#Stay-at-home — it potentially saved lives and contained the COVID-19 Pandemic but it very quickly put the Travel & Tourism industry on life support. COVID-19 has affected businesses and industries worldwide, but the travel & tourism sector is experiencing an existential crisis owing to increasing global travel restrictions, major event cancellations, and overall risk aversion to travel internationally and domestically.
Estimates suggest that the tourism industry is staring at an overall loss of Rs 5 lakh crore and job cuts impacting up to five crore people. Globally and especially in India, the aviation sector has been one of the hardest hit and the situation is dire many airlines considering steep job cuts and even closure.
The immediate requirement of travel & Tourism sector is liquidity for the short and midterm in order to meet the fixed costs during the lockdown period. The current liabilities of the sector are multifold and thus the dire need for immediate liquidity. In addition to the loss of revenue from cancellations and a freeze on all business activities most companies still have considerable liabilities to service. These liabilities range from salaries, rents, statutory dues, license fees (state and federal) to various utility bills. These all add up to a significant sum and without abatements and fiscal support will be un-serviceable. This will also affect the financial sector as
a while as NPA’s will increase considerably.
The government should create easily accessible structures to enable travel related companies to secure immediate un-secured loans and monetary support on a long term basis with respectable moratorium periods of up to a year. The eligibility criterion for these loans will need to be flexible and based on personal guarantees and non-collateral based lending rules. The industry and government can mutually come up with acceptable terms and conditions.
It may be considered to defer GST and various forms of excise or taxes (which are operationally archaic and draconian) for all sectors to ensure their revivals. The travel sector will benefit from this the most.
The taxes on aviation and aviation fuel are complex and not conducive to running any form of Airline in India. The government must with immediate effect rationalize all forms of excise and taxes and bring Aviation Fuel under the GST regime. ATF presently is chargeable at 11 per cent ad valorem rate of excise duty. Ad valorem rate means that the impact of an increase in price of the fuel because of global rate hike translates into an even higher price for airlines as the tax incidence also rises. At the very least the government should introduce a specific excise duty
expressed in Rs per kilolitre. Petrol and diesel already attract a specific rate of excise duty and so ATF naturally qualifies for such a shift; to be fair. Considering aviation fuel cost accounts for 50% of the overall cost of an airline this shift to GST would be the fairest and logical move to make.
To encourage Inbound tourism for foreign tourists GOI should make most visas free and issuable upon landing from most friendly countries.
Till the epidemic wanes and to encourage the tourist to return to India the industry should enact proper social distancing and hygiene norms and ensure that the new policies are advertised properly and widely; to revive confidence in tourists to visit India.
The Travel & Tourism industry generates significant numbers of direct and indirect employment across all types of skilled and unskilled labor classes and in all sectors of the economy. It is one of the largest generators of income and taxes in India and directly accounts for approximately 10% of the Indian GDP. To lose this sector to inaction or due to inadequate support will be dangerous and foolhardy and could potentially lose India 38 Million jobs.
Covid-19 has brought the momentum of the travel & tourism industry to a halt but with timely intervention and requisite support from the government, it’s a sector that can help lead recovery for the economy while continuing to support millions of jobs.
The government needs to do a lot more to revive demand!