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The Parliamentary standing committee for transport, tourism and culture, chaired by V Vijaisai Reddy, has asked the Central government to take a stand on the long pending proposal of the ministry of tourism for infrastructure status for hotel projects with an investment Capex above INR 25 crore, excluding land cost.
The committee has asked the department of economic affairs to “spell out its stance” in the matter within three months.
Noting that the proposal is “pending for long” in the department , the committee said that considering the capacity of the sector to generate employment at all levels, and the capital crisis being faced by the sector currently, infrastructure status will reduce the risk involved with the sector.
“The Committee observes that construction of hotels is highly capital intensive and it takes long for hotel projects to reach operational profitability. COVID has aggravated this and the current crisis is threatening the existence of hotel business for organizations in the hospitality sector because availability of lending by banks and financial institutions that have turned risk averse, especially towards the hospitality sector, have reduced contact-intensive sectors. The Committee, therefore, recommends that hotel projects with Capex above INR 25 crore (excluding land) be accorded infrastructure status and included in the Infrastructure list of the RBI so that long term funds are accessible at lower interest rates and the gap between return expectations and debt cost is bridged.”
In another major morale booster to the distraught hotel industry which is yet to come out of the financial stress inflicted by the Covid 19, the Parliamentary Standing Committee in its latest report has extended unequivocal support to the industry’s demand for extension of the timeframe to reach the four performance parameters by borrowers and for the repayment schedule of the loans.
As per the KV Kamath Committee recommendation, the timeline to achieve the four ratios by borrowers expired in September, 2022 and the repayment time frame is to start from December, 2022.
The panel in its latest report has supported the tourism and hospitality industries’ demand for extension of these deadlines. The Committee has recommended the deadline to be extended under the resolution framework to September, 2023 and the repayment schedule to December 2023.
“The Committee lends its Parliamentary support to the demand of the travel, tourism and hospitality industry and recommends that in view of the adverse impact of the third wave of COVID-19 pandemic and the resultant recessionary conditions and the difficulties faced in revival of businesses and meeting the operational requirements, the deadline for achievement of all five financial parameters, i.e., (i) Total Outside Liabilities/ Adjusted Total Net worth, (ii)
Total Debt/ EBITA, (iii) Current Ratio, (iv) Debt Service Coverage Ratio (DSCR) and (v) Average Debt Service Coverage Ratio under the Resolution Framework relating to operational performance of borrowing entities be deferred to September, 2023 and the repayment schedule be extended from December 2022 to December 2023,” the Action Taken Report tabled in the Rajya Sabha says.
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