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What is pegging back tourism in India?

Goutam Das     April 11, 2018

India's tourism services are a tortoise. There are many reasons why the country, replete with mountains, a long coast line, monuments and historical architecture, is a laggard in the competitive world of tourism.    

Vivek Nair, Chairman and Managing Director of Hotel Leelaventure Limited, which runs The Leela Palaces, Hotels and Resorts, was in Delhi on Tuesday to announce a new management contract. The company would manage the Mahatma Mandir, a large convention centre in Gandhinagar and an adjoining, upcoming 300-room The Leela Gandhinagar, which would open next year.

Nair, also the Chairman of the Services Export Promotion Council, doesn't think the ease of doing business has substantially changed for the tourism and hospitality sector. He laid out everything that  plagues the industry, on the sidelines of today's announcement.  While the government wants to double foreign tourist arrivals from the current 10 million by 2025, it appears a difficult ask. Here's why:

An additional 180,000 guest rooms are required to cater to such a volume - the present inventory is 120,000 rooms. Nair says that at an average capital expenditure of Rs 1 crore per room, an estimated amount of Rs 180,000 crore would be required. Mobilising this sort of capital is challenging for the industry in the absence of benefits. The industry has been demanding infrastructure status to hotels when the project cost is Rs 50 crore and above, from the current threshold of Rs 200 crore now.

A second bottle neck is high GST rates on luxury hotels. A unit of accommodation of Rs 7,500 and above per day is taxed at 28 per cent. Nair says tourists find this "oppressive" in comparison to other "tourism-minded countries" who charge zero to 12 per cent.

The single window clearance mechanism for projects is not really single window. Any project requires 20 or more permissions from state departments and agencies. That is time consuming and isn't easy.

India has a long coastline but beach tourism is dead. This has less to do with India's dirty beaches. Costal Regulation Zone rules currently specify a setback distance of 200 metres from the High Tide Line and 100 meters from the edge of the river. The 200 meters is far higher than what Maldives, Sri Lanka, Bali and Phuket specifies. The industry wants the distance rationalised to revive beach tourism.   


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