Enhanced ECLGS limit of Rs 50,000 crore earmarked for hospitality, allied services; Here’s how it will impact the sector

The Modi govt has enhanced the limit of Emergency Credit Line Guarantee Scheme (ECLGS) by Rs 50,000 crore. It has now reached Rs. 5 lakh crore from earlier Rs. 4.5 lakh crore. The additional amount has been exclusively earmarked for companies engaged in hospitality and allied businesses. The move is set to give much needed support to the industry jolted by the severe impact of Covid-19 pandemic. This will be incentivizing lending institutions to offer additional credit of up to Rs. 50,000 crore at low cost. Hence, it will enable these business enterprises in hospitality and allied services to meet their operational liabilities and continue their businesses.

Talking to FinancialExpress.com about this decision on ECLGS, Himank Tripathi, Industry veteran with nearly 20 years of experience across hospitality, consumer tech and start-up landscape, said, “This news should be considered a big boost that will help fast-track the recovery of the entire travel and tourism industry. The industry is showing a slow and steady growth curve based on the positive travel sentiments where, for instance, it is expected that outbound tourism from India will surpass USD 42 billion by 2024 and such initiatives by the Indian government will boost this growing market. Furthermore, this will especially help small enterprises and businesses struggling amid the unprecedented hit due to the pandemic.”

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Reacting to the announcement, Shreyas Kudalkar, Owner of Kings Hotel & Resort said, “One of the industries most impacted by the Covid-19 pandemic is tourism, which has an adverse impact on all continents’ economies, livelihoods, public services, and possibilities . Every link in its extensive value chain has been impacted. Many enterprises will benefit from the expansion of the Emergency Credit Line Guarantee Scheme as the fund has increased to open ways for the sector. The travel and tourism industry has taken a heavy hit as a result of the pandemic, but with government backing, things will get a little easier. This can assist aspiring entrepreneurs in visualizing and achieving their goals. According to a survey, tourism supports one in ten employment and generates income for millions more people in both developed and developing countries. This will assist in helping them acquire it back.”

When asked about the impact of this move on the human resources associated with the hospitality industry, Dr Anil V. Pillai, Founder of Terragni Consulting (P) Ltd., said, “The travel and tourism industry, which is a large employer and an industry with a huge potential for India’s growth, has been hard hit by the pandemic and its consistent impact on global travel. The industry is currently hit on three counts viz., a) severe shortage of trained personnel due to the intense Covid layoffs, b) working capital shortfall that has had an impact on the hiring cycle and customer acquisition and engagement, and c) capital for renovation and upkeep for severe wear and tear brought upon by properties idling for the last two years.”

Welcoming the move, Pillai added, “This very welcome step by the GoI should help in all of the above. Should the line of credit be made available friction-free to the SME/MSME end of the hospitality industry, it would very well kick off a virtuous cycle of investment and ease the investment freeze that the industry has been laboring under. The only minor quibble is, that the step is much delayed.”

Vandita Purohit, Founder of Mauji Cafe and TraWork, said, “This is obviously a much needed relief for the travel and hospitality sector, not only because it was one of the most badly affected during the pandemic but also because right now is a great time to grow and cover up for as much losses as possible. The extended line of credit will help immensely to gear up operations, re-hire and create more business. I just hope that the MSMEs in the travel sector know about this timely and also how to avail it.”

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Covid-19 pandemic adversely impacted contact-intensive sectors, especially the hospitality, travel and allied sectors more severely. Other sectors came back faster on the path of recovery, it took some time for these sectors to see some green shoots in recovery. Given hospitality’s high employment intensity and together with tourism, its direct and indirect linkages with other sectors, their revival is also necessary for supporting overall economic recovery. Recognizing this, in Union Budget 2022-23, FM Nirmala Sitharaman announced to extend validity of ECLGS upto March, 2023 and increase in the limit of guaranteed cover of ECLGS by Rs. 50,000 crore to total cover of Rs. 5 Lakh core, with the additional amount being earmarked exclusively for the enterprises in hospitality and related sectors.

With India’s immunization drive achieving success and roll-back of lockdown restrictions and overall economic recovery, conditions are better for sustained growth in demand for these sectors as well. This additional guarantee cover is expected to support the recovery of these sectors as well. ECLGS cover is expected to support the recovery of these sectors.


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