New Delhi: Reeling under deep financial crisis triggered by Coronavirus-induced lockdown, travel and hospitality sector has asked the government to allow one-time loan restructuring and extend moratorium on loan repayments till March 2021.
The demand has come from industry body Confederation of Indian Industry (CII) which represents bulk of the private firms operating in the sector.
In a letter to Finance Secretary Ajay Bhushan Pandey, the CII has said that moratorium on loans would provide immediate relief to the struggling companies.
“Moratorium should cover term loans, working capital loans, overdrafts and any non-fund-based limits. Further the accrued interest should be added to the principal outstanding to be serviced through the tenure of the facility. Currently several banks require the accrued interest to be paid post moratorium which is untenable for any company in this sector,” the industry body has said.
Its travel and hospitality panel headed by Dipak Haksar, CEO at ITC Hotels & WelcomHotels, has also urged the government to widen the definition of micro, small and medium enterprises (MSMEs) to include companies with annual turnover of upto Rs 250 crore in its fold.
Getting MSME status would help these companies get cheaper loans from banks, government guarantee for funds and preferential treatment in public procurements. It will be a major boost for the struggling hotel operators, travel firms and other allied service providers.
While proposing change in the MSME definition, Haksar said that it will provide support to a large pool of companies that have potential to grow bigger and compete with their global peers.
The Centre on May 13 announced to revise the definition of MSMEs to cover more firms under its fold. It also removed the distinction of manufacturing and service sector while classifying an enterprise as MSME.
As per the revised definition, a firm with annual turnover with less than Rs 20 crore investment and less than Rs 100 crore annual turnover would qualify as medium enterprises. Earlier. The CII’s travel and hospitality unit wants the turnover cap for MSME tag to be increased to Rs 250 crore while investment criteria to be done away with.
“Putting a lower investment criterion only acts as a discouragement for Indian entrepreneurs to invest the right capital for their businesses to grow to their future potential. We want Indian entrepreneurs to invest capital, take risk and allow their enterprises to eventually compete on global scale. However, till they scale up in terms of turnover, they should be provided the support as currently contemplated in various policies for MSME,” Dipak Haksar has stated in his letter reviewed by Top Lead India.
The travel and tourism sector is considered the worst affected by Coronavirus-afflicted economic crisis. The industry expects that cash flows for most players would unlikely improve till October 2020 and is only expected to normalize by 2021.
It has been estimated that the entire value chain linked to the sector is likely to lose around Rs 5 lakh crore or US$ 65.57 billion, with the organized sector alone likely to lose US$ 20.84 billion. Around 20 million jobs are at stake and would soon be lost.
While several sectors of the economy are likely to recover post lifting of lockdown restrictions, travel and tourism industry is most likely to suffer for a much longer period of time.