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Ease of doing business – A game-changer for India’s hospitality sector
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Tuesday, 03 January, 2023, 14 : 00 PM [IST]
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Jaison Chacko
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The final draft of the Ministry of Tourism’s new Tourism Policy envisages to transform tourist destinations to provide world class visitor experience making India one of the topmost destinations for sustainable and responsible tourism.
The mission of the policy is to create an enabling policy framework and strategic plan in partnership with Central, state and local Governments and industry stakeholders to improve framework conditions for tourism in the country, support tourism industries, strengthen tourism support functions and develop various tourism sub-sectors. The policy’s overall goal is to make India one of the top five destinations in the world in terms of both, the international arrivals and international tourism receipts by 2030. The hospitality industry firmly believes that this vision can be achieved through Ease of Doing Business.
Transformation of the tourism eco-system The concept of Ease of Doing Business envisages meeting the aspirations of resurgent India by achieving prosperity, hassle-free environment to do business, better governance, better quality of life and building the world’s most modern infrastructure. This idea is of paramount importance to the hospitality sector as well for creating a roadmap for growth and development of the sector leading to transformation of the tourism eco-system in the country.
The importance of tourism for economic development of the country and the multiplier effect it can have on employment generation is an undisputed fact. There exists massive potential for the growth of hospitality and tourism sector in India as there is no dearth of destinations that are appealing to both international and domestic tourists along with other tourism offerings which are unique in nature. But India needs to traverse an arduous path in unwinding a host of reformist measures and facilitative policies to put the tourism sector in the next orbit. Among these, bringing ease of doing business in tourism and hospitality by reducing compliance burden and cost of regulations is the most opportune measure which can be a game-changer for the sector.
Approvals and compliances is a serious issue Absence of a uniform system in the hospitality sector for approvals and compliances is a serious issue that is hampering the growth of tourism and hospitality sector in the country today. From inception of a hospitality project to the day to day running of establishments, the sector is tangled in the complex web of bureaucratic processes. Different states in the country follow different licensing and compliance requirements making the process very cumbersome and time and cost consuming.
Single-window clearance systems Therefore, two separate single-window clearance systems, separately for the state government licences/compliances and the Central Government specific approvals and permissions, need to be put in place. The state level single-window system should set a common national standard and protocol for hospitality sector projects.
Enforcement of regulations in construction permits remains complex and asymmetric in India. This needs to be simplified and standardised to the possible extent for the benefit of all stakeholders. Similarly, time taken to obtain construction permits in India is between 98 -114 days, much higher than 35.5 days in Singapore. There are 11-19 procedures in India for construction permits as compared to only around nine procedures in countries like Hong Kong, the UK and Singapore.
In India, inspections are conducted separately by various departments, adding to delays in getting permits. There is scope for placing higher reliance on technology for cutting down processes and procedures for construction permits.
To save tourism and hospitality enterprises from filling multiple paperwork for different permissions, certifications & licences across Central and state Governments an e-central repository of such information may be created which can auto populate preliminary documents through a ‘standardised template’ and thus save immense documentation time and resources.
An environment of trust should be the basic foundation for all permissions and approvals for ongoing enterprises and thus they should be made available on a self-certification basis against certain timelines. A post-facto compliance review can be undertaken after self-certification through mutual understanding.
Submitting self-declaration forms Currently the regulators or authorities are over-burdened with regulating and monitoring activities of various businesses, which in turn reduce effectiveness of the entire process. However, the same can be easily and effectively managed if there are provisions of self- regulation with clear accountability of the businesses. The accountability can be established by getting the businesses submitting self-declaration forms along with an affidavit and an undertaking.
Even during the course of operation, on a regular basis hotels need to obtain or renew a number of licences and approvals. Around 30 to 35 such licences and approvals are required by the hotels regularly. Each of these licences has different renewal timelines, making hotels undergo a tiring process of renewal for each approval every time, throughout the year. This needs to be simplified through measures such as single-window clearance system deemed approvals, self-regulation, merging of multiple approvals and licences and fixing validity of five years for the licences.
