Ease of Doing Business for MSMEs: Marred by the pandemic, a host of sectors and industries have been making a beeline for the government sops to survive Covid. While the government had extended the scope of the Emergency Credit Line Guarantee Scheme (ECLGS) recently to cover the hospitality, travel, and tourism sector, the industry body for hotels has now urged Finance Minister Nirmala Sitharaman for ‘customisation’. In its submissions to Sitharaman recently, the Hotel Association of India (HAI) said that ECLGS needs to factor in the fact that being highly capital intensive, hotels have a high percentage of fixed costs of operations that have become unsustainable due to nil or negligible revenues. Moreover, HAI stressed that the recovery of hotels will also be long drawn as borders will be reopened with extreme caution and traveler confidence will return over an extended period of time.
“Inclusion of State Financial Corporations, Asset Reconstructions Companies (ARCs) and Debt Funds, extension of the moratorium, capping of interest rate at 8 percent, increasing of the delinquency period are some of the suggested customisations,” the association, which represents members having properties including 2-star and below to 5-star, said in a statement. HAI added that while ECLGS 3.0 offers liquidity to pay interest obligations, it does not help businesses to survive, and hence, interest subvention and a longer payback period can provide both liquidity and relief.
The government had in March announced the launch of ECLGS 3.0 to cover enterprises in hospitality, travel & tourism, leisure & sporting sectors and extended the overall emergency credit scheme including the previous two versions by three months from March 31, 2021, till June 30, 2021, or until guarantees for the entire Rs 3 lakh crore amount are issued. While this would definitely help MSMEs however the overall impact would be negligible, the apex body for the travel and tourism sector in India: Federation of Associations in Indian Tourism & Hospitality (FAITH) had told Financial Express Online.
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“We think something is better than nothing as 70 per cent enterprises in the sector are small businesses. Domestic tourism has recovered only 30-40 per cent while domestic travel has revived 80 per cent of the pre-Covid levels. However, international tourism is absolutely on standstill. I think the overall impact of ECLGS on MSMEs in the travel and tourism sector will be negligible,” Subhash Goyal, Secretary-General, FAITH and Chairman, ASSOCHAM National Tourism & Hospitality Council had told Financial Express Online. As of February 28, 2021, banks and other lenders had sanctioned 82 per cent or Rs 2.46 lakh crore of Rs 3 lakh crore under the ECLGS scheme, MSME Minister Nitin Gadkari had said in a written reply to a question in the Rajya Sabha in March.
Among other asks by HAI were allowing hotels to utilise the credit line for any business purpose, including repayment of loans and interest payment, complete or partial waiver of statutory expenses like property tax, lease rentals, license fee, excise fee, and introducing plan or policy for hotels to renegotiate lease rentals/license fee in a manner that for the remaining term, the lessor or licensor can have incremental revenues, while hotels can recover losses. Recently, retailers, traders, and other industry groups had approached the government for similar benefits to fight Covid.