Moneycontrol PRO
you are here: HomeNewsBusiness

COVID-19 crisis | Government's measures to revive tourism receive mixed reactions from the industry

Industry participants said that the government's moves are not expected to provide a major boost to the sector immediately.

June 28, 2021 / 09:16 PM IST
Finance Minister Nirmala Sitharaman

Finance Minister Nirmala Sitharaman

The central government on June 28 came out with a set of measures to help revive the tourism sector battered badly by the second wave of COVID-19.

The government announced it will issue free tourist visas for the first 5 lakh tourists after global air travel opens up till March 31, 2022 and will also provide financial support to more than 11,000 registered tourist guides/travel and tourism stakeholders.

Working capital/personal loans will be provided with 100 percent guarantee with a limit of Rs 10 lakh for travel and tourism stakeholders and Rs 1 lakh for registered tourist guides, with no processing charges and waiver of prepayment charges, Finance Minister Nirmala Sitharaman said.

While industry experts and participants welcomed the government's move to provide guaranteed loans to the sector, as it will help companies stay afloat in the difficult conditions following the aftermath of the pandemic, the moves are not expected to boost spending in the sector immediately.

“While the measures are welcome and target COVID sensitive sectors, most of the fiscal support is still below the line and in the form of loan guarantees, and not direct stimulus," said Emkay Global's lead economist Madhavi Arora.

COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more

Industry participants also said that the government's moves are not expected to provide a major boost to the sector immediately as only a small percentage of the country's tourism operators are registered with the ministry and the loan requirements for players is a lot more than that provided by the government.

"Only a small percentage around 5 percent of all tour operators are registered with the Ministry of Tourism, and most of the players handling international tourists have loan requirements of larger than the Rs 10 lakh. for which the government is providing guarantees," an official from Delhi-based Swan Travels told Moneyconrol.

Another Delhi-based travel agency Welgrow Travels Pvt Ltd said that while the government providing loan guarantees will help improve liquidity in the industry, however, the government has not cut interest rates on loans for the industry and this will continue to hinder the health of participants.

"The government should have looked at other financial benefits like a cut on interest rates on loans, reduction of the GST on the sector, a rebate of interest of outstanding loans or even interest-free loans to boost the industry immediately," an official from Welgrow Travels said.

Chirag Agarawal, Co-founder, TravClan, a B2B travel platform, pointed out that hotels have high taxation rates at 18 percent. If the government reduces that will another way to provide financial stimulus to the travel and tourism sector.

He further said that the relief measures the Finance Minister announced today will helps with the liquidity bit. "People will get money from the government and they can push the money in the ecosystem. In the last 15 months, what has happened is that money has been stuck at various places. This will help the entire ecosystem. However, it is not enough. yet, it is a good starting point."

Similarly, the government's move to provide free visa's for the first 5,00,000 tourists once global air travel opens up also failed to garner excitement from the industry.

"The Finance Minister has announced that the fees on five lakh tourist visas will be waived off. The scheme is applicable till Mar 31, 2022 or till the stated number of visas are issued, whichever is earlier. While it would incentivise foreign tourist arrivals to an extent, the recovery in foreign tourists coming into India would primarily depend on the COVID-19 containment and the pace of vaccine rollout," said Vinutaa S, Assistant Vice President & Sector Head - Corporate Sector Ratings, ICRA.

"Indian visas are not very expensive, tourist visas for passengers from the US and European countries cost around $50 - $75 and is even lower for tourists from South Asian countries like Singapore, Japan, and Sri Lanka," the official from Welgrow Travels said, adding that, visa costs make up a very small portion of the expenses for tourists and a wavier in visa fees is unlikely to boost consumer confidence unless the COVID-19 situation is controlled in the country first.

"A lot of the government's measures to boost the tourism industry are dependant on the situation surrounding the COVID-19 in the country, and what percentage of the population is vaccinated against the virus," an official from ABC Travels said, adding, that there is still a lot of scepticism from tourists to travel to India because of the pandemic situation in the country.

Talking about the tourist visas that will be issued free of charge, a spokesperson of Rategain, a travel technology company, said that the first five lakh free VISA (worth approximately Rs 100 crore) will give much needed kick start to the inbound segment mainly for tourists. However, he added that this will not be a boost as such but will act as a kick start.

"We could have said this a boost only when the inbound sector would have had some movement already. This (free visa) will depend on how the Tourism Ministry works out a solid recovery plan for the tourism sector especially showcasing to the world the various COVID health and safety measures taken to increase inbound tourist confidence index. This will be the key to ensure international tourists are inspired enough and feel safe to visit India. Ofcourse it will also depend on the much talked about Delta plus variant third wave and how the govt works to containing its spread."

The Hotel Association of India also said that the government's announcement on free visas has a very strong symbolic message but has requested the government to come out with measures like liquidity support and exemption from statutory taxes to make the industry recover and be ready to welcome tourists.

"HAI would like to compliment the FM on this initiative and look forward to some more pragmatic initiatives to create jobs and livelihoods through a rejuvenated Tourism and Hospitality industry," the industry body said in a statement.

The government's announcement for financial relief for the tourism industry comes after ASSOCHAM had reached out to the government seeking an urgent relief package, comprising long-tenure debt restructuring and priority in vaccination of the staff engaged in the hospitality industry.

The industry chamber had asked the government to consider granting E – Tourist Visa for all those who are fully vaccinated and have negative RT-PCR Tests. People employed in the sector, including part-time workers, cab drivers, tourist guides, hotel staff and third party/ service providers should be vaccinated on a priority basis. Besides, the scheduled international flights should start at least from the countries with which India has ‘ air bubble’ agreements.

Yaruqhullah Khan
Maryam Farooqui
first published: Jun 28, 2021 08:40 pm