Comments of Mr. Vivek Nair, Honorary Secretary, Federation of Hotel & Restaurant Associations of India (FHRAI) on the Budget proposal given by the Finance Minister on 29th Feb. 2008.

It is a major disappointment that the Finance Minister has not acceded to our request that the Hotel Industry be included in the Infrastructure list alongwith Airports so that the various benefits as available for Infrastructure projects would be available to the sector. Recently the Reserve Bank of India discontinued granting permission to Hotel companies availing of ECBs/ FCCBs as they were not included in the Infrastructure list.

Given the huge shortage of Hotel rooms existing in the country and the need to add atleast 100,000 guest-rooms in the next 3 years if the target of 10 million tourists by the year 2010 is to be achieved, the conferring of Infrastructure status would have given the necessary fillip to the Hotel Industry.

In fact our request that the benefit given in the last year’s Finance Act under Section 80-ID of a tax-holiday for 2, 3 & 4-star hotels being set up in the National Capital region of Delhi and surrounding areas in time for the Commonwealth Games 2010 be extended to all category of Hotels throughout the country, has also not been acceded to. This benefit would have given the Hotel Industry an opportunity to re-invest back for the development of new Hotels.

The FHRAI welcomes the Finance Minister’s proposal to extend a tax-holiday to 2/ 3 & 4-star hotels for 5 years being developed in areas which have UNESCO declared sites as this would give a impetus to cultural tourism as most of these destinations have inadequate Hotel Infrastructure. However we estimate a maximum of about 30 hotels with about 3,000 guest-rooms would be built which would be able to avail of this benefit and thus this proposal would only cover 3% of the total of 100,000 guest-rooms which are required to be made operational if the present demand-supply mismatch is to be mitigated.

An investment of Rs. 40,000 crores is estimated to be required for such an additional room inventory to be created in the next 3 years which appears to be well-nigh impossible to achieve and thus the present mismatch of demand-supply is expected to continue.

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Issued by
Ms. Mithu Basu
Group Head - Corporate Communications
The Leela Palaces-Hotels-Resorts
Sahar, Andheri (East), Mumbai – 400 059, India
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E-mail : mithu.basu@theleela.com