Government Initiatives: In India and Abroad
As economies come to a grinding halt the world over, employers scramble to cut costs and stay afloat. A large cost for most service providers today is salaries and employee benefits while for many industrial/ manufacturing-centric organisations major costs include taxes, debt repayments and license fees. For people below the poverty line, the cost of goods itself is a challenge. For many others, it is the availability of food and essential commodities that proves to be challenging. As stock markets slide and GDPs plummet, people and industries alike look to their governments to bail them out.
The Government of India has been applauded by several world leaders for taking stringent measures to contain the spread of the COVID-19 outbreak in the country at an early stage. They had also announced the first relief package of INR1.7 lakh crore between April and June 2020, mainly targeted at economically weaker sections of society, and include the following actions:
- For 20.40 crore women covered under the Jan Dhan Yojana, three instalments of INR500 each will be directly transferred to their accounts over the three-month period.
- For 2.8 crore senior citizens, widows and the disabled, two instalments of INR500 each will be directly transferred to their Jan Dhan accounts.
- 8 crore farmers have received or will soon receive INR2,000 each in cash hand-outs.
- 12 lakh frontline medical workers will be included under the New India Assurance Company Ltd’s INR50 lakh cover per person over a period of 90 days (starting March 2020) in case of death during the pandemic.
- 5 crore construction workers are being handed-out cash amounting to a total of INR3,071 crore.
- Free gas cylinders have been promised to all beneficiaries of the PM Ujjwala Yojana.
- 80 crore households below the poverty line will be provided with 5 kg wheat/rice and 1 kg pulses per month under the PM Garib Kalyan Ann Yojana.
- 79 lakh individuals and 3.8 lakh establishments stand to benefit from the announcement pertaining to government taking on payments of 12% EPF as employer and employee shares each where monthly wages amount to less than INR15,000.
- Advance PF withdrawals of up to 75% have been allowed by the government during this period and 2.1 lakh members have already availed this benefit.
While the Government of India works on a Financial Relief Package for the revival of industries and services in the country, there is already talk of what it will include. Some believe that the package will not be released all at once, rather, ‘booster doses’ will be made available for various sectors in a phased manner. A major concern for the government at the moment is that cash crunch faced particularly by medium and small-scale enterprises (SMEs) will translate into insolvency issues. Some proposals that may find their way into the second relief package include:
- 3-month moratorium on working capital loans may well be extended to a 6-month period. Cheaper lending and softer loan servicing may also be worked out.
- Payroll support for employees of SMEs will take the burden off the organisations while offering some respite to the employees currently facing retrenchment or even loss of jobs.
- Some fixed expenses for such enterprises may be borne by the government e.g. fixed electricity cost.
- Reduction in GST rates to lower slabs for the service sector including airlines, hotels and restaurants that cannot recover losses incurred during the lockdown period. This will lead to a reduction in overall prices of services thereby creating demand and allowing the service providers to find their feet again.
Eleven committees set up by the Prime Minister’s Office to submit proposals for repairing the economy post the lockdown include not only the aforementioned points but also make suggestions regarding ease of doing business, cash flow support for organisations, and working capital loans to companies at low interest rates that are guaranteed by the government in case of failure to repay on the company’s parts.
Hotelivate, along with key stakeholders in the hospitality industry, has proposed relief measures for the industry such as:
- Monetary support to casual/contracted staff in the hotel, aviation and cruise line industries as people face severe pay-cuts and lay-offs
- Working capital loans at reduced interest rates in order to continue paying employee salaries
- Offering a moratorium or a deferment of debt payments to hotel owners over a six to nine-month period
- Deferment of renewal of licenses that do not pose immediate health, hygiene or safety related operating risk to establishments by six months as well as the possibility of smooth renewal at no incremental cost in this fiscal year
- Deferment in filing and submission of GST on the monthly portal for a longer period of time post June 2020
- Introduction of Leave Travel Allowance (LTA) post the lockdown period to create domestic demand that will help jump-start the Indian aviation and hotel industries
Internationally, many governments have extended benefits to the hospitality and tourism sectors, as below:
- Singapore – for the current year, the Government of Singapore has announced 100% property tax rebates for hotels, serviced apartments, food and beverage outlets, etc. It has also promised to pay salaries up to 75% based on sector
- Malaysia – the Malaysian government has gone a step further and offered deferment of tax debts for 6 months, exemption of hotels from Service Tax, investment of US$6 million to promote tourism in the country and discount vouchers for airlines and hotels
- Indonesia – along similar lines, Indonesia has also exempt hotels and restaurants in 10 tourist destinations from paying taxes for a period of 6 months. Additionally, it has also announced financial incentives for airlines, travel agencies and tourism marketing amounting to US$13 million
- United Kingdom – other than offering salary benefits up to 80% for all hospitality employees, the UK government is also offering sickness benefits to self-employed people. It has waived off all VAT payments until the end of the year and are also offering grants of between £10,000 and £25,000 to small hospitality businesses
- Italy – one of the worst-hit countries in the ongoing pandemic, Italy has frozen lay-offs for 2 months and also extended unemployment insurance for its workers.