The request follows the recent announcement by the Ministry of Finance that the ECLGS has been increased by INR 50,000 crore from INR 4.5 crore to INR 5 crore.
In its representations to the Minister of MSMEs and the Minister of Tourism, the FHRAI extended special thanks for their efforts to enable this support to the tourism and hospitality sector. The association hailed the measure saying it would greatly benefit MSMEs in the hospitality sector. However, given the major difficulties encountered by the sector over the past two years, the industry considers that the measures announced are insufficient to mitigate the losses suffered by it. In order for the hospitality industry to get the most out of ECLGS, FHRAI requested that the program be customized to meet industry needs.
“We thank the government for announcing the increased ECLGS limit. This positive step will bring much-needed relief to the deeply struggling hospitality sector. However, we also believe that the government could have critically examined the shortcomings of the previously announced ECLGS and could have come up with a more robust and effective program for the hospitality sector. For example, the 6-year period is too short a window for the hospitality industry to reap the desired benefits of an otherwise well-intentioned program. For the program to truly benefit the industry, it is imperative that the term of the loan be extended to at least 10 years,” says Mr. Gurbaxish Singh Kohli, Vice President of FHRAI.
The duration of the loans granted under the ECLGS 3.0 is 6 years, including a moratorium period of 2 years. While the same under ECLGS 1.0 is 4 years and under ECLGS 2.0 is 5 years with a one year moratorium. The FHRAI pointed out that many hotel establishments have taken advantage of the loans under the ECLGS 1.0 and 2.0, and that the repayment period for these loans has already started in most cases.
“Unfortunately, hospitality properties do not have the cash to repay loans due to continued business disruptions over the past two years. The industry is also being forced to meet other loan obligations while managing its huge capital outlays to stay afloat Extending the ECLGS limit will only increase the industry’s credit load and borrowing additional loans that need to be repaid in a short period of time may not be a viable and sustainable option We therefore call on the government to streamline the standards for all ECLGS loans taken out by hospitality establishments,” says Pradeep Shetty, Jt. Hon. Sec., FHRAI.
As the industry’s business environment is highly volatile and unpredictable, the FHRAI opined that only long-term credit facilities can help the industry weather the challenges arising from the prolonged impact of the pandemic.
“We understand that the government intends to extend its support to the hotel sector affected by the pandemic and we really appreciate it. However, at present, even the eligibility criteria for applying for a loan are too strict and constitute a major obstacle. The cumbersome application process makes it difficult for entities to obtain loans. We therefore call on the government to relax the eligibility criteria and simplify the loan application process. One-stop or one-click customs clearance is highly desired,” concludes Kohli.