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Tax incentive delays 250 hotels in South India

A B Mahapatra in New Delhi

Nearly 250 new hotels are almost ready in South India, but their owners are unwilling to open them before April 1998.

Why? The catch lies in Finance Minister Palaniappan Chidambaram's announcement during the Budget session of Parliament that hotels opened between April 1998 and March 2002 will be eligible for a decade-long tax concession. Considered the most lucrative incentive for hoteliers so far, the tax exemption will be 50 per cent on their net profit.

According to sources in the tourism ministry, all the hotel projects are currently nearing completion in Andhra Pradesh, Karnataka, Kerala and Tamil Nadu. But the hoteliers are holding them up for full-fledged occupancy till 1998. ''I don't think they will complete their respective projects before 1998. We have decided to hold a fresh round of talks with them sometime next month,'' said a senior tourism ministry official. ''We know they are delaying the projects deliberately to get