Federation of Hotel & Restaurant Associations of India (FHRAI) has submitted a representation to the Union Finance Minister Nirmala Sitharaman requesting to increase the ECLGS loan term with rationalized norms for all loans for the hospitality sector.
The request comes on the back of the recent announcement by the Ministry of Finance vide which the ECLGS has been increased by INR 50,000 crore, from INR 4.5 lakh crore to INR 5 lakh crore. In its representations to the MSME Minister and Minister of Tourism, FHRAI has extended special thanks for their efforts in enabling this support for the tourism and hospitality sector.
The Association has welcomed the measure stating it would immensely benefit the MSMEs in the hospitality sector. However, considering the major hardships faced by the sector over the last couple of years, the industry feels that the announced measures are inadequate to mitigate the losses incurred by it. For the hospitality industry to avail the maximum benefit of the ECLGS, FHRAI has requested for the scheme to be customized to meet the needs of the industry.
“We thank the Government for announcing the increase in the ECLGS limit. This positive step will provide much needed relief to the deeply distressed hospitality sector. However, we also feel that the Government could have critically examined the shortfalls in the previously announced ECLGS and could’ve come out with a more robust and effective scheme for the hospitality sector. For instance, the 6-year period is too short a window for the hospitality sector to reap the desired benefits of an otherwise well-intended scheme. For the scheme to truly benefit the industry, it is imperative that the tenure of loan term is increased to at least 10 years,” stated Gurbaxish Singh Kohli, Vice President, FHRAI.
The tenor of loans granted under ECLGS 3.0 is 6 years including a moratorium period of 2 years. Whereas, the same under ECLGS 1.0 is 4 years and under ECLGS 2.0 is 5 years with one-year moratorium. The FHRAI has pointed out that many hospitality establishments have availed the loans under ECLGS 1.0 and 2.0, and the repayment period for these loans has already started in most cases.“Unfortunately, hospitality establishments do not have the cash flow to repay the loans due to continued business disruptions during the last two years. The sector is also constrained to service its other loan obligations along with managing its huge capital expenditure to remain afloat. The extension of the ECLGS limit will only increase the credit burden of the industry and borrowing additional loans that need to be serviced in a short duration may not be a viable and sustainable option. We, therefore, request the Government to rationalize the norms for all the ECLGS loans taken by the hospitality establishments,” said Pradeep Shetty, Joint Hony Secretary, FHRAI.
The business environment of the sector being highly volatile and unpredictable, FHRAI has opined that only long-term credit facilities can help the industry withstand challenges arising out of the prolonged impact of the pandemic.
“We understand that the Government intends to extend its support to the pandemic-hit hospitality sector and we truly appreciate it. However, at present, even the eligibility criteria to apply for loan are too stringent and a major deterrent. The cumbersome application process makes it difficult for entities to get loans. We, therefore, request the Government to ease the eligibility criteria and simplify loan application process. A single-window or single-click clearance is highly desired,” concluded Kohli.