Hotels, restaurants tell FinMin banks not cooperating in loan restructuring; may ‘succumb’ by year-end

Ease of Doing Business for MSMEs: Indian hotels and restaurants are likely to “succumb” by the end of the year due to the lockdown impact if immediate action is not taken by the government, Federation of Hotel & Restaurant Associations of India (FHRAI), which represents 5 lakh restaurants and 55,000 hotels, told Finance Ministry’s Principal Economic Advisor Sanjeev Sanyal. The association told Sanyal, over a recent webinar hosted by the former, about the “reservations and non-cooperation of banks in extending the one-time restructuring of loans announced by the government,” according to FHRAI. Ever since lockdown was enforced by the government in March, the hotel and restaurant sector has been seeking necessary support from the government to help overcome the Covid burden. The sector, which largely has small and mid-sized businesses, accounts for 12.75 per cent of India’s employment out of which 5.56 per cent is direct and 7.19 per cent indirect employment.

“We presented to him the revenue projections which indicate a loss of Rs 1.6 lakh crore and job losses mounting to 5.5 crores if the sector is not revived. With no revenues, but rentals, salaries, statutory bills still to be paid, the industry may succumb by the year-end. Indian Hotel and Restaurant (Hospitality) industry contributes about 10 per cent GDP to the country’s economy and needs urgent attention from the Government,” said Gurbaxish Singh Kohli, Vice President, FHRAI.

Importantly, the weekend lockdown or partial lockdown, which was imposed in 15 states and union territories, hit the overall retail sector. Uttar Pradesh, Tamil Nadu, Punjab, Nagaland, Madhya Pradesh, Thiruvananthapuram in Kerala, Jharkhand, Jammu and Kashmir, Haryana, Chandigarh, Assam, Andaman & Nicobar had imposed weekend lockdown in Unlock 3.0 while Uttarakhand and West Bengal were partially locked down and Maharashtra’s Thane district had shut malls. Under Unlock 4.0, multiple states such as UP, Punjab etc have continued with the weekend lockdown. “Almost 95 per cent retail is MSMEs and they are struggling. All kinds of retailers see around 45 per cent of their business on the weekend. Demand per se is inelastic. Despite safety norms, customers are not willing to come to the store,” Kumar Rajagopalan, CEO, Retailers Association of India (RAI) had told Financial Express Online.

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Sanyal, however, informed the hoteliers and restaurateurs that “appropriate action” will be taken against the banks not following the RBI or the government’s directive. “If something isn’t working, the government will intervene and identify the reasons for it not working. I would ask the industry to flag specific cases and details of the banks so that we can take measures to address and resolve the issues,” Sanyal said adding that the 100 per cent guarantee which is given to MSMEs is also applicable for the hospitality sector.

The association also informed Sanyal about interaction with the Commerce Ministry for “rationalizing and cutting down the number of licenses under ease of doing business policy. We also apprised him on the unscrupulous licencing laws including copyrights issues,” said Pradeep Shetty, Joint Secretary, FHRAI. While Sanyal asked the association to reconnect on the issue of rationalising licenses, he urged the members to “focus on available things and try to resolve issues within existing choices that are not working” The simplest way would be to take examples from the rest of the world where the systems are working successfully. So instead of looking to perfect things, we should aim at minimum moves for a maximum outcome, Sanyal added.