Tourism industry continues to demand incentives, government not in an accommodative mood

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India’s tourism industry has continued its demand for government incentives in view of the losses the industry suffered during the coronavirus pandemic.

This has come in light of the new Foreign Trade Policy that was released by Commerce Minister Piyush Goyal on March 31.

While the policy had already done away with the Service Export from India Scheme (SEIS), the tourism sector, one of the worst hit by the pandemic, expected incentives either in the form of a revamped SEIS or other rebates.

The reintroduction of SEIS, which was discontinued in FY21 after the World Trade Organisation ruled against subsidy schemes, has been a long-pending demand of the industry.

The scheme provided freely transferable duty credit scrips to exporters at 3-5 percent of the net foreign exchange earned. These SEIS scrips could be used to pay import duty or were encashed by selling them to any importer.

The concerns of the industry were also voiced by the sector in a meeting held on April 19, in the presence of industry representatives and top officials of the commerce ministry.

However, as per officials who attended the meeting, even though the industry presented a host of proposals, requesting incentives be provided for sectors including tourism and healthcare, the government has made its stance clear, reiterating that no incentives will be provided.

Goyal has time and again stated that no incentives will be provided to the industry. “Services industry must be competitive and not seek subsidies to boost exports,” Goyal had said on September 22 last year, while addressing an event organised by the Services Exports Promotion Council (SEPC).

The services sector needs to dream big and march ahead to become competitive in the global markets without incentives and subsidies, the minister had added.

What were incentives under SEIS used for?

The tourism industry used these incentives extensively for international marketing and market research purposes.

The scheme was especially instrumental for inbound tour-operating companies, which used the scrips for business-to-business marketing.

An inbound tour operator company plans and sells packages to foreign tourists for their travel and stay in India.

Ravi Gosain, vice president of the Indian Association of Tour Operators (IATO), says, “All inbound tour operators have to undertake marketing at foreign bases to run our businesses,” he adds. The IATO members go to travel trade fairs and exhibitions and tie up with counterparts overseas who channel tourists to their Indian partners.

How is its absence affecting the industry?

“In the absence of any supportive scheme, our advertisements abroad have dropped. Work coming in has slowed down. With zero marketing, what else can you expect?” asks Rajiv Mehra, president, IATO.

Most people in the industry, explains Mehra, had used this scheme as a tool to go to foreign countries, find new markets and bring in work. “This not only generated profits for us but benefited the government as well. They were receiving foreign currency as well,” he points out.

Offering the example of countries that have expanded their tourism base, Mehra adds, “Exemplar countries like Vietnam or Thailand offer special incentive schemes to their businesses. Almost every country in the Middle East and Far East is working with some strategy to help out operators and increase tourism. But India is running without any policy framework in this regard.”

What is the industry demanding?

The industry, in a letter to the prime minister on April 27 made several demands “to place the tourism industry at par with foreign tour operators and help them compete with neighbouring countries”.

Its demand is either the restoration of SEIS or the introduction of an alternative scheme in the new Foreign Trade Policy, as the inbound tourism sector is still suffering and needs handholding by the government.

Besides, it has also sought the rollback of TCS (tax collected at source) of 5 percent to 20 percent on overseas tour packages announced in the budget.

“Post revival of international flight operations and tourist visas, only 35 percent of inbound tourism to India has been revived, which the government itself accepts,” says Mehra.

The letter says that it took nine years to increase foreign exchange earnings to $30.05 billion in 2019 from $14.49 billion in 2010. “However, at present we have gone back to 2004 levels, which was $6.17 billion in terms of foreign exchange earnings. This is indicative of the stress this sector is undergoing,” the letter adds.

“We need to compete. But it becomes very difficult as the government has withdrawn marketing and promotion support in foreign countries. SEIS has ended and no alternative benefit has been given. GST (goods and services tax) is as high as 20-23 percent without any input tax credit, whereas neighbouring countries are charging 6-8 percent,” Mehra says.

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