Tourism industry no destination for Budget 2021-22

Budget leaves tourism high and dry

Tourism

February 6, 2021

/ By / New Delhi

Tourism industry no destination for Budget 2021-22

Thousands of small tour operators face existential challenges as their offices remained closed for several months (MIG photos/Varsha Singh)

While the economy as a whole is picking up in bits and starts, tourism industry, one of the biggest employers in the country and that generates 10 pc of the GDP, is still reeling under the crisis brought about by lockdown. After being left out of the much-hyped INR 20 trillion ‘AtmaNirbhar Bharat’ economic revival package announced last year to revive the post-lockdown economy, tourism players were hoping that at least in the budget the government would do right by them. Instead, they have been left out entirely once again.

When she presented her budget for the next fiscal year, 2021-22, India’s finance minister Nirmala Sitharaman once again left the Indian tourism industry bitterly disappointed. For the past 10 months, the tourism industry has been crying out for emergency relief from the government as it has paid the highest price for the three months of lockdown and even now it is struggling to emerge from the unprecedented crisis imposed on it by the unplanned lockdown announced by Prime Minister Narendra Modi on March 24, 2020.

In absence of any comprehensive data collected by government bodies, the estimates for the losses caused to travel and tourism industry range sharply, but most stakeholders estimate that it is potentially looking at losses exceeding 85 pc in revenues and possibly two-thirds of 50 million persons employed in the sector have lost their jobs due to the crisis. “The Indian tourism and hospitality industry is staring at a potential job loss of around 38 million, which is 70 pc of the total workforce,” a report by KPMG, a financial services and business advisory firm, said in April last year.

The real state of the industry may never be known as most of the sector is either unorganised, informal or falls under the MSME category where the companies don’t declare their financial results. Only a handful of travel and tourism companies are listed on the stock exchanges and their results point to a disastrous performance. For instance, the market leader in traditional travel companies, Thomas Cook India reported on February 4, a net loss of INR 662 million in third quarter ended December 2020, as against a net profit of INR 86 million in the corresponding period in the previous year. The drop in revenues was even starker, falling from INR 17.27 billion in previous year to INR 2.36 billion this year. A fairly profitable venture in normal years, Thomas Cook has been bleeding red since the lockdown was announced. Even though the lockdown covered only a week of the March 2020 quarter, Thomas Cook felt the impact of the pandemic almost immediately as its net profit declined 78 pc to INR 29 million in the quarter ended March 2020 as against INR 135 million in the quarter ended March 2019.

The losses have continued without a break ever since, indicating that the industry has been on the brink ever since the lockdown was announced. The story is likely no different for any other travel company.

For many stakeholders, the absence of any immediate relief came as a huge blow and even the most tempered responses to the budget indicate the extent of the disappointment and even anger in the tourism industry over the government’s continued negligence of their plight.

“The Union Budget 2021-22 that offered considerable scope to catalyse domestic tourism was noticeably silent on specific announcements towards the travel and tourism sector. A 19 pc reduction in the tourism budget is a strong concern for a sector that contributes 10 pc to the country’s GDP and is a critical source of employment for travel, tourism, hospitality and allied industries,” says Rajeev Kale, president & country head, Holidays, MICE and Visa of Thomas Cook (India).

Other stakeholders are more direct and blunt in expressing their disappointment with the budget. “The Union budget has failed in addressing the concerns of the tourism industry. Once again, it has disappointed our sector. Any sort of relief from the government would have helped in uplifting the industry sentiment. Despite knowing that we are one of the worst-hit industries by Covid, there was no mention of any relief. It’s high time we get together and make our industry strong enough that our voice can be heard,” Riaz Munshi, OTOAI president tells Media India Group.

“The travel and tourism industry continues to be disappointed. The Budget 2021 was just not for us just, like there was nothing in the Covid emergency relief fund for the travel and tourism industry. The industry really needed some short-term measures to be taken to boost the revival of the industry, but nothing was said or done. Constituting 10 pc of the GDP is not small but I do not know why we are so ignored. If the rate of GST was cut for hotels and other tourism products it would have reduced the cost for travellers. But there is nothing, there is no hope for us which we see in the near future. I think we still have to wait till the entire country is fully vaccinated,” Riddhi Roy, manager of Kolkata-based Dolphin Travels, tells Media India Group.

The cut in GST is indeed an important demand for most players who express their disappointment over the absence of any immediate relief in the budget that preferred to focus on long-term measures like infrastructure development. Months before the budget was finalised and while the government was consulting various industry bodies about their expectations and needs, most tourism bodies had made representations to the government with an outline of what was needed to revive the sector.

“Lack of immediate direct support in the Budget has disappointed the Indian travel and tourism industry. While infrastructure measures announced in the Budget may boost tourism over long-term, the opportunity for immediate support has regretfully been missed out,” says Nakul Anand, chairman of Federation of Associations in Indian Tourism and Hospitality (FAITH), an umbrella body of the industry.

He added to ensure that there was an immediate national common tourism vision and revival action plan across the centre and states, FAITH had proposed the creation of a National Tourism Council of Chief Ministers headed by the Prime Minister along with the tourism minister. “There was an immediate need for common industry status across the country for the complete tourism industry by putting it in the concurrent list to organise the industry and make them post-COVID ready,” Anand said.

The industry players also feel that it was important to bring overseas global Online Travel Agencies (OTAs) operating in India into the tax net of GST and other taxes to have a level playing field with Indian travel agents and tour operators. They also said there was need for a 100 pc tax exemption and reclaim taxes paid by travel agents and tour operators on their transactions when airlines windup or closedown as it would protect both the industry and the consumer. However, even these measures were missing.

“We expected much more than what was announced. Union Budget 2021 has focused more on spending to enable economic growth through infrastructure roads and financial remedies. Travel, tourism and hospitality was completely neglected,” Jyoti Mayal, president of Travel Agents Association of India (TAAI), one of the largest bodies of the industry, tells Media India Group.

Mayal, however, saw some positives in the budget. “We had proposed single employee benefits / security under one provision which shall take care of labour welfare, social security, health and families of employees. We are happy to note prima facie that with the implementation of the four labour codes, for the first time globally, social security benefits will extend to gig and platform workers. Minimum wages will apply to all categories of workers and they will all be covered by the Employees State Insurance Corporation. Women will be allowed to work in all categories and also in the night-shifts with adequate protection. At the same time, compliance burden on employers will be reduced with single registration and licensing, and online returns. This shall assist members of our trade,” says Mayal. “All that is presented is surely good for the growth of the GDP growth in the long run, but needed immediate reliefs, Mayal adds.

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