Unlike other export sectors, services or merchandise, covered under SEIS and MEIS, for tourism exports, the SEIS scheme barely covers about a seventh of India’s tourism export revenue, whereas it impacts every dollar that the country earns in tourism receipt.
In the tourism services exports segment, India has some serious catching up to do vis-à-vis the global share. According to World Travel & Tourism Council (WTTC), in 2019, Travel & Tourism resulted in US $ 1.7 trillion in visitor exports worldwide, which is 6.8 per cent of total exports and a staggering 28.3 per cent of global services exports. In India’s case, WTTC says International visitor impact is US $ 30.3 billion which is about 5.6 per cent of total exports (Merchandise and Services included) revenue and around 15 per cent of total Services exports which is currently at around US $ 200 billion.
There is huge room for the country to grow in ‘Tourism Services.’ India’s Tourism exports receipt grows by an additional US $ 6 billion, if it’s share is to match the global share of tourism, which is 6.8 per cent, in total worldwide exports resulting in millions of additional jobs for the country. And if India’s tourism exports can climb to 28 per cent, in line with the sector’s share of global services exports, the country is looking at a tourism exports revenue in the region of US $ 60 billion and tens of millions of additional jobs in the travel and tourism sector.
And therefore, as a low income country, a population hovering at 130 crore and growing, more than 10 million youth entering the job market every year and tens of millions left unemployed due to Coronavirus pandemic, growing tourism exports with right policy framework and its sincere implementation is greater need than ever before.
The country needs to revisit its services exports support scheme SEIS (Services Exports from India Scheme) for the tourism sector and further strengthen it in order to lure the tour operators who are marketing and promoting the country all over the world and largely with their own money. Last incentivized at 7 per cent, the government shall seriously consider increasing the SEIS reward scheme between 10-12 per cent for at least the next five years to handhold the inbound industry towards faster recovery.
The latest draft National Tourism Policy recognizes that “as a travel destination, few other nations can offer the diversity of products and experiences found in India. However, tourism in India, though growing consistently, is yet to realize its full potential.” It further acknowledges that “growth of tourism sector will impact Indian economy in terms of spreading benefits across the country including remote areas and providing employment and entrepreneurial opportunities to youth, women, marginalized sections of the society and those in the informal sector.”
“The SEIS incentives’ impact on India’s tourism exports and overall economy is significant to say the least. In the absence of a robust and result-oriented policy framework and still developing tourism exports strategy, SEIS has immensely helped India’s tourism exports on several front and covering many fault lines that have continued to jeopardise country’s inbound tourism and foreign exchange earning potentials. And therefore today the inbound industry, as well as country’s inbound tourism need SEIS more than ever,” says Sarab Jit Singh, Managing Director, Travelite (India) a unit of KTC India Pvt Ltd., Former Sr. Vice President of Indian Association of Tour Operators and Founder & Former Vice Chairman, FAITH.
SEIS’ impact is tremendous in growing India’s tourism exports. The scheme puts the inbound industry in a unique position to herald a stronger and wider recovery plan for the country’s
tourism exports.
Making India Price Competitive
This is no hidden fact that India’s tourism taxes goes as high as 18 per cent. Besides, the sector continues to be marred by the multiplication of taxes, further jeopardizing India’s destination competitiveness. The tour operators have to also charge a tax of 5 per cent on the total package cost that includes GST taxes on various services raising the overall tax to as much as 20 per cent or even more.
This is unlike most of the prominent destinations in the neighbouring ASEAN like Thailand, Malaysia, Singapore and others that charge much less taxes to tourists. Besides, some of these destinations also have VAT refunds programme for further reducing the tax burden on tourists and providing another strong reason to choose these destinations over India. Afterall shopping is one sought-after vocation tourists indulge in while travelling.
“SEIS is also factored in our packages pricing in order to make India a competitive destination vis-à-vis countries in the Asian region. Our taxes are high. To bring in parity with the Asian markets, especially destinations in South-East Asia, SEIS gives us scope for further discounting to offer competitive pricing and attract more tourists to India,” says Pronab Sarkar, Managing Director of Swagatam Tours, one of the country’s leading DMC and President of Indian Association of Tour Operators (IATO).
