Musafir Says

No more a pillar!


budget-2016-tabOnce again, the Indian travel and tourism sector has been given the short shrift in the general budget. There had been great hopes that Arun Jaitley’s Budget 2016-17 would build on the leads provided to the sector in the previous budget.

With a total contribution totaling about 7 to 8 per cent of GDP and with tourism as one of the 5 ‘T’s of the new government (yes, we do remember those promises), there had been a great hope in the air, at least in hotels and travel agencies. Unfortunately, times have moved on, and in the nine new pillars announced today, tourism no longer figured! “The FM Arun Jaitley today in his budget speech has talked about 9 (odd) new pillars, but there was no mention of tourism or hospitality industry,” said Kamlesh Barot, past president, The Federation of Hotel and Restaurant Associations of India (FHRAI).

A whole lot of ‘prasad’ and ‘darshan’ later, those hopes, along with that of the economy at large have taken a beating. Hotel ARRs and occupancy rates are at record lows – and that is not helping. Airline ticket prices are fairly low too, though they are directly helped by lower fuel import prices. Of course the budget has hiked the excise duty on jet fuel – incomprehensible in these times of globally low fuel prices.

The industry had hoped, even expected that some of its key recommendations, such as lowering the threshold of infrastructure status threshold for hotel projects to Rs 25 crore, lower goods and service tax (GST) for related services, extension of e-tourist visa, promotion of medical tourism would be taken up in the budget. And there would a relook at luxury tax for hotels, a long standing grievance with the sector.

Not only has all of that been ignored, in effect, due to increases in cesses, all services – including hotel stays and airline tickets – have only got more expensive.

There was just one direct mention, the announcement of yet another new scheme, ‘Ek Bharat – Shreshtha Bharat’, which is designed to link various states through culture and tourism. It is unclear how, though, as details are awaited.

indian-railways-logo-thOf course the stress on improving infrastructure, notably roads and rail, for which a provision of ₹2,18,000 crore has been announced, should, if implemented, help movement of tourists too.

The minister also announced a scheme to work on improving airports and working with states in this regard, but little progress seems to have been made. Or little allocation made!

Greater spends on Swachh Bharat, which the FM referred to as a dream of the father of the nation, will indirectly benefit the tourism industry. Or so one hopes.

Among the real surprises in the budget is a hike in clean energy cess. This may impact the Heat Light and Power (HLP) cost for hotels, which currently forms more than 10% of a hotel’s expenses. Add to that a cess for agriculture, and the holidaying and eating out bills are going to be dearer for the consumer too.

Another tenuous takeaway is the announcement of 1,500 multi-skill training institutes across the country, which could potentially address the shortage of skilled labour for the industry.

For a country that still regards hotels as luxury, and charges a tax accordingly, this budget does not augur well.

Musafir Namah Bureau


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