Indian Market & Trends

Budget 2016-17: Reactions from the travel sector

DELHI

The reactions from India’s tourism and travel industry have been polite at best. Even though most are putting up a brave face, and pointing to promised infrastructure development, that is nothing they have not seen before.

Here is a cross section of reactions from the sector:

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Manmeet Ahluwalia
Marketing Head 
Expedia India

This budget has specifically focussed on infrastructure across the country with a huge outlay for roads & highways, railways and reviving the unserved and underserved airports and airstrips in the country.

The government realises that as the global economy wavers, domestic demand will be the key to tourism growth, especially to untapped regions like the North-east. We see a specific focus on enhancing regional and last mile connectivity with sops for starts-ups and innovation in the passenger transport segment.

In fact, increased regional connectivity will also give a fillip to outbound tourism from Tier II and III cities due to higher accessibility. The government is adopting measures from some of the thriving global tourist destinations, where-in public transport is critical not only for daily commuters but also the backbone for tourist traffic. Strengthening the infrastructure across levels will definitely strengthen India as an attractive tourist destination in the global ranks.

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Vishal Kamat
CEO
Kamat Hotels

The Budget was a dry one from tourism’s perspective but it was not particularly a bad Budget but rather a “status quo” Budget. While we did not receive sops as far as taxation is concerned, there was not much additional burden that was imposed either.

Overall measures like Swachh Bharat that promote overall sanitation, awareness and education will improve the civic sense which will have an indirect impact on the tourism sector.

Moves to revive nonfunctional airstrips may not impact us as well if airlines find that the routes are non-profitable. We already have good connectivity to the capitals of some Tier II cities and second level capitals like Bhubaneshwar for example. One will have to wait and see how much value will be added by this move.

As far as the F&B sector is concerned, I think the industry has learned to live with instability and heavy fluctuations in commodity prices. The control over inflation obviously helps the F&B sector and is a postive.

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Subhash Goyal
President
Indian Association of Tour Operators (IATO)

Overall, the Budget was a very disappointing one for the tourism industry.

The Prime Minister Narendra Modi had talked about tourism being the best engine for job creation and poverty alleviation for India. Unfortunately, there was nothing in the Budget that could boost tourism in the country and help achieve these goals.

The Tourism industry was also looking at exemption of Service Tax on foreign exchange earnings. This too did not happen. Instead, a 0.5% cess component has been added, increasing the Service Tax component to 15%. The additional tax on SUVs and diesel coaches will make tourist coaches expensive as well hampering growth for tour operators.

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Jyoti Kapur 
President
Association of Domestic Tour Operators of India (ADTOI)

Union Budget 2016-17 is not tourism friendly and has failed to meet the expectations of the industry. Both domestic and inbound tourism have been ignored. The increase in service tax will be an additional burden making all services more expensive.The prominent Buddhist circuit was also over-looked.

The development of infrastructure and up-gradation of rural India will eventually boost rural tourism opportunities though. Connectivity could also see a boost with the proposed revamp of 160 airports. But the increase on the tax on air turbine fuel will again make price of flight tickets increase. Offering very minimal relief, the Union Budget has added to the taxation burden for the traveller in India.

Sharat Dhall
President
Yatra.com

“The much awaited budget has turned out to be very friendly for the Aam-Aadmi but there could have been a bit more in it for the corporate sector. The proposal to increase the tax on ATF will result in increase in airfares and dampen air passenger growth which could have been a catalyst for economic growth. However, the focus on revamping roads and airports across the country is a positive move that should provide a fillip to infrastructure and the tourism sector as it will enhance connectivity to the smaller cities and encourage people to travel to unexplored destinations. Liberalisation in public transport and the government’s plea for private investors to contribute in refurbishing highways is also expected to create a positive ripple in the travel industry.”

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Ajay K Bakaya
Executive Director
Sarovar Hotels & Resorts

“The proposal to levy Infrastructure and Agriculture cess is retrograde as it adds another slice to a high tax burden. We welcome the proposal of a 3-5 year tax holiday for start-ups. We hope this applies to new hotel projects. This will add vigour to the business climate. Amendments to boost ARCs are a good fiscal step. Mention of revival of 160 airports/airstrips is excellent. We hope this translates to reality in FY17. The Proposed outlays in infrastructure, highways, roads and rails are all excellent. Once again, we hope to see real progress on the ground. An outlay of 9000 crores on Swachch Bharat Abhiyan is welcome. India needs to solve the issue of final garbage disposal against the largely prevalent system of sweeping dirt away from one place only to another.”

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Ankur Bhatia 
Executive Director, Bird Group
Member, CII National Committee on Civil Aviation

“The budget for 2016-17 is for heartland of India, which is overall focused on agriculture, infrastructure development, education and health. The Finance Minister this year has laid emphasis on rail and road infrastructure developments as well as on new startups and Make in India campaign, which are good measures. We welcome, Cabinet’s decision of reviving underserved airports by allocating a budget of 50 – 100 crores each, developing 10 out of 25 non-functional airstrips in partnerships with state governments, which I believe will definitely accelerate the development of regional aviation sector and will also give a well deserving boost to the overall aviation sector.

