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Monday, 29 February, 2016, 16 : 30 PM [IST]

Industry Reacts to Union Budget 2016-17

Subhash GoyalSubhash Goyal, President, IATO (Indian Association of Tour Operators)
Overall, the Budget was very disappointing for the tourism industry. The Prime Minister was talking about job creation and poverty alleviation, and tourism was the best engine. Unfortunately, there is nothing in the Budget that could boost tourism in the country. We wanted exemption of Service Tax on foreign exchange earnings, which didn’t happen. On the contrary, 0.5% cess component has been added, which will increase Service Tax component to 15%. The additional tax on SUVs and diesel coaches will make tourist coaches expensive.
Arjun SharmaArjun Sharma, Chairman, Le Passage to India Tours & Travels Pvt. Ltd.
Overall, the Budget was fairly positive, but the tourism industry was totally ignored. The announcement to develop regional airports is not enough to promote tourism. At the same time, the proposal to increase investment in rural infrastructure would create more demand for domestic travel. The details on allocation of budget for Incredible India marketing are still awaited.
Rajiv DuggallRajiv Duggal, CEO, Lavasa Corporation Limited
Infrastructure projects which have been announced worth INR 2.18 lakh cr is a positive sign where roads will see INR 57,000 cr investment. Infrastructure along with rail upgradation will see an investment of INR 97,000 cr, which will bring exposure to tourist destinations across India. Also, amendment in the Motor Vehicle Act will allow entrepreneurs to invest in road transport industry, which is almost un-utilised till now for quality tourism.
Manmeet AhluwaliaManmeet Ahluwalia, Marketing Head, Expedia India
This Budget has specifically focussed on infrastructure across the country with a huge outlay for roads & highways, railways and reviving the unserved and underserved airports and airstrips in the country. The government realises that as the global economy wavers, domestic demand will be the key to tourism growth, especially to untapped regions like the North-East. We see a specific focus on enhancing regional and last mile connectivity with sops for starts-ups and innovation in the passenger transport segment. In fact, increased regional connectivity will also give a fillip to outbound tourism from Tier-II and III cities due to higher accessibility. The government is adopting measures from some of the thriving global tourist destinations, where-in public transport is critical not only for daily commuters, but also the backbone for tourist traffic. Strengthening the infrastructure across levels will definitely strengthen India as an attractive tourist destination in the global ranks.
Sharat DhallSharat Dhall, President,
The much awaited Budget has turned out to be very friendly for the Aam-Aadmi, but there could have been a bit more in it for the corporate sector. The proposal to increase the tax on ATF will result in increase in airfares and dampen air passenger growth which could have been a catalyst for economic growth. However, the focus on revamping roads and airports across the country is a positive move that should provide a fillip to infrastructure and the tourism sector as it will enhance connectivity to the smaller cities and encourage people to travel to unexplored destinations. Liberalisation in public transport and the government’s plea for private investors to contribute in refurbishing highways is also expected to create a positive ripple in the travel industry.
J B SinghJ B Singh, President and CEO, InterGlobe Hotels
The Union Budget 2016-17 has provided a sharp focus on building a stronger eco-system for the travel and tourism industry. The INR 2,21,246 crore outlay for infrastructure development, INR 97,000 crore investment in road sector and the intent to build as well as upgrade highways is a measure that will aid connectivity across the length and breadth of the country. Last mile connectivity is a key hurdle for tourism and travel in India, and we believe this measure will aid in overcoming this challenge. Emerging India and rural India have a lot to offer from a point of view of tourism. There is immense potential in these markets to develop hubs of tourist attraction and also develop it as a means of employment for locals. The Government’s focus on development and empowerment of emerging India – Tier-II and III cities - is a positive sign. It will boost consumer sentiment and purchasing power and also encourage the next phase of rural tourism in India. The industry was keenly looking forward for the Government to focus on incentives for the commercial real estate sector such as REITS, Real estate regulatory bill and single-window clearances; however it continues to remain a challenge.
Conrad Clifford.jpgConrad Clifford, Regional Vice President, Asia Pacific, IATA (International Air Transport Association)
The Budget had a minimal focus on aviation. We hope the government will do a better job with the National Civil Aviation Policy (NCAP). While the NCAP is a step in the right direction, there are areas of concern, especially where it adds costs to the industry or where it deviates from well-established global standards. We hope the government will address three priority areas – retract the 2% Regional Connectivity Fund levy, abandon the plan to auction traffic rights, and allow AERA to perform its functions independently by not enshrining any ‘Till’ for airport charges in the policy document.
Iqbal MullaIqbal Mulla, Chairman, Treasure Tourism Development Corporation Ltd & immediate past President, TAAI
Road transport is important for tourism and economic development of the country. The PM in his pre-election agenda focused on five Ts, which included tourism. Like the last year, I was expecting tourism to be in the focus for 2017. However, I am disappointed with the Budget 2016-17. The FM spoke about infrastructure development, which is a pleasant move. As far as air connectivity is concerned, the government needs to be serious about formulating rules and regulations, and implementing the plans in a phased manner. The overall focus on tourism is skewed, and I am not very hopeful about the government fulfilling its commitment.
Sriram RajmohanSriram Rajmohan, CEO & MD, Club7 Holidays and CEO, Centrum Global Visa Services
The FM did not raise the service tax, but has announced Kirish Kalyan cess of 0.5%, which will impact air travel and dining out from June 1, 2016. With forex being a record high, the importance of tourism needs recognition.  Otherwise the Budget has no major breakthrough for the travel & tourism industry.
Jayant NadkarniJayant Nadkarni, President, Business Aircraft Operators Association
Developing new airports is always a good move. But, we already have many airports without much connectivity. For operations to commence, we need clarity on funding, taxation, duties, and incentives. These are yet to come together for the small aircraft sector in business aviation, and in scheduled commuter flights to remote areas. The potential for growth clearly exists.
Ankur BhatiaAnkur Bhatia, Executive Director, Bird Group and Member, CII National Committee on Civil Aviation
The Finance Minister this year has laid emphasis on good measures such as rail and road infrastructure developments as well as on new startups and ‘Make in India’ campaign. Cabinet’s decision of reviving underserved airports by allocating a budget of 50 – 100 crores each, developing 10 out of 25 non-functional airstrips in partnerships with state governments, will definitely accelerate the development of regional and overall aviation sector. However, levying of additional cess in hospitality could have been avoided as the industry is already burdened with taxes. We do hope that the cess levied on combustion will be used for a betterment and development of green vehicles and infrastructure. Overall, it is a balanced budget with emphasis on development.
Vishal KamatVishal Kamat, CEO, Kamat Hotels
While from a tourism perspective you could say that the budget was a dry one, one wouldn’t say it is a bad budget. It is‘status quo’ since last year’s budget. So while we didn’t receive any sops as far as taxation is concerned, not much additional burden has been imposed either, as far as I can see.

