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BELEAGUERED HOSPITALITY SECTOR PLEADS TO THE FM TO TAKE IMPACTFUL MEASURES TO MAKE THE ON-TAP LIQUIDITY WINDOW FOR CONTACT-INTENSIVE SECTORS EFFECTIVE

15 th Jun 2021

India's apex Hospitality Association - Federation of Hotel & Restaurant Associations of India (FHRAI) has submitted a representation to the Hon’ble Finance Minister - Smt. Nirmala Sitharaman suggesting measures to make the On-Tap Liquidity Window for contact-intensive sectors more impactful and effective for the Hospitality sector. Among the suggestions made, the FHRAI has requested an extension on the tenor of the ECLG scheme from 3 years to 5-10 years. It has also asked for a 100 per cent guarantee from the Central Government to banks and NBFCs and the formation of a Redressal Forum to look into issues relating to non-implementation of the schemes by banks.

 

“We are thankful to the Ministry of Finance for provisioning a separate liquidity window of Rs.15,000 crore for the hospitality and tourism industry. However, the two successive waves of the pandemic and subsequent lockdowns have caused colossal damage and it would take nothing less than 5 years for the sector to return to normalcy. So, for reviving the sector we request the Finance Ministry to extend the tenor of the scheme from 3 years to 5 to 10 years. Also, we strongly feel that the recently announced scheme would not be able to achieve the desired outcome without the Government’s backing of 100 per cent guarantee to banks and NBFCs,” says Mr 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 estimates, in FY 2020-21 approximately 75 per cent of the industry's revenues got wiped off. This 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.

 

“The hospitality industry has no business and many hotels and restaurants are already struggling under debt burden therefore banks and financial institutions shy away from lending to such businesses as they are unwilling to take risks. Many relief measures of the Government have failed due to this unwillingness. 100 % guarantee from the Government is the only tool by which such measures can be made effective. This is a very crucial stage for the hospitality industry and hence we request the Ministry to revisit some of the critical provisions in the schemes and make their implementation effective,” adds Mr Kohli.

 

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

 

“Since April 2021 the Hospitality industry’s revenue hasn’t even crossed 8-10 per cent and it 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. The Government’s flagship schemes like the ECLGS and the Resolution Framework have not been able to completely alleviate the sufferings of the beleaguered hospitality industry as banks have almost complete discretion to decide the disbursal mechanisms in these schemes. Therefore, we request the Government and the RBI to set up a redressal forum like the Champion Portal of the Ministry of MSME to address the specific issues faced by the tourism and hospitality industry in availing the scheme. We also request the Ministry of Finance to release the operational guidelines of the scheme so that customers can avail benefits in a hassle-free manner,” concludes Mr Pradeep Shetty, Jt. Hon. Secretary, FHRAI.

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