February 21, 2017 TnH Global

COVER STORY : Tourism industry not amused with Union Budget 2017-18

FM Arun Jaitley in his budget speech announced the launch of second Incredible India campaign in FY 2017-18 across the world. Jaitley also announced setting up of five special tourism zones in the country. But, India’s Travel & Tourism industry is not amused with the Budget. They say the FM has failed to address their concerns in the budget.

The first ever integrated Union Budget 2017-18 (Rail budget has been merged in general budget from this year) presented by Finance Minister Arun Jaitley focuses on rural India, infrastructure, housing and employment generation. A better infrastructure is imperative not just for tourism but for whole economy. The country’s infrastructure including transport did see improvement in the recent years, but we have to go a long way. The focus on the infrastructure will definitely boost our tourism sector.

Tourism has been a key priority area for the Narendra Modi Government. For the development of India’s tourism sector, the Finance Minister in his budget speech has announced the launch of second Incredible India campaign in FY 2017-18 across the world. Jaitley also announced setting up of five special tourism zones in the country. The travel and tourism industry has been asking for revamping of Incredible India campaign and launching its 2nd version. Lack of an international marketing campaign in recent years is given as one of reasons of modest growth in FTAs to India; therefore Incredible India 2.0 was overdue. While announcing measures for tourism sector, Jaitley said, “Tourism is a big employment generator and has a multiplier impact on the economy. Five special tourism zones anchored on SPV (special purpose vehicle) will be set up in partnership with the states.” The Union Budget 2017-18 has proposed setting up airports in tier-2 cities in partnership with private players. As part of the regional connectivity plan, Jaitley has announced that selected airports will be developed and maintained under PPP mode. From this year, there is no separate railway budget, therefore, the General Budget also provides for budgetary allocations for railways. Unlike past, no new trains have been announced in the budget. FM has allocated `55000-crore for the railways with focus on safety and cleanliness. `1 lakh crore special fund has been announced for a five-year safety upgradation of the Indian Railways. The minister also announced to launch dedicated trains for tourism and pilgrimage. To promote digital transaction in the Railway, FM has removed service charges on railway e-tickets.

Commenting on the budget proposals for the upcoming fiscal year, JB Singh, President and CEO of Inter- Globe Hotels, said, “This budget has taken several measures to boost the travel and tourism industry. We see a strong focus on strengthening railroad infrastructure and building of airports in tier-II cities in order to support the tourism ecosystem, which is likely to improve connectivity across the country.” According to him, Rural India holds immense potential from a tourism point-of-view, and the newly announced initiatives to further develop our rural markets with 100% village electrification will further add to the overall development of our economy. Singh however added that the industry was keenly looking forward to a stronger government focus on incentives for the commercial real estate sector such as listing of REITS, changes to the Real Estate Regulatory Bill and creation of single-window clearances besides according infrastructure status to the hospitality industry. We now look forward to the implementation of GST such that all taxes are streamlined for the long-term benefit of the country.

According to Peter Kerkar, Director, Cox & Kings, infrastructure is a part of the 10 most important themes in Union Budget 2017 with allocation for infrastructure at a record `3,96,135 crore. Road and rail infrastructure are crucial in terms of boosting tourism as these are widely used mode of transport in India. “In this context, stepping up the allocation for national highways to `64,000 crore, announcement to launch dedicated trains for pilgrimage/ tourism and service charge withdrawal on booking of rail tickets are welcoming moves which will help to accelerate domestic and inbound travel. Provisions made for clean and safe rail travel and making 500 rail stations disabled-friendly are also encouraging,” said Kerkar, adding: we are quite positive about the focus on rural infrastructure development as we see a scope to promote rural tourism even further, especially for inbound tourists.

As per Ritesh Agarwal, Founder & CEO, OYO: “The launch of the Incredible India 2.0 will result in best tourist interest and inflow from overseas, creating a huge demand and opportunity for the Indian hospitality industry. The proposed creation of 5 special tourism zones in partnership with state governments will also provide excellent fillip to domestic tourism. It is encouraging to note the government’s focus on infrastructure development as it forms the backbone of tourism and hospitality sector. Furthermore, reduction in tax rate for SME and the push towards digital economy by de-incentivizing cash transactions will support new-age businesses and start-ups.”

Commenting on the budget, Mahesh Iyer, COO, Thomas Cook (India) said that this budget has very little to offer to the tourism industry, but with plans to launch Incredible India 2.0 as the next phase of growth for domestic tourism with respect to India, there is something to look forward to. “India has a vast railway network and the recently announced Railway Budget acknowledges the strength of this. One of the biggest announcements is the withdrawal of service charge on rail tickets booked through IRCTC. This will not only lead to more bookings but will enable the consolidation of a digital economy. Another significant development is the emphasis on safety and sanitation, by introducing bio-toilets, which will increase passenger comfort. It is also encouraging to note the measures that will be incorporated to make the Railways friendlier for the disabled.” With emphasis on a Digital Economy, by introducing measures like elimination of service charge rail e-tickets, launching DigiGaons to facilitate employment & skilling, and even augmenting transactions done via the BHIM app; the Finance Minister has laid out a path that directs the country towards digital transformation.

Rakshit Desai, MD, FCM Travel Solutions, “I believe, the Union Budget provides a good perspective on building a stronger ecosystem by focusing on development of key aspects such as rural areas, infrastructure and poverty alleviation. The year 2016, overall has been a good year for both tourism and hospitality. The industry contributes close to 7.5 per cent of India’s GDP and has been a key contributor to the Indian economy. With an objective to clearly give a further impetus to both domestic and inbound tourism, we feel the strategic vision for ‘The Incredible India 2.0’ campaign announced by the finance ministry is a positive step. This kind of support from the government goes a long way in creating awareness and should further help India get a distinct competitive edge vis-à-vis other destinations.

Rishi Puri, Vice President, Lords Hotels & Resorts said that he had hoped for the FM to announce some incentives for investing in new projects in the tier 2 & 3 cities that draw tourists but lacks good hospitality infrastructure. “Many renowned and international hospitality groups are investing in India because they too see the growth potential here. However, the Government has not doled out anything of much consequence to the sector. Except for the 5 per cent reduction in tax for MSMEs which will elevate the tax burden on us, there is nothing that hospitality players such as us will benefit from,” added Puri.

Expressing his disappointment on the budget, Dilip Datwani, President, Hotel and Restaurant Association of Western India (HRAWI), said, “We had very high expectations from this year’s Union Budget for tourism and hospitality. Based on the Government’s vision for tourism and our hopes were to receive the much needed reduction in taxes which would come into effect in the GST roll-out later this year. Also we had hoped that the government would grant infrastructure status to hotels with a project cost of INR 25 crore as against the present INR 250 crore. But there has been no mention on any of the critical aspects for promoting tourism.”

Key highlights

• Finance Minister announced the launch of Incredible India 2.0

• 5 special tourism zones to be set up

• Airports in tier-2 cities under PPP mode to be developed

• Rs 1 lakh crore special fund for safety upgradation of the Indian Railways

• Service charge removed on Railway e-ticket

• Dedicated trains for tourism and pilgrimage to be launched