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Union Budget 2022: Hospitality sector gets additional relief, but left wanting more

The pandemic has impacted the hospitality sector severely, especially due to the imposition and lifting of restrictions.

union budget 2022 hospitality sector
The extension of ECLGS in time as well as amount for the hospitality and related sectors seems to come as a relief. (Representational image)

Union Budget 2022: In her Union Budget speech for 2022-23, Finance Minister Nirmala Sitharaman announced support to the hospitality and related sector. In an acknowledgement of the severe impact that these sectors have faced due to the COVID-19 pandemic, she proposed an extension to the Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs till March 2023. While that in itself is important, what is more important is that the guarantee cover under the ECLGS was proposed to be extended by Rs 50,000 crore, with this amount being earmarked solely for enterprises in hospitality and related sectors.

The pandemic has impacted the hospitality sector severely, especially due to the imposition and lifting of restrictions. In her speech, FM Sitharaman noted that the hospitality sector and related services, especially MSMEs in this sector, are yet to reach the pre-pandemic levels of business, something that was also highlighted in the Economic Survey 2022.

Hence, the extension of ECLGS in time as well as amount for the hospitality and related sectors seems to come as a relief.

Talking to Financial Express Online, Aloke Bajpai, Group CEO & Co-founder, ixigo said, “We believe extension of ECLGS will provide additional support to the hospitality industry which has borne the maximum brunt of the pandemic.”

“The recovery of the tourism sector remained stretched due to decline in domestic passenger traffic in the first two week of January 2022. Hence extension of the ECLGS by a year and additional limit of Rs. 50,000 crore will benefit vulnerable players in the industry to reel back from the disruptive impact of the pandemic,” Ankush Nijhawan, Joint Managing Director, TBO.com said.

Dinesh Kumar Kotha, Co-Founder & CEO at Confirmtkt, said, “ECLGS is certainly a good step in the right direction.” He, however, added that it won’t solve all the problems the sector is facing right now.

“The hospitality and corresponding services, especially those by MSMEs, are yet to regain their pre-pandemic business level. Raising and Accelerating MSME Performance (RAMP) programme with an outlay of Rs 6,000 crores over five years in the budget is a step in the right direction. This will enable the MSME sector to become more resilient, competitive and efficient,” Bajpai added, highlighting the need for relief in the hospitality and tourism sector, especially with a focus on MSMEs.

On the current state of the sector, Kotha said, “According to statistics by IBEF, the Travel and Tourism industry provides 4 crore jobs, 8% of total employment in the country and contributes nearly about 7% to the country’s GDP. This industry was one of the hardest-hit industries in the pandemic and hence, it is not working with the full and sufficient staff as compared to pre-covid times, so a lot of people are still without jobs.”

Apart from the relief for MSMEs in the hospitality and tourism sector, e-passports were also announced in the Union Budget. “International travel is likely to recover soon despite the progress being slowed by the current variant. The introduction of innovative initiatives like e-passports will boost security and will enhance the convenience of international travelers by cutting down long queues at immigration counters. This will help support a faster revival of international travel in a pandemic-driven environment,” ixigo’s Bajpai said.

Meanwhile, according to Kotha, a few more measures would have gone a long way in helping the industry. “Including hotel-related expenses under LTA, those could have been given a good boost. The one-time accepting LTA claim for every year at least for the next two years irrespective of the 4-year block rule would have helped a lot. Apart from this, a temporary relief by reducing the GST on mid-tier hotels from the current 12% to 5% would’ve boosted demand from tourists.”

The Economic Survey, while noting that tourism, hospitality and other contact-intensive industries were not back to pre-pandemic levels yet, stated that if the vaccination levels and the impact of Omicron variant are anything to go by, these industries could resume functioning properly in the coming financial year. Against that backdrop, the proposed emergency credit line guarantee extension makes sense, since the time to properly revive the sector seems to be near and the government has been focusing on encouraging start-ups and small businesses.

However, as far as financial aid by the Centre is concerned, it remains concentrated to the MSMEs in the industry. Though initiatives like e-passports, Vande Bharat trains and ropeways have been announced, the rest of the industry is left wanting more.

How the industry functions this year, however, is yet to be seen. It cannot be ignored that the Centre had, last year as well, announced financial support to the sector in a bid to revive the industry. This means that while for now, this is all the aid the government would be providing, the sector can hope for relief if things worsen.

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