Government announced ₹50,000 crore boost for hospitality sector
The government approved an additional Rs 50,000 crore under the Emergency Credit Line Guarantee Scheme (ECLGS) Mr Pradeep Shetty Sr. Vice President, Hotel and Restaurant Association of Western India (HRAWI). “Travel is picking up and tourism destinations are seeing
The government approved an additional Rs 50,000 crore under the Emergency Credit Line Guarantee Scheme (ECLGS)
Mr Pradeep Shetty
Sr. Vice President, Hotel and Restaurant Association of Western India (HRAWI).
“Travel is picking up and tourism destinations are seeing a revival. The additional ECLGS of Rs.50,000 Cr was much needed by the hospitality sector which is still grappling with massive debts. The extended ECLGS will help establishments facing liquidity crunch to keep the wheels in motion. However, considering the hardships faced by the sector over the last couple of years, the scheme should have been customised to meet the needs of the industry. The present 6-year tenure of the loan is too short for the hospitality sector to reap the desired benefits. For the scheme to be beneficial, the tenure of the loan term should be increased to at least 10 years. Also, due to continued business disruptions over the last two years, hospitality establishments do not have the cash flow to repay the loans. The sector is constrained to service its other loan obligations and manage its huge capital expenditure to remain afloat. The extension of the ECLGS limit will only increase the credit burden of the industry. So, borrowing additional loans that need to be serviced in a short duration is not a viable and sustainable option. The eligibility criteria to apply for a loan through ECLGS are too stringent. The Government needs to ease the eligibility criteria and simplify the loan application process through a single-window or single-click clearance system.”
Founder & CEO, Signum Hotels & Resorts
‘Excellent endeavour from the government in extending the emergency credit line. It needs to touch ground level and impact the hospitality sector. Government must also tell us how the companies can be benefitted and the process to use the scheme. It’s a great and re-assuring step and will boost liquidity into the system and will surely put the industry on track to some extent.’
CEO – Rester Hotels & Resorts
“Hotel bookings have picked up and the industry is seeing revival. But several companies cannot sustain operations without sufficient funds.
Additional ₹50,000-crore boost via emergency credit line to support the ailing travel, tourism and hospitality sector is expected to provide much needed relief.
We thank the government for standing with us and supporting the industry. With such industry-friendly policies, India leads in Tourism efforts.”
Principal – Lexicon Institute of Hotel Management
The Government of India launched the Extended Credit Limit Guarantee Scheme (ECLGS) through the Finance Ministry on May 13, 2020. Recently it has been extended up to March 2023.
The initial cover of Rs. 4.5 lakh crore has been further extended by 50,000 crore which has been extensively earmarked for the Hospitality Sector. This allows the borrowers in the hospitality sector to extend their credit limits with a cap of 9.5% interest from banks. The government guarantees the payback to the banks.
This is a welcome step for the organised sector of the hospitality industry as it will give some breathing space to those who are wilting under debt. The cash flow for small and medium players have been of serious concern during the last two years of the pandemic. With demand for most sectors returning to pre-covid levels, the confidence to payback and turn the books green is at its peak. The backing of the government will provide impetus to struggling units and help them to be back in a profit-making business.
However, hospitality business being capital and labour intensive, the deadline could be extended to March 2024. This could help small players with time to recover their losses and improve growth in the sector. Moreover, the unorganised sector of hospitality industry in India is very large and may not be even aware that such schemes exist, leave alone availing them. There should be considerations under this scheme to accommodate the large unorganised food service sector. This will lead to holistic development of the industry.
Founder & CEO, JustMyRoots
“The Emergency Credit Line Guarantee Scheme is going to be a boon for Hospitality and related industries. Covid-19 has caused a massive disturbance in this sector, and this facility will give the industry a much-needed boost. This scheme will help small and mid-sized businesses overcome liquidity problems and focus on growth and stability. ECLGS is a welcome step that will lead to a new growth trajectory for the economy and will lead to more job opportunities for the youth and help to uplift the Indian economy.”
Founder, VLOGS Food Pvt. Ltd
The enhancement in the limit of ECLGS by Rs 50,000 crores from Rs 4.5 lakh crores to Rs 5 lakh crores is a welcome move as this is earmarked exclusively for enterprises in hospitality and related sectors. Hospitality being a contact intensive sector took a huge hit due to the pandemic, which let to many organizations shutting door and many people losing their jobs.
The move is timed very well as we are seeing demand picking up for these services, which faced intense headwinds during the pandemic period. Being an employment intensive sector, this will certainly boost the present jobs situation as well.
The easy credit facility will help many organizations in meeting their operational liabilities by increasing liquidity into the system.