HomePoliticsHospitality sector may be granted infra status

Hospitality sector may be granted infra status


The tourism ministry plans to discuss the long-standing demand for infrastructure status to the hospitality sector with other concerned departments, two government officials aware of the development said.

Infrastructure status for any sector provides incentives and relaxations, including cheaper loans, tax concessions, and increased flow of capital. It also help the sector attract investments. A deduction of up to 40% can be availed on the income derived by financial investments due to their investments in equity shares.

The officials cited above said the ministry may take up the matter with the finance ministry and the Prime Minister’s Office (PMO) to reach a consensus on the issue. The talks come at a time the hospitality business in the country has been severely impacted by the pandemic and the restrictions in the past two years.

A spokesperson for the Union tourism ministry did not respond to queries emailed on Saturday morning till press time.

Infrastructure status also helps companies raise viability-gap funding (VGF) and allows external borrowing. Currently, hospitality projects are classified as “infrastructure” projects only in cities with a population of up to 1 million.

According to industry analysts, the hospitality sector currently pays interest of around 11%, which would be way lower if the infrastructure status is provided. The draft National Tourism Policy released by the tourism ministry in November stressed the need for infrastructure status for hotels.

Noting that accommodation is a key prerequisite for the development of tourism, the draft policy said if tourism has to grow in the country, both inbound and domestic traffic, there will be a need to expand accommodation facilities across the destination.

“Most of the hospitality infrastructure such as hotels, resorts, and convention centres are being developed by the private sector in the country. There is a very little public investment in hospitality infrastructure. Investment in these hospitality projects requires significant time to recover,” it said.

M.P. Bezbaruah, secretary-general, Hotel Association of India (HAI), also said that government’s tourism-related programmes such as ‘Dekho Apna Desh’ would be successful only if the hospitality sector grows. “Instead of the government pitching in, why not encourage the industry to invest and give them some incentives. Whatever little outgo the government would make, it will be compensated by hundred-times more returns from the sector,” Bezbaruah said.

He also said that the move, if implemented, would be in line with the government’s push for capital expenditure and infrastructure growth. The Union Budget 2022-23 primarily focussed on infrastructure growth and pegged the capital expenditure for FY23 at 7.5 trillion, 35.4% higher than the budget estimate of 5.54 trillion for FY22.

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