For several years now, liquor licence fees is charged based on the star category of the hotels. Tax and licence fee based on star classification should be avoided. This will enable more hotels to apply for higher star classification by improving the quality of their product and services.
Copyrights in music exploitation Another major challenge the hospitality industry faces today is in the area of copyrights in music exploitation. The Copyright Act, 1957, was brought into force to not only recognise the rights of copyright owners and to increase copyright protection, but also to ensure that the public may be able to enjoy the creative works in a hassle-free manner while ensuring monetary gains for the owners of the copyright. It was introduced to strike a balance between protecting creative works and allowing the public to use them.
The proviso to Section 33(3) of the Act provides that the Central Government shall not ordinarily register more than one copyright society to do business in the same class of works. Despite such a clear provision, many societies have been registered, leading to multiplicity. Some other assignees are also charging the fee from the hotels. As a result, for playing music, hotels are getting demands from IPRS, PPL, ISRA, copyright owners, agents or assignees of copyright owners and so on. Due to the existence of multiple copyright societies, hotels and restaurants receive notices from multiple societies for the same event. This is causing immense hardship to the hotel owners and severe harassment to the users and public in general who are utilising the music for their events.
Setting up a single-window system to administer copyright licences along with one copyright society for each category of work and requisite amendments in law to reinforce the authority of Section 30 and to weed out the lapses in Section 33 of the Copyright Act are the immediate measures required to ease the burden of the sector on this front.
It is also imperative for tourism, travel and hospitality to be classified in the concurrent list to ensure a national shared common framework between the Centre and states for tourism and all its verticals.
Need for granting infrastructure status As part of introducing ‘Ease of Doing Business’ for the sector, the need for granting infrastructure status for the hospitality sector becomes most critical. Currently, hotels built with an investment of Rs 200 crore or more are eligible to avail the benefits under this facility. The infrastructure status will allow hotels to avail term loans with longer repayment schedule of 15 or even 25 years like road, railways and ports, among others.
Although, industry status has been granted to hospitality by many state governments, the incentives and privileges associated with an industry are not conferred to the sector properly. For instance, Karnataka, Maharashtra, Gujarat, Rajasthan, Goa and Uttarakhand Governments have accorded industry status to hospitality, but this status remains merely on paper. Providing industry status will enable the sector across all the states to pay the tariffs on industrial rates instead of the present commercial rates. Under industry status, the hospitality sector can receive benefits including lower tariffs on electricity rate, electricity charges, property taxes, water charges, increased carpet ratio, development tax and subsidised land cost for investors, among others. This will significantly lower the operating cost structure and enhance the overall competitiveness of the tourism sector.
A mechanism should be put in place There exist a number of Central and state laws that are either redundant or have lost their significance in today’s context. Prevalence of such laws like the Sarais Act, 1867, are antiquated and should be repealed. Even today, KYC documents are required to be submitted at multiple windows or authorities. As part of the EODB endeavour, a mechanism should be put in place to ensure that hospitality enterprise should submit just once in a common repository and the same should be accessible to multiple authorities.
Along with all these measures, a grievance redressal mechanism should be brought into place for conducting regular stakeholder meetings and immediate resolution of the complaints received.
The Government is taking proactive measures in promotion and development of tourism sector in the country. But, for the sector to make a big leap towards becoming a tourism powerhouse on the global landscape, it is imperative that Ease of Doing Business be implemented on ground. Tourism is one of the important sectors in the country that accounts for around 10 per cent of the GDP and employs roughly 90 million people. The tourism and hospitality industry has the potential to be the key driver to accelerate socio-economic development of India. To achieve this, tourism should be declared as a priority sector with special incentives and benefits to help the sector attain its true potential.
(The author is secretary-general, Federation of Hotel & Restaurant Associations of India [FHRAI])
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