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HOTELS & TOURISM The hotels and tourism related industry has been declared as a `High Priority Industry' for development. The term `hotels' includes restaurants, beach resorts and other tourist complexes to tourists. The terms `tourism related industry' includes among others the following: - Travel agencies, tour operating agencies and tourist transport operating agencies; - Units providing facilities for cultural, adventure and wildlife experience to tourists; - Surface, air and water transport facilities for tourists; - Leisure, entertainment, amusement, sports and health units for tourists; - Convention/seminar units and organizations. FOREIGN INVESTMENT Hotels and tourism related industry is now eligible for automatic approval upto 51 percent foreign equityANNEX - III. Higher foreign equity participation on specific proposals are also considered on a case to case basis. Non resident Indian investment is allowed up to 100 percent. Dividends on investment are repatriable. The procedures for foreign investment in hotels and tourism related industry have been simplified and bottlenecks removed. Automatic approvals are now available for foreign technology agreements related to hotel industry subject to fulfillment of following parameters: (i) Technical and Consultancy
Services including Fees for Architect, Design, Supervision, etc: (ii) Franchising and
Marketing/Publicity Support Fee (iii) Management Fees (including incentive Fee): TOURISM : EMERGING OPPORTUNITIES Over the years, tourism has emerged as a major segment of the Indian Economy, contributing substantially to the Foreign Exchange earnings which increased from Rs. 320 mln. in 1971-72 to more than Rs. 30 mln. in 1991-92. However India's share in international tourism is insignificant considering the size of the country, rich cultural heritage, and the number of tourist attractions. With pragmatic planning, a much higher growth in the earnings from this sector can be achieved by fulfilling the target of 3 mln. tourist arrivals by the turn of the century.
In the development of tourism, the public sector has made significant contribution during the last three decades. However, during the Eighth Five Year Plan, tourism infrastructure is proposed to be developed mainly through private sector initiatives. To develop the infrastructure, the private sector is encouraged to invest in tourist transport facilities by giving them relief in excise duties. Air Taxi system has already started in India. Rail Transport system has a special fascination for foreign tourists as demonstrated by the successful rail tourism projects like the "Palace on Wheels". Another such package, the "Great Indian Temples" in Southern India would be introduced. The possibility of having ship cruises along the coast line and the potential offered by the back waters of Kerala and Sunderbans in West Bengal for river cruises could be fully tapped. NATIONAL ACTION PLAN FOR TOURISM The Government has come out with a National Action Plan for Tourism. The major objectives of the new Action Plan are : a. Socio-economic development of areas. b. Increasing employment opportunities. c. Development of international tourism and optimisation of foreign exchange earnings. d. Diversification of the tourism product i.e. while maintaining the traditional image of cultural convention tourism in India, efforts to be made for diversification in the field of leisure, adventure convention and incentives tourism. e. Increase in India's share in world tourism. The Action Plan has outlined the following strategies for achieving the objectives : - Improvement of tourism infrastructure. -Developing areas on a selective basis for integrated growth along with marketing of destination to ensure optimal use of existing infrastructure. - Restructuring and strengthening the institution for development of human resources. -Evolving a suitable policy for marketing and overseas publicity for increasing foreign tourist arrivals and foreign exchange earnings.
Given the immense potential and the Eighth Plan thrust, there is need and enough opportunity for investment in the tourism sector in India. Shortage of hotel accommodation in the country is a major bottleneck in promotion and development of tourism. At present India has about 45,000 approved hotel rooms as against the requirement of 59,000 rooms. It is estimated that the country requires about 90,000 hotel rooms by the year 1996 and about 100,000 hotel rooms by the turn of the century. Besides,hotels, there is also a hard felt need for development of tourism related services like travel and tour operating agencies, transportation and other services providing leisure, entertainment, convention facilities, etc. POTENTIAL FOR GROWTH OF TOURISM Although India is at the lowest ebb in international tourism (only 0.34% of global tourist traffic), there are several distinguishing features that would help in achieving its set goal. Some of these are given below : - The rate of growth in tourist traffic to India has been greater than the global average. - The average duration of stay of foreign tourist in India is one of the highest in the world. On an average, it exceeds 27 days in the case of non-package tourist and is 14 days in the case of package tourist. - The major share of the international visitors emanates from West Europe and North America. -The tourist on package tours spend nearly 65 per cent of their expenditure on shopping. - There is high degree of seasonality in the foreign tourist traffic. - The hotels and tourism related industry has been declared as a High Priority Industry" for development. Apart from these features, there have been certain policy changes foster the growth of tourism related industry. The recent amendment to the Foreign Exchange Regulation Act has simplified certain activities like the following : - Airlines, travel agents, etc. are not now required to obtain a licence from the Reserve Bank of India for carrying on business or booking passages for travel abroad. - Hotels in India may receive payments from foreign nationals in settlement of their bills either in foreign currency or in Indian Rupees without insisting on production of encashment certificates. INCENTIVES FOR INVESTMENT To encourage private investment in the hotels and tourism related industry various incentives and concessions are available. The Tourism Finance Corporation of India has specifically been set up to render financial assistance to the private sector for development of tourism related services and facilities. Loans are also available from Industrial Finance Corporation of India and the State Financial Corporations. The Government gives interest subsidy on the loans granted by these financial institutions. The incentives and concessions include : (1) Tax Exemptions - Of the income attributable to foreign exchange earnings of the hotels, 50% is also exempt if reinvested in tourism industry. - Approved hotels functional after 31.3.1990 but before 1.4.1995 are eligible for Tax Holiday deductions. The deductions range between 25-30 percent of the profits and is available for ten years. - An interest subsidy of 5% will be given on loans for all 1 to 3 star hotels in special areas and specific destinations. - The Budget for 1993-94 has provided for a 5 year tax holiday for all kinds of investments in the industrially backward States and Union Territories. (2) Concessional Customs Duty - Customs duty on specified items have been reduced to the level as applicable to project imports, provided the goods imported are required for initial setting up of the hotel or for substantial expansion of the hotel. This includes equipment for kitchen, health club, laundry, house-keeping, energy saving devices, etc. - Equipment for Adventure Sports can also be imported on a concessional rate of duty. Priority consideration is also given to approved projects in allotment of construction materials like cement, steel and for telephone, telex, LPG connections. For proposals which qualify for automatic approval, entrepreneurs should write to : The Exchange Control Officer, For other proposals entrepreneurs The Joint Secretary, For further information and assistance, write to : The Director General
Last Upate: July 31, 1998 |