As far as investment in rural development and skill development is concerned, this will not directly impact hospitality because we need a different skill set, but yes, overall sanitation awareness and education will improve civic sense in society which will have an indirect impact.

Moves to revive nonfunctional airstrips may not impact us if the airlines find that the routes are non-profitable.We already have good connectivity to the capitals of some Tier II cities and second level capitals.Bhubaneshwar for example. So it is to be seen how much value will be added by this move.

As far as F&B sector is concerned, I think the industry has learned to live with instability and heavy fluctuations in commodity prices, control over inflation obviously helps the F&B sector.
Sunil KumarSunil Kumar R, President, TAAI
The travel & tourism industry is put behind, again. Shocking. A big tragedy in favour of an industry that has so much to offer to many countries of the world. Wonder when India will consider this industry as an important economic success strategy. 

Overall, the Budget does not meet our expectations from this government which has been projecting innovation with wide reforms and a more dynamic India.
Jyoti KapurJyoti Kapur, President, ADTOI
This Union Budget 2016-17 is not tourism friendly and has failed to reach up to the expectations of the industry. Both domestic and inbound tourism has been ignored and the increase in service tax will be an additional burden, thereby making all the services dearer. The prominent Buddhist circuit is also over-looked. Though the development of infrastructure and up-gradation of rural India will eventually boost rural tourism opportunities. Connectivity has also been boosted with the proposed revamp of 160 un-served and under-served airports, but increase in the tax on air turbine fuel will again shoot up the price of flight tickets. Alongside the minimal relief, the Union Budget has brought together added taxation and has overburdened the traveller in India.
Nikhil GanjuNikhil Ganju, Country Manager, TripAdvisor, India
The government's focus on developing better infrastructure by investing in national highways and non-functional airports is definitely a step in the right direction for the travel industry - making India more accessible will no doubt help boost India's appeal as an international destination and help Indians see more of the country domestically, although the implementation of 'Krishi Kalyan cess' may lead to Indians spending less on travel and dining out.
Rajesh MagowRajesh Magow, Co-Founder and India CEO,
Developing 160 non-functional airports will improve connectivity within the country especially in Tier-II and beyond towns and cities and thereby, help boost the travel and tourism industry. Increasing the excise duty on Aviation Turbine Fuel from 8% to 14% will have some adverse impact on the demand side of the industry; the financial health of the aviation industry of the country was just beginning to stabilise. Lastly, service tax has now been increased to 15% from 14.5%. Krishi Kalyan Cess at 0.5% will be levied on all taxable services. While it is understandable that this move is aimed towards financing initiatives for improvement of agriculture and welfare of farmers, this will lead to paid services becoming dearer. Service tax has been consistently increasing over the past few years, it stood at 12.36% in 2013-14. Not only will service based companies but also the end consumer of the services will bear the brunt of this move.
Aloke_Bajpai.jpg Aloke Bajpai, CEO & Co-Founder, ixigo
The Union Budget 2016 has laid out big investments for the infrastructure sector which include allotment of funds for the development of roads and highways and an action plan to revive 160 non-functional airports. These steps come as a welcome move for the travel and tourism sector.The focus on travel and tourism is further reaffirmed with the Finance Minister announcing the annual programme “Ek Bharat – Shreshtha Bharat” which will aim at linking states and districts through exchanges in areas of language, trade, culture, travel and tourism. We also welcome the Government’s initiative to increase baggage allowance for international passengers and exempt passengers flying into India from filing the baggage declaration form if they are not carrying dutiable or prohibited goods. This will surely ease inbound tourism. The current government's focus on the Indian startup ecosystem is very positive and the Union Budget 2016 has reinforced support for entrepreneurship and start-up businesses in India.
