Budget Evokes Mixed Response to Boost Business Travel

According to Priya Paul, president, HAI, the union budget spells out a sound framework for restoring the economic growth on a nine per cent trajectory during 2009-10. This will usher in opportunities for growth sectors like hospitality and tourism to make a larger contribution to GDP and employment generation in the country. She also welcomed the statement of the finance minister made at the post-budget conference on July 7. “The finance minister has assured to look into the main concerns of hospitality industry for infrastructure industry status and tax breaks needed for boosting the growth of  hotel accommodation infrastructure in the country,” she said.

Justifying the budget in the current economic scenario, Madhavan Menon, managing director, Thomas Cook India said, “The overall budget seems focussed on continuity rather than any major breakthrough decisions. The budget is justified given the current global economic environment and political compulsions.”

Vijay Thakur, president, IATO maintained that this year’s budget is quite a balanced one with focus on rural poor. It is giving due emphasis to the infrastructure sector. As far as tourism is concerned, the removal of Fringe Benefit Tax (FBT) is a welcome step. Adventure tourism will also get a boost with full exemption of customs duty on floatable rafts, snow skis, water skis, surf boats and other water sports equipment.

E M Najeeb, CMD, Airtravel Enterprises India Holidays, was of the view that the budget is aimed at economic growth through rural development, upliftment of vulnerable segments of society and strengthening women empowerment, food security, rural housing, infrastructure development and so on. “This is a very essential approach for the overall inclusive growth that leads to a strong economic base. Taking all aspects into consideration, we can easily say that this is a realistic budget in the given global and national environment,” he observed.

Najeeb pointed out to the attention being paid on infrastructure development of highways, roads, airports, seaports, power and telecom are contributing factors for the fast development of tourism. “Foreign Direct Investment would give a boost to vacation packages of hospitality industry. The priority given to environment and climate change and rural development schemes would enhance the quality of tourism in terms of sustainability and rural tourism objectives,” he added. Shedding light on the positive aspect of customs duty exemption, Tejbir Singh Anand, president, ATOAI, said, “The exemption of customs duty on water sports and ski equipment will bring down the cost of adventure tour operations. As a result, they will be able to bring in more tourists from international markets.”

Similarly, expressing optimism over good news for the tourism industry, Rakesh Lamba, president, ADTOI said, “The exemption of service tax on passenger vehicles, the flagging off the direct trains to major metros, improving highways, and reducing the customs duty on some adventure sports equipment is good news.” However, on being asked about the impact of exemption from service tax on passenger vehicles, Sarab Jit Singh, president, ITTA, clarified, “Initially, we thought that service tax on tourist transport operators is exempted. However, the notification issued by the ministry of finance on July 7 clearly states that the exemption of service tax is only for those operators that have Contract Carriage Permits for interstate transportation of passengers.

Surprisingly, it excludes tourism, conducted India Tours, charter or hire services.” It may be recalled that services provided in relation to a journey from one place to another, generally known were not subject to service tax. With effect from July 7 this year, the disparity was removed by providing exemption to Contract Carriage Permit vehicle for services provided in respect of journey from one place to another. However, no exemption is available with respect to journey undertaken in relation to tours conducted by tour operators, chartered or hired services for India tourism.

Though tourism is generating jobs in every field, still it is unable to attract the attention during budget even in the present scenario when global meltdown has had an impact worldwide and also in relation to terrorist attacks in Mumbai. “No relief is announced during this current budget, though we have had high expectations,” said Pronab Sarkar, MD, Swagatam Tours. “It clearly shows that the government does not view India tourism as an important sector, despite agreeing to the fact that tourism has the largest scope for employment generation,” added Singh.

Year after year, the whole industry presents its pre-budget memoranda and meets the finance minister along with the ministry of tourism officials, but has not seen any positive action. “For instance, in the budget for 2004-05, government announced to set-up two convention centres, one each in Delhi and Mumbai at a cost of Rs 2000 crore. But nothing was heard about it later,” Singh pointed out.

According to Rajji Rai, president, TAAI the government has once again failed to realise the importance and contribution of tourism for the development of the country’s economy. “We had raised several demands during our meeting with the finance minister with regard to budget 2009-10. We are absolutely unhappy after studying the budget from the perspective of tourism industry’s interests,” Rai expressed.

Similarly, expressing pessimism, Pradip Lulla, president, TAFI, said, “It is very disappointing there is nothing in the budget to give impetus to tourism industry. We are under pressure from all sides i.e reduced business, fear of terrorism and reduced or no commission from air-lines. And, with no sops from the budget, we have nothing to look forward to.” In his opinion, even the benefit from Fringe Benefit Tax, which has been abolished, is nullified by other taxes. The industry is looking at the removal of service tax on business and first class air tickets to boost business travel.

M P Purushothaman, president, FHRAI, said, “The budget did not give any importance to hospitality and tourism industry, especially when the country expects to generate more and more jobs from our industry. The industry is one of the pillars of the Indian economy and brings in substantial gains in terms of foreign exchange as well as employment generation. It would be fair to expect the government to aid sectoral growth and capacity expansion so that we can maintain the competitive edge as a cost effective tourist destination.”

Likewise, Vikram Madhok, MD, Abercrombie & Kent India conveyed the same sentiment. “The inbound tourism is witnessing serious crisis due to economic meltdown. We have already seen more than 30 per cent decrease in inbound tourist traffic during the last couple of months and it is clear that forthcoming months will also see the same trend,” he said. In his opinion, the government could have offered some benefits Knowledge to the hospitality and tourism industry like revival of Section 80 HHD of Income Tax Act, 1961 to make India a cost effective destination.

According to Lamba, tourism has never been a priority sector for government despite the fact that domestic tourism in particular can create lots of jobs and play a very important role in upliftment of Indian economy.

Meanwhile, Himmat Anand, MD, Diethelm Travel India, added another perspective to budget analysis. “I did not expect anything from the budget and was not disappointed. We must understand that tourism is nowhere on the radar of the government as it has no impact on aam admi. In fact, there was no mention at all of tourism, which shows the priority the government gives us. For how long will we keep asking for government’s attention? Let’s just get on with what we have to do for ourselves,” he said. Anand viewed that tourism must understand and accept that it needs to take solace in what other related areas get – civil aviation, infrastructure, civic facilities, etc. “All these impact tourism directly and if these segments get the government’s attention, we ourselves will benefit,” he observed.

Rai also urged private entrepreneur and the ministry of tourism to jointly promote tourism by means of private-public partnership and also through their ingenuity. He anticipated that despite the finance minister’s apathy, this year will be a better year for tourism, in which a growth of over 10 per cent is expected from last year since the worst period of economic recession is almost over.