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Hospitality industry requests govt to ease ECLGS rules to help the ‘dying’ industry

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The hospitality industry has requested the Union Finance Ministry, Reserve Bank of India and Tourism Ministry to ease some rules and regulations of Emergency Credit Line Guarantee Scheme (ECLGS) introduced on March 31 to help the ‘dying’ industry.

FAITH, the policy federation of all the national associations representing the tourism, travel and hospitality industry, stated, “This scheme proposes to extend support to tourism, travel and hospitality accounts which were classified as regular, special memorandum account-0 and special memorandum account-1 and whose past dues were not beyond 60 days as on February 29, 2020.”

However, Clause 19 of the operational guidelines mentions that the scheme will not be applicable to accounts classified as non-performing assets ‘as on’ date of disbursement, it said.

“This clause is inherently contradictory to the proposed spirit of the scheme which is to help borrowers by assessing their accounts on a pre-pandemic status,” FAITH stated

The organization said that all government data, whether that of GST or of income tax, has repeatedly highlighted and affirmed that the tourism, travel and hospitality sector is the worst hit by Covid-19 and there has been negligible business for the majority during the 13 months since the time pandemic struck India.

FAITH suggested to reissue the necessary instructions to have the Clause 19 issued in operational guidelines of the scheme to be immediately annulled as it is sending a contradictory message to all the member lending institutions.

The policy body also sought to consider eligible outstandings for tourism, travel and hospitality as an average of 11 months of FY 2020 – April 1, 2019 to February 29, 2020 – as just against the outstandings as of February 29, 2020.

The rationale for the same is that October-February is traditionally the peak tourism season in India and thus credit outstanding levels are usually the lowest during February.

Accordingly, an 11-month average of outstandings would enable a correct need assessment of the Indian tourism, travel and hospitality enterprises as it would balance out the off-season and the peak season accordingly, it stated.

The think-tank also stated that there is no moratorium on interest on funds drawn under this scheme and it has to be paid as per Clause 10 of the guidelines and Clause 16 of the Frequently Asked Questions.

They also highlighted that due to the second wave of the pandemic, there is literally no domestic tourism business.

This is on top of complete shutdown of all other segments of tourism – inbound, outbound, corporate and also group tourism business.

“Without any business, it is practically impossible for tourism, travel and hospitality entities to generate cash flows and to service interest,” it stated.

The organisation requested to allow moratorium on interest too to enable drawdown under the proposed scheme.


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