Addition of Viability Gap Funding for projects to be the key factor
With the exorbitant investment cost deterring investors from tapping hospitality and tourism potential, the State government is mooting re-examination of the Tourism Policy 2015-20.
Viability Gap Funding
Several provisions like 100% exemption of luxury and entertainment tax, industry status to new infrastructure projects and others under the existing policy had failed to attract investors. The modified policy is most likely to offer Viability Gap Funding (VGF), capital subsidy and other incentives.
Expensive land and uncertainty over the break even period were the key factors that discouraged investors, according to experts.
“Based on the industry feedback we are re-examining the existing policy. After a thorough review, the government will take necessary decisions. There is no particular fund allocated for the purpose and incentives will be offered to investors with feasible criteria as any incentive policy is to attract investments,” Principal Secretary, Tourism & Culture, N. Srikant told The Hindu.
About extending provisions to the existing organisations, Mr. Srikant said it would be decided only after consulting the stakeholders.
Aimed at encouraging and accelerating rapid world-class tourism infrastructure development, the policy only offers incentives to new investors during the first three years.
“The VGF and other incentives will be most useful for newcomers. Due to high property costs and other issues, not many investors came forward. The gestation period for tourism projects is usually long and one can achieve break even in just three or five years. The VGF will give an assurance to the investors and it is likely to attract investors,” said AP Chambers of Commerce and Industry Federation’s Tourism Sub-Committee Chairman K. Lakshminarayana. “The VGF for toursim projects is rare in other States but it will help AP grow,” he said.
According to the Union Ministry of Tourism’s guidelines for PPP infrastructure, the VGF can be extended only up to 20% of the project cost