Crisis for MSMEs in travel: This emergency step required from Modi govt is need of the hour, say experts

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Updated: September 29, 2021 12:08 PM

Ease of Doing Business for MSMEs: Currently, India's bilateral air bubble arrangement with 28 countries, aimed at restarting commercial flight services, is underway. Under the agreement, the two countries perceive each other to be safe and allow their passengers to travel back and forth without Covid restrictions.

To address the Covid impact on MSMSs and other businesses in hospitality, travel & tourism, leisure & sporting sectors, the government had in March this year extended the scope of ECLGS scheme.

Ease of Doing Business for MSMEs: Even as Prime Minister Narendra on Monday, on the occasion of World Tourism Day, highlighted the significance of integrated health infrastructure to improve the tourism sector, MSMEs in travel and tourism space called for emergency support measures ahead of the upcoming travel/holiday season. Tourism has probably been the worst-hit sector due to Covid, witnessing millions of job losses.

According to a study conducted by the National Council of Applied Economic Research (NCAER) in January 2021 on economic losses for households engaged in tourism and policies for recovery, 14.5 million tourism jobs were expected to be lost during the first quarter of 2020 following by 5.2 million jobs lost during Q2, and 1.8 million jobs lost during Q3. The data was shared by the Minister of Tourism G Kishan Reddy in the Lok Sabha in July this year.

The MSME-dominated tourism sector also witnessed a decline in its share in the Indian GDP by 120 basis points to 4.7 per cent in 2020, from 6.9 per cent in 2019, thanks to the Covid impact, SBI Research had noted in a report in June this year citing data from the World Travel and Tourism Council.

Now MSMEs in the tourism sector across segments including hotels, tour operators, business travel, restaurants, travel agents, tourist transporters, and more, are wary of missing the upcoming holiday or travel season beginning November till March or April next year if the government doesn’t lift the suspension on international passenger flights immediately. The ban has now been extended till October 31, 2021.

“We informed the government that if you lift the ban for international tourists now then the upcoming holiday season will be lost. Tourists would start planning for their travel to India if the government allows travel. If there is no clear policy then they will make plans for some other countries and it would continue to impact the tourism sector. The government has taken the cognizance and is working on how to issue tourist visas,” Pradeep Shetty, Director, Maharaja Foods & Restaurants, and Joint Secretary, Federation of Hotel and Restaurant Association of India (FHRAI) told Financial Express Online.

As the vaccination rate goes up and the number of Covid cases continues to decline steadily, India is finally looking at allowing foreign tourists to travel India since Covid struck last year. According to a government statement in June this year, free visas will be issued to the first five lakh foreign tourists or till March 31, 2022, whichever is earlier, with a total finance implication of Rs 100 crore. In terms of vaccination, according to the government data as of Monday, India’s cumulative Covid jabs coverage had crossed 86 crores with a recovery rate of 97.78 per cent.

“The only way tourism business can happen is when the government allows resumption of commercial flights. The e-tourist visas are yet to be issued while the government was kind to give half a million visas free to tourists but it would be nice to extend it further,” Ashish Gupta, Consulting CEO, Federation of Associations in Indian Tourism & Hospitality (FAITH) told Financial Express Online. The federation represents associations for hotels and restaurants, tour operators, hotels, travel agents, etc in India.

Delhi-based Ravi Gosain who runs inbound travel operator company Erco Travels and is also an angel investor has been out of business since last year due to the ban on international flights. The key ask from the government is to allow visas and engage tour operators like him to plan itineraries for foreign tourists who want to travel to India as most tour operators cater to foreign tourists. Erco used to serve 8,000-9,000 tourists annually before Covid.

“It is only domestic tourism that is looking at recovery. Hotels may get some business because of that but not tour operators. Tour operators benefit when people book packages of at least three-four days, which is not happening currently. I am completely out of business since last year. More than 90 per cent of our customers were foreign tourists but after Covid, it has been zero. We are trying to get through this crisis with whatever savings we had,” Gosain, who is also the Vice President at Indian Association of Tour Operators (IATO), told Financial Express Online.

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Similar has been the situation for Amaresh Tiwari who own destination management company AT Seasons & Vacations Travel for business travel or MICE (Meetings, Incentives, Conferences and Exhibitions) travel. Tiwari also heads the national body for MICE travel — India Convention Promotion Bureau (ICPB) as its Chairman. He wants the government to at least allow people from countries that are letting Indians travel to their region.

“MICE travel always contributes three times higher revenue than leisure travel to the tourism sector. Also, MICE travellers adhere more to hygiene norms and are more Covid disciplined as they are business travellers. Since tourism is a state subject in India, every state currently has its own policies around tourism. So far, we are surviving on past credit and it has been extremely difficult to survive. I estimate there would be worth Rs 2,000 crore business opportunity by next year or 2023 but perhaps there might not be too many businesses by then,” Tiwari told Financial Express Online.

Currently, India’s bilateral air bubble arrangement with 28 countries, aimed at restarting commercial flight services, is underway. Under the agreement, the two countries perceive each other to be safe and allow their passengers to travel back and forth without Covid restrictions. India saw around 11 million foreign tourists in 2019 that had contributed nearly $30 billion in foreign exchange earnings.

“Today we have an air service agreement with 105 countries globally but air bubble agreement is operating for only 28 countries. We have to live with this pandemic. So, vaccinated people should be allowed to travel like people with Yellow fever are allowed to travel in Africa. Otherwise, more people will die of economic starvation than they will die of Covid. There can’t be a $5 trillion economy vision unless you open the aviation sector,” Subhash Goyal, Chairman, STIC Travel Group of Companies and President, Confederation of Tourism Professionals of India told Financial Express Online. Goyal is also the past Chairman at Assocham National Tourism & Hospitality Council. 

To address the Covid impact on MSMSs and other businesses in hospitality, travel & tourism, leisure & sporting sectors, the government had in March this year extended the scope of the Emergency Credit Line Guarantee Scheme (ECLGS) scheme through the introduction of ECLGS 3.0. Enterprises with total credit outstanding not exceeding Rs 500 crore and overdue, if any, for 60 days or less, as of February 29, 2020, were eligible.

The scheme involved the extension of credit of up to 40 per cent of total credit outstanding across all lending institutions as of February 28 while the tenor of loans was six years including a moratorium period of two years. However, there is currently no data on the number of tourism beneficiaries under this scheme. 

The government had also introduced Rs 60,000 loan package for sectors other than healthcare such as tourism etc. However, the scheme is yet to be notified. “The scheme has not been notified so far though we are told that operational details are being worked out. We would request the government to incentivise domestic tourism in the form of tax rebates etc., to encourage people to travel. Resort locations are about doing 50 per cent of occupancy after the second wave but city hotels are still suffering as there is no international,” added Shetty.

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