Although levying of additional cess in hospitality, could have been avoided as the industry is already burdened with taxes.

We do hope that the cess levied on combustion will be used for a betterment and development of green vehicles and infrastructure.

Overall a balanced budget with emphasis on development.”

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Aloke Bajpai
CEO & Co-Founder
ixigo

“The Union Budget 2016 has laid out big investments for the infrastructure sector which include allotment of funds for the development of roads and highways and an action plan to revive 160 non-functional airports. These steps come as a welcome move for the travel and tourism sector.

The focus on travel and tourism is further reaffirmed with the Finance Minister announcing the annual programme “Ek Bharat – Shreshtha Bharat” which will aim at linking states and districts through exchanges in areas of language, trade, culture, travel and tourism.

Further, we also welcome the Government’s initiative to increase baggage allowance for international passengers and exempt passengers flying into India from filing the baggage declaration form if they are not carrying dutiable or prohibited goods. This will surely ease inbound tourism.

The current government’s focus on the Indian startup ecosystem is very positive and the union budget 2016 has reinforced support for entrepreneurship and start-up businesses in India.”

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Rajesh Magow
Co-Founder and India CEO
MakeMyTrip.com

“The Finance Minister today announced that 160 non-functional airports will be developed at a cost of Rs 50-100 crore each. This is a welcome move as it will improve connectivity within the country especially in tier2 and beyond towns and cities and thereby, help boost the travel and tourism industry. The budget also proposed to increase the excise duty on Aviation Turbine Fuel from 8% to 14%. The financial health of the aviation industry of the country was just beginning to stabilise but this move will have some adverse impact on the demand side for the industry. Lastly, service tax has now been increased to 15% from 14.5%. Krishi Kalyan Cess at 0.5% will be levied on all taxable services. While it is understandable that this move is aimed towards financing initiatives for improvement of agriculture and welfare of farmers, this will lead to paid services becoming dearer. Worth mentioning that service tax has been consistently increasing over the past few years, it stood at 12.36% in 2013-14. Not only will service based companies but also the end consumer of the services will bear the brunt of this move.”

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Conrad Clifford
Regional Vice President, Asia Pacific
International Air Transport Association (IATA)

“The budget had a minimal focus on aviation. The significant hike in excise duty on ATF will add to the high cost-environment for airlines in India. We do hope the government will do a better job with the National Civil Aviation Policy. While the NCAP is a step in the right direction, there are areas of concern, especially where it adds costs to the industry or where it deviates from well-established global standards. We hope the government will address three priority areas – retract the 2% Regional Connectivity Fund levy, abandon the plan to auction traffic rights, and allow AERA to perform its functions independently by not enshrining any ‘Till’ for airport charges in the Policy document.”

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Kapil Goswamy
Managing Director
BigBreaks

The budget presented by the Honourable Finance Minster Mr. Arun Jaitley is progressive. This year’s budget has laid out a wider government policy towards achieving greater macroeconomic stability and better fiscal management. This gives out a very positive signal not just to the industry in India but also to investors across the world who have been troubled in recent years by imprudent measures like retrospective tax.

The overall emphasis on strengthening infrastructure, particularly road and highways infrastructure is also a welcome move. It is welcome not just from the overall economic point of view but also from the point of view of our sector- the travel and tourism sector which always gets a boost if road transport is good with ‘weekend getaways’ and ‘short trips’ getting a spike due to smoother connectivity within the country. The “Ek Bharat Shreshtha Bharat” programme that aims to promote travel and Tourism within the country is another welcome move for the sector.

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Kabir Bogra
Associate Partner
Khaitan & Co

“The FM in his budget speech has mentioned that the government is looking to develop 160 non-functional airports, at a cost of 50 to 100 crores each and will also develop 10 defunct airstrips with state governments. If effectively managed these investments would provide a huge impetus to regional airlines and help in unlocking a significant potential in civil aviation in the India. This is likely to be undertaken under the PPP model.

The other significant announcement for the aviation industry comes in the form of incentivizing the MRO sector. This has been done in two steps. As a first step, the Customs exemption under notification number 12/2016 has been extended to a wider variety of equipment and tools required to be imported by a MRO service provider and secondly, Customs duty on aircrafts imported for undertaking repairs has also been completely exempted. In fact the exemption has been completely streamlined with operational procedures followed by airlines and an international airline can fly into India with passengers, get the aircraft serviced and thereafter use it to fly passengers from India. This has been much delayed but yet a welcome move and may yet help in establishing India as a preferred MRO destination.”

Musafir Namah Bureau

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