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Hospitality sector which had taken a big hit during the pandemic with the Centre announcing to extend the validity of Emergency Credit Line Guarantee Scheme (ECLGS).
The ongoing pandemic has adversely impacted the contact intensive sectors especially the hospitality and related sectors. During the covid 19 pandemic the hospitality sector has suffered a great loss in the fiscal year 2020-2021. The Indian hotel industry has taken a hit of over Rs. 1.30 Lakh crore in revenue according to the Federation of Hotel and Restaurant Associations of India (FHRAI). The Indian Hotel Industry’s total revenue in FY 2019-2020 was 1.82 lakh crore. It is being estimated that approximately 75 percent of the industry’s revenue has been wiped off due to the pandemic.
As the hospitality sector has a high employment intensity and their direct and indirect linkages with other sectors their revival is also important to balance the economy.
Extension of the validity of ECLGS
The Union Budget 2022-2023 has announced extending the validity of ECLGS upto March, 2023 and increase the limit of guarantee cover by Rs. 50,000 Crore to total cover of Rs. 5 Lakh Crore, with the additional amount being earmarked exclusively for the enterprises in hospitality and related sectors.
The enhancement has been approved by the Union Cabinet
“The increase has been done on account of the severe disruptions caused by Covid -19 pandemic on hospitality and related enterprises,” Nirmala Sitharaman, finance ministry said in a statement on Wednesday. The additional amount of ₹50,000 crore will be made applicable to enterprises in hospitality and related sectors till validity of the scheme, which is March 31, 2023, it added. “The enhancement is expected to provide much needed relief to enterprises in these sectors by incentivizing lending institutions to provide additional credit of up to ₹50,000 crore at low cost, thereby enabling these business enterprises to meet their operational liabilities and continue their businesses,” it said.
Objective of ECLGS
Emergency Credit Line Guarantee Scheme has been introduced by the finance ministry of India in May 2020, in order to give financial assistance to the pandemic hit economy of India. The main objective of this scheme is to provide 100 percent guarantee coverage to Banks and NBFCs to enable them to extend emergency credit facilities to Business enterprises, MSMEs in view of covid 19 to meet their additional term loan or additional working capital.
ECLGS is an already operational scheme and due to the effect of covid 19 pandemic the government has specifically reserved Rs. 50,000 Crore for this sector. This enhancement by the government is expected to provide additional credit of upto Rs.50,000 Crore at low cost. This will enable these business enterprises to meet their operational liabilities and continue their businesses.
Loans of about 3.67 Lakh Crore have been sanctioned under this scheme till August 5, 2022. The amount which is being sanctioned will be valid till the scheme is valid which is till 31 March, 2023.