Furthermore, Sarkar insists that put together, the inbound tour operators fraternity is probably spending more in the promotion of the country than the government’s overseas tourism promotion budget. “We travel everywhere incurring cost on international travel, stay, on local travel and transport, marketing and promotion like attending exhibition and travel marts, developing video, print and online promotional contents, organizing workshops and seminars, meetings and one-to-one calls, joint advertisements. That’s a lot of marketing activities and budget and create massive destination interest in every part of the world.”
Deal of a Bargain!
Unlike any other sectors that are covered under the incentives reward scheme of SEIS and MEIS, tourism exports presents a very different picture when we look at the total foreign exchange that the country earns vis-à-vis the amount under the reward scheme that is provided. In 2018, India’s tourism exports was more than 1,94,000 crore. And according to reports, the total incentives/ duty drawback provided to tour operators was well under Rs. 2000 crore that year. If this is true then it means that calculated at 7 per cent (SEIS incentives reward rate for tour operators in 2018), the government had to only incentivize for foreign exchange of around 28,000 crore, or just about one-seventh of the total foreign exchange that the country earned in tourism exports that year.
Now this is what sets the tourism exports apart from other sectors covered under services exports where the government gets to incentivise on almost every Dollar earned as services exports revenue. The same applies under MEIS (Merchandise Exports from India Scheme), a similar scheme to give boost to merchandise/goods exports.
Elaborating further, Singh says, “The government only has a tiny fraction of foreign exchange revenue, probably around 15 per cent, to incentivize on in the tourism exports. That’s how the SEIS works and apply. However what is important to underscore is that it is because of tour operators’ round the year marketing and promotional activities across the globe that generates demand and interests attracting millions more as independent travellers who yield billions in foreign exchange revenue for the country that the government does not need to incentivize on. This segment of traveller do not come within the SEIS scheme guidelines and hence the government does not have to incentivize tour operators on over 85 per cent of the foreign exchange revenue earned on tourism exports by the country.”
Given her vast untapped potential, India can assuredly assume leadership position in tourism services exports. As an organizer of one of Asia’s biggest travel exhibition, SATTE, in India that attracts international buyers from over 50 major source markets and portfolio of exhibitions spanning every continent of the world, Pallavi Mehra, Group Director of Informa Markets in India, says, “We have noticed absolutely tremendous destination aspirations for India. And this is one big advantage that India as a destination enjoys. Converting this ‘aspiration’ into actual visits will mean that the country can realistically treble its international arrivals to 33 Million as mooted in the new draft National Tourism Policy released recently.”
“This may also mean as much as trebling the tourism export revenue for the country which is currently at about US $ 30 billion. In the post-Covid world an aggressive new international marketing strategy and the country’s real marketeers, the tour operators, will need to be adequately galvanized and encouraged with schemes like SEIS that has the potential to entirely change India’s tourism landscape,” Mehra added.
Release SEIS incentives, plead operators
As the industry battles ongoing pandemic turmoil that’s devastated India’s tourism exports sector, robbed the tour operators of business and liquidity and key human resources, the fraternity is looking at SEIS as the light at the end of the tunnel, both for themselves as well as country’s inbound tourism. However there is worry in the ranks as the SEIS platform, say operators, has been closed for over four months, decision regarding the rate of incentives for the last fiscal is still pending and there is ambiguity about the continuity of SEIS incentives reward in the coming years.
Notwithstanding the answers as to how these concerns are addressed, it is more important than ever for the Government to understand that tourism is almost entirely a private sector driven industry and SEIS serves many strategic purpose towards strengthening the private sector, especially the tour operators, towards building a faster recovery and further growth plans in the post-Covid world. At the moment SEIS is the life-line that needs to be immediately extended to help the sector through the crisis and buckle up to promote the destination.
According to Homa Mistry, CEO of National Tourism Award winning DMC Trail Blazer Tours, “SEIS greatly helped us increase our marketing of India. It was a big benefit. What happens is in anticipation of doing more business you actually have to invest that amount and so this amount is already invested. Every year we used to get it in time. Unfortunately at a time when SEIS is almost like oxygen as we are on our last straw, we haven’t got what is due to us yet. It will help us keep our staffs. It takes years and years of hard work to build a company. And today most of the companies have reduced salaries and are on the verge of asking most of the staffs to leave jobs also. Frankly SEIS is the only thing that is required right now, for our companies as well as country’s tourism economy and maintaining employment in the sector.”
Wondering why the government has chosen to close the online window that has stopped the operators from filing their claim for the SEIS duty drawback, Shikhar Travels’ Managing Director, Capt. Swadesh Kumar, one of the oldest IATO members and President of Adventure Tour Operators Association of India (ATOAI), rues, “We have been asking the government to give us some financial aid in order to survive. However if that is not possible, the SEIS incentives is our hard-earned incentives that not only we have toiled for but have also benefitted the tourism sector, national economy, foreign exchange earnings, employment creation, immensely and many times more than the small part of total foreign exchange that the industry is incentivized for.”
“If the government cannot give us any financial aid, then at least give us our SEIS incentives that will help the inbound industry sustain and survive through this crisis. It will also help us retain the jobs in the sector. The impact of the pandemic on the sector is devastating. The inbound trade need liquidity to survive and rise,” he added.
Another IATO veteran and probably the biggest operator for the high-yield Japanese market, CMD of Lotus Trans Travel, Lajpat Rai, warns, “SEIS is the biggest morale booster at this moment. We do not know when we are going to get international tourism back to pre-2020 level. Things don’t seem to be back on track at least until 2022 for inbound tourism. But we must try. However, if the government takes away SEIS then there is nothing left for the tour operators to put in any significant effort. The government is not investing any money to bring tourists. It’s investment is going in boosting the image. The effort and money is being invested by the tour operators.”
Furthermore, there are doubts about the continuity of the scheme. MEIS has been greatly curtailed in its current avatar announced a few days back and may not be applicable from next year. Rai insists that it is time to show confidence in the industry and remove any ambiguity over the SEIS incentives reward scheme for both, the industry and inbound tourism.
“SEIS should not just be a one year policy to promote tourism exports. It should be announced for a minimum of 5 years. SEIS factors probably the most prominently in wooing country’s inbound operators to put in their best efforts for the next couple of years which will be toughest and most challenging for tour operators and India tourism. It’s absence will be the biggest setback to not just the industry but also our effort to revive and grow tourism,” says Rai.
Tourism Economy & SEIS
India generated tourism export revenue of almost 1,95,000 crore in 2018. In 2019, the total foreign exchange revenue was over 2,10,000 crore and the sector employs almost 40 million. India’s Economic Survey 2019-20, a pre-budget government survey, has amply highlighted tourism increasing role in building and strengthening national economy and employment with far-reaching impact. Foremost, the survey highlights that the services exports, led by ‘tourism services’, have outperformed goods exports in the recent years, due to which India’s share in the world’s commercial services exports has risen steadily over the past decade to reach 3.5 per cent in 2018, twice the share in world’s merchandise exports at 1.7 per cent.
Furthermore, highlighting ‘Tourism Services’ as one of the top Services Sector’s sub-sector, the report identifies it as “a major engine of growth, contributing to GDP, foreign exchange earnings and employment.” However, the survey also states that “growth in foreign exchange earnings have slowed in 2018 and 2019.”
“With the current state of economy and employment, India cannot afford be caught napping in the post-Covid tourism reviving world. A strong and attractive SEIS reward scheme is a crucial step in the direction to not sustain the inbound industry through this devastating crisis but also help recover our market share, then realize country’s hitherto untapped tourism potential and last but not the least create tens of millions of new employment opportunities in every corner of the country. Tourism continues to be the silver line in the global economy as the sector grew at significantly more 3.5 per cent than the global economy that grew by 2.5 per cent. And according to WTO, in the last few years, one in every four jobs have come from Travel & Tourism and the trend would continue!,” says Singh.
Hailing SEIS as “a transformative initiative” by the Ministry of Commerce, Government of India, Mehra suggests that the tourism sector, both public and private, needs to create greater awareness about SEIS in order to create larger pool of operators to take advantage of the scheme. “Not only it will help the Indian tour operators fraternity further sharpen their marketing skills, strategy and reach, resulting in incremental growth in tourist footfalls and a sharp jump in revenue but is also a promising pillar towards the success of the Prime Minister’s vision of Atmanirbhar Bharat and local entrepreneurship,” stressed Mehra.
