Troubled hospitality sector seeks MSME tag for more firms, loan recast to tide over COVID-19 crisis

KEY HIGHLIGHTS

• Hospitality sector demands MSME tag for companies with annual turnover of up to Rs 250 crore
• CII requests the Centre for a one-time restructuring of loans and freeze on loan repayment till March 2021
• While the entire value chain linked to travel and tourism sector is likely to lose around $65.57 billion, the organised sector alone is expected to lose $20.84 billion
• The industry expects total job loss in the sector to be over 2 crore.

Claiming the hospitality sector could take Rs 5 lakh crore hit due to coronavirus pandemic, the industry has proposed micro, small and medium enterprise (MSME) tag for firms with an annual turnover of up to Rs 250 crore, which would help them get preference in government tenders and easier terms for credit among a host of other benefits.

The industry body CII (Confederation of Indian Industry) has suggested removing the investment criteria from the revised definition of MSMEs. It has recommended Rs 5 crore as the turnover threshold for firms to qualify as micro-enterprise.

Dipak Haksar, Chief Executive of ITC Hotels and WelcomHotel and also Chairman of CII National Committee on Tourism & Hospitality is learnt to have proposed annual turnover of more than Rs 5 crore but less than Rs 75 crore for small enterprises. Businesses with turnover over Rs 75 crore and up to Rs 250 crore have been proposed to be treated as medium enterprises.

"Putting a lower investment criterion only acts as a discouragement for Indian entrepreneurs to invest the right capital for their businesses to grow to their future potential. We want Indian entrepreneurs to invest capital, take the risk and allow their enterprises to eventually compete on a global scale," Haksar has argued while proposing to further widen the definition of MSMEs.

Also Read: Coronavirus effect: Hospitality sector revenue to take $4.7 billion hit in 2020

Haksar is of the view that the increase in turnover criteria would provide support to a large pool of companies that have the potential to grow bigger and compete with their global peers. Further, this entrepreneurial surge will be the key source of economic growth and employment in the years to come.

The government on May 13 announced to change the definition of MSMEs removing the distinction of manufacturing and services.

As per the revised criteria for MSMEs, a firm making investment of less than Rs 1 crore and recording annual sales of less than Rs 5 crore would be classified as a micro-enterprise. The investment and turnover threshold for qualifying as a small firm has been set at less than Rs 10 crore and less than Rs 50 crore, respectively.

An enterprise with less than Rs 20 crore investment and less than Rs 100 crore annual turnover would be grouped as a medium-size firm.

As per the CII estimate, the travel and tourism industry is the most challenging sector at the current juncture. It suggests cash flow is unlikely to improve till October 2020 and that it can only normalise by 2021. While the entire value chain linked to the sector is likely to lose around 5 lakh crore or $65.57 billion, the organised sector alone is expected to lose $20.84 billion.

The industry expects total job loss in the sector to be more than 20 million or 2 crores. In its recommendations to revive the sector amid the coronavirus crisis, the CII has also requested the government for a one-time restructuring of loans and the extension of the moratorium on repayment of existing loans to March 31, 2021.

"Such restructuring may be limited to the account which was standard as on March 31, 2020, to prevent abuse of the restructuring route for ever-greening of faulty loans before the impact of COVID-19," the industry chamber has said.