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FAITH writes to KV Kamath-led RBI Expert Committee for extending moratorium by 2years

Wednesday, September 2, 2020, 15:00 Hrs  [IST]
HBI Staff | Hyderabad

Federation of Associations in Indian Tourism & Hospitality (FAITH) and cause partner AIRDA has raised a request to Expert Committee set up by the Reserve Bank of India (RBI), and headed by former ICICI Bank CEO, KV Kamath.  As per the RBI circular of August 6, this Expert Committee is tasked with identifying norms for stressed sectors. 
 
FAITH has shared that as per the Systemic Risk Survey carried out by RBI and quoted in its the Financial Stability Report, July 2020 five sectors have been identified as being the most affected by the COVID-19 pandemic. Within them further, tourism sector is the one which is the most highly affected where 90% of the respondents foresee a bleak business scenario for at least the next six months. 
 
It is roughly estimated that due to its high multiplier effect, Tourism, travel & hospitality in India impacts almost 10% of jobs & GDP directly & indirectly across the whole country.  With the 6 months moratorium almost over, it has put this complete tourism, travel & hospitality industry of India in a state of panic with nil cash inflows in hand and with continued commitments of cash outflow pressure from payrolls and central and state statutory obligations. 
 
FAITH has also requested the Tourism Ministry to take up FM for extension of moratorium to 2 years and for access to special liquidity facility on funds closer to repo rate on a direct benefit transfer from Ministry of Finance. They have also requested Tourism Ministry to take up with MSME ministry to make a provision for tourism to get access to 50% of outstanding instead of 20% of outstanding under the INR 3 lakh crore emergency guaranteed fund for MSMEs.

They have shared that even the feedback from collections data of GST & IT from Q1 indicates that hospitality and tourism businesses are the sectors facing the most difficulty as against other sectors. 
 
FAITH has submitted that all segments of Indian tourism are down and will underperform as an outcome of this pandemic. Inbound tourism segment had contributed almost USD 28.5 billion or INR 1.95 lakh, and a total of 17.42 million tourists to India (10.56 million foreign tourist arrivals and 6.87 million non-resident indian arrivals). 

FAITH Associations have taken the issue of extension of moratorium with Ministry of Tourism, and had also requested the Ministry to take it up with KV Kamath, on RBI Expert Committee.

The October to March period is the peak season for this segment but for the current financial year FY 20-21 there is no visibility of this business happening. It is estimated that this segment will start travelling and returning only in FY 21-22. 
 
The United States of America is the largest long-haul source market for India with almost 14% share but it is also currently the number one country affected by the pandemic. Almost 70% of the inbound business to India is concentrated within top 13 countries (United Kingdom, Canada, Australia, Malaysia, China, Germany, Russian Fed, France, Japan , Singapore, Thailand ) all of which are battling the pandemic and have stringent and varying travel restrictions.  
 
FAITH shared that the domestic travel visits within India were 1.85 billion. At a very conservative average of INR 3,000 per domestic travel visit this could be estimated at a value of INR 5. 55 lakh crore. The major season of domestic travel in India is the summer holiday season which for FY 20-21 was under lock down. The rest of the year might see extremely muted domestic travel due to low consumer confidence. All discretionary travel is non- existent and only essential travel might take place. 
 
Even 26.3 million outbound travelling Indians which are serviced by Indian travel agents and tour operators will be non-performing in the current financial year FY 20-21 due to restricted international travel and resurgence of virus in many destination countries.  
 
With the first half of the financial year FY 20-21 almost finished, the second half will see extremely low capacity utilisations and thus huge cash flow stress for all tourism entities. 
 
FAITH shared that as per IATA (International Air Transport Association) globally pre- pandemic levels of air travel recovery will not happen until 2024. They highlight this resulting from three key reasons - slow virus containment in developing economies, highly reduced corporate travel due to the severe economic downturn and weak consumer confidence due to travel pessimism and rising unemployment among many reasons. 
 
FAITH shared that as per UNWTO this pandemic is likely to put almost 100-120 million global jobs tourism jobs at risk, upto $ 1.2 trillion loss in global tourism exports and upto 1.1 bn fewer international tourists. UNWTO estimated that this is by far the worst historical result for international tourism since 1950. 
 
Further, the United States of America has issued a travel advisory, rated level 4 for India (last update on 6th Aug 2020). On a scale of 1-4 this is the highest level of risk rating, carrying with it the advice of ‘do not travel’.lSome of the few countries that were reflecting in this category as on 23rd Aug include Syria, Iran, Pakistan, Iraq, Yemen etc. This is perceptually extremely poor for any recovery for Indian tourism & travel. 
 
FAITH assessed that almost all factors indicate that pending the successful deployment of vaccine and the nervous wait for its impact, up to 3-6 months post the vaccination, there will continue to remain a downside risk to the tourism industry all the way up to later part of FY 21-22.

 
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