Jaideep_Ghosh.jpgJaideep Ghosh, Partner and Head - Transport and Leisure, KPMG India
Union Budget 2016-17 is built on sharp forward-looking themes towards achieving economic growth, which are expected to have a positive impact. Significant funds allocated in Rail Budget and for expedite expanision of highways and rural roads will be one of the strongest boosts to our economy and thereby facilitate rapid growth of the tourism sector. Cruise tourism is also expected to be augmented, though at a slower pace, once Sagarmala is under implementation. Development of under-served airports and airstrips will facilitate deeper connectivity has the potential to augment passengers traffic including tourists. Proposed simplification of customs procedure for international passengers’, in addition to already-existing e-visa for several countries, is expected to result in faster achievement of international travellers.
Peeyush Naidu, Partner, Deloitte Touche Tohmatsu India LLP
The growth of civil aviation in India over the last decade has been phenomena, and India is on course to become an even larger aviation market. The Ministry of Civil Aviation through its Draft National Civil Aviation Policy 2015 proposed an inclusive expansion plan for the aviation sector by promoting regional air connectivity. The Finance Minister in today’s Budget speech focused on development of 160 non-functional airports at a cost of INR 50-100 crore each, along with 10 of 25 defunct airstrips in partnership with state governments. This move will facilitate creation of necessary infrastructure for enhancing regional air connectivity and providing access by air to more parts of the country.
Kabir Bogra, Associate Partner, Khaitan & Co
The FM in his Budget speech has mentioned that the government is looking to develop 160 non-functional airports, at a cost of INR 50 to 100 crore each and will also develop 10 defunct airstrips with state governments. If effectively managed these investments would provide a huge impetus to regional airlines and help in unlocking a significant potential in civil aviation in the India. This is likely to be undertaken under the PPP model. The other significant announcement for the aviation industry comes in the form of incentivizing the MRO sector. This has been done in two steps. As a first step, the Customs exemption under notification number 12/2016 has been extended to a wider variety of equipment and tools required to be imported by a MRO service provider and secondly, Customs duty on aircraft imported for undertaking repairs has also been completely exempted. In fact, the exemption has been completely streamlined with operational procedures followed by airlines and an international airline can fly into India with passengers, get the aircraft serviced and thereafter use it to fly passengers from India. This has been much delayed but yet a welcome move and may yet help in establishing India as a preferred MRO destination.”
Ajay K. Bakaya, Executive Director, Sarovar Hotels & Resorts
The proposal to levy Infrastructure and Agriculture cess is retrograde as it adds another slice to a high tax burden. We welcome the proposal of a 3-5 year tax holiday for start-ups. We hope this applies to new hotel projects. This will add vigour to the business climate. Amendments to boost ARCs are a good fiscal step. Mention of revival of 160 airports/airstrips is excellent. We hope this translates to reality in FY17. The Proposed outlays in infrastructure, highways, roads and rails are all excellent. Once again, we hope to see real progress on the ground. An outlay of 9000 crores on Swachch Bharat Abhiyan is welcome. India needs to solve the issue of final garbage disposal against the largely prevalent system of sweeping dirt away  from one place only to another.
Bhupesh Joshi, Director & CEO, Club One Air
This Union budget looks like a formative one which will push in reforms from the top and the benefits will trickle down to the common man in the long term. For our sector the remote connectivity will be the key element to actually grow and diversify our operations. Once the proposed airports get functional the travel options will increase and may boost the local economy and open opportunities for investments in that geography.
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