on infrastructure whilst finalising its harmonised list of infrastructure sub-sectors has only extended the benefits to 3-star or higher category classified hotels located outside cities with population of more than one million. This would leave out more than 95% of the hotels which would require the benefits of being included in the infrastructure list. This is because outside cities with population of more than one million, hotels of only small size of say about 100 rooms could be set-up in Beach Resorts, Heritage Sites, Wildlife Sanctuaries, etc. The bulk of the hotels which are set-up in cities with population of more than one million are the ones that really require the incentives given to infrastructure projects by infrastructure lending institutions like Infrastructure Development Finance Corporation (IDFC), India Infrastructure Finance Ltd. (IIFL), IDBI, IFCI and other Commercial Banks who could extend financial assistance up to the period of 15 years, unlike at present where the maximum tenure is 10 years from Commercial Banks. Also, the hotels of about 100 rooms outside the population of more than one million have a low project cost say of about Rs 100 crores, as the cost of land is very small compared to the total cost of the project; unlike in cities where land constitutes a major pro-
portion of the cost and cost of projects range upto Rs 2,000 crore. They are capital-intensive and have a long gestation period. These hotels are the ones that really require the benefit of extended tenure of loans of 15 years. Thus, the main characteristics of the definition of infrastructure i.e. high sunk cost and large scale employment generation leading to economic development because of huge multiplier effect of the Hotel and Tourism Industry etc. would not be fully fulfilled by the hotels outside city limits.
What steps do you want the Government to take? We wish the necessary amendment is made so that in Section 35 AD of the Income Tax Act, 2-star or above category hotels operating anywhere in India would benefit from being in the infrastructure list. Tourism is India’s largest employment generator at 53 million i.e. 9.2% of the total employment workforce. The government’s target is to double our Foreign Tourists Arrivals from the present 6 mn to 12 mn for which additional 1,80,000 guest rooms is to be set-up at a cost of about Rs 72,000 crore and for which the aforesaid amendment to all the hotels in India to be eligible, to be in the infrastructure list, is of vital importance. If the aforesaid target is accomplished, almost 23% of the additional employment of 78 Mn could come from the Hotel and Tourism Sector in the 12th 5-year Plan (2012 - 17). ■