Budget makes a special allocation for loans to small travel operators and other players in hospitality

• Nirmal Sitharaman has expanded the emergency credit scheme by ₹50,000 crore.
• The finance minister mentioned that the additional loans will go to the sector.
• The wave of Omicron infections stopped people from travelling again, stalling a nascent recovery in the sector.

India’s hotels, travel operators and players in the hospitality sector get a special mention in Finance Minister Nirmala Sithraram’s budget speech as part of the emergency credit scheme, which has been expanded by ₹50,000 crore to total cover of ₹5 lakh crore.

She mentioned that the additional loans will go to the sector.

“Considering these aspects, the ECLGS [Emergency Credit Line Guarantee Scheme] will be extended up to March 2023 and its guarantee cover will be expanded by ₹50,000 crore to total cover of ₹5 lakh crore, with the additional amount being earmarked exclusively for the hospitality and related enterprises,” Sitharaman said.

ECLGS was a part of ₹20 lakh crore comprehensive package announced by the finance minister on May 13, 2020. The aim of this package is to aid micro, small and medium enterprises (MSMEs) to overcome the distress of the pandemic.

Hospitality is one of the segments that still haven’t recovered from the pandemic. The wave of Omicron infections stopped people from travelling again, stalling a nascent recovery in the sector.

The shares of Indian Hotels — one of the prominent companies in the Indian hospitality segment — witnessed a spike in their share prices post this announcement.

“The prolonged effect of COVID-19 pandemic on the overall hospitality sector has created a burden on small to medium scale players to service their debt obligations… We feel, in the 2022-23 budget, the GoI [government of India] shall create provisions to create liquidity for the travel & tourism industry, provide directions to the central bank to roll out low interest working capital loan schemes and expedite the paperwork process,” Pranav Dangi, founder of hospitality startup Hosteller, had previously said.

This is how other major hospitality stocks performed on the day of the budget.
*Share price as of 1:55 p.m.
Source: BSE

“The ECLGS extension up to March 2023 and the increased cover of Rs. 50,000 crores to a total cover of ₹5,00,000 crore is a welcome move to empower our hospitality industry which has been struggling to cope with the COVID induced challenges,” Ajit Shah, Partner at White Panda Hospitality (parent entity of restaurants Tera Vita, Kiko-Bā and Dadel), said.

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