Hospitality association FHRAI seeks increase in ECLGS loan tenure

However, we also feel that the Government could have critically examined the shortfalls in the previously announced ECLGS and could have come out with a more robust and effective scheme for the hospitality sector, FHRAI Vice President Gurbaxish Singh Kohli said.The six-year period is too short a window for the hospitality sector to reap the desired benefits of an otherwise well-intended scheme, he noted.

The Federation of Hotel and Restaurant Associations of India (FHRAI) has submitted a representation to Finance Minister Nirmala Sitharaman seeking an increase in the Emergency Credit Line Guarantee Scheme (ECLGS) loan tenure and simplified process for availing of loans by the hospitality sector.

The request comes on the back of the finance ministry's recent decision to increase the ECLGS corpus from Rs 4.5 lakh crore to Rs 5 lakh crore.

For the hospitality industry to avail the maximum benefit of the ECLGS, FHRAI has requested for the scheme to be customised to meet the needs of the sector.

''We thank the Government for announcing the increase in the ECLGS limit. This positive step will provide much needed relief to the deeply distressed hospitality sector. ''However, we also feel that the Government could have critically examined the shortfalls in the previously announced ECLGS and could have come out with a more robust and effective scheme for the hospitality sector,'' FHRAI Vice President Gurbaxish Singh Kohli said.

The six-year period is too short a window for the hospitality sector to reap the desired benefits of an otherwise well-intended scheme, he noted. For the scheme to truly benefit the industry, it is imperative that the tenure of the loan is increased to at least 10 years, he said.

The tenure of loans granted under ECLGS 3.0 is six years, including a moratorium of two years. The same under ECLGS 1.0 was four years and under ECLGS 2.0 five years with a one year moratorium.

FHRAI has argued that many hospitality establishments have availed loans under ECLGS 1 and 2, and the repayment period for these loans has already started in most cases.

''Unfortunately, hospitality establishments do not have the cash flow to repay the loans due to continued business disruptions during the last two years. The sector is also constrained to service its other loan obligations along with managing its huge capital expenditure to remain afloat,'' said Pradeep Shetty, Joint Secretary, FHRAI.

He observed that extension of the ECLGS limit will only increase the credit burden of the industry and borrowing additional loans that need to be serviced in a short duration may not be a viable and sustainable option.

''We, therefore, request the Government to rationalize the norms for all the ECLGS loans taken by the hospitality establishments,'' Shetty said.