Key Policy Issues for the Indian Hospitality Industry: Part 2

by and Jul 3, 2024Hotel Development, Travel & Tourism

In last week’s article, we discussed a few crucial policy reforms in Building Bye-Laws and Construction Norms pertaining to the hospitality industry. Interestingly, last week also witnessed the Uttar Pradesh Government stating the importance of changing the State’s current building bye-laws in an effort to boost the State’s tourism potential. This article draws attention to two longstanding demands made by the hospitality industry: Industry Status and Infrastructure Status.

Industry Status

The purpose of recognising any sector as an industry is to promote its development via benefits such as subsided rates for electricity and water, reduction in property tax and, in some cases, industrial rates for land parcels. This also helps attract investors to the sector. Maharashtra was one of the few States in the country to award industry status to the tourism sector in 1999. Similar recognition has been given by Karnataka, Punjab, Odisha, Goa, Gujarat, Assam, to name a few; however, the benefits of this ‘status’ have remained only on paper. 

In our opinion, the key issue is the disconnect between designing of incentives and their implementation. For example, other than the State of Rajasthan, special electricity rates for hotels under ‘Industry Status’ are yet to be made applicable in any of the States. This is because the Central Electricity Regulatory Commission’s (CERC) tariff order, which governs the same, has not yet provided any direction to that effect.

We recommend creating a joint ministerial committee at a central level to monitor the implementation and progress of the incentives. Furthermore, to encourage other states to recognise tourism as an industry, we suggest the Central Government to incentivize states that have already done so.

Infrastructure Status

Infrastructure Status is a classification granted by the Central Government to certain sectors to facilitate their development through privileges such as long-term financing at lower interest rates and tax incentives. This status is typically bestowed upon sectors that are deemed critical for economic growth and societal well-being: transportation, energy, water supply, telecommunication, social and commercial infrastructure. It also provides regulatory support, including fast-track approvals, making large-scale projects more financially viable and appealing to private investors.  

Currently, tourism falls under the Social & Commercial Infrastructure sector in the Harmonised Master List of Infrastructure sub-sectors. The list is issued and updated by the Ministry of Finance.

As seen in the above figure, the benefits available as ‘infrastructure’ projects would only be available to three-star or higher category classified hotels located outside cities with a population of more than one million. Infrastructure Status should be awarded irrespective of the city’s population. Furthermore, in the list, Exhibition-cum-Convention Centre is defined as “Exhibition and Convention Centre Projects with minimum built-up floor area of 100,000 m² of exclusively exhibition space or convention space or both combined”. While this should encourage development of M.I.C.E. oriented projects, there are minimal projects that fit this criterion.

We recommend adding a criterion for hotels that are built at a project cost of 25 crore and above; this demand has been voiced by Associated Chambers of Commerce & Industry of India (ASSOCHAM), Confederation of India Industry (CII), Federation of Indian Chambers of Commerce & Industry (FICCI), Hotel Association of India (HAI), Federation of Hotels and Restaurants Association of India (FHRA) and World Travel & Tourism Council – India Initiative.

In next week’s article we will discuss some other key issues in the present policy framework. You can access the complete whitepaper here.


For more information, please contact Trisha Suvarna at [email protected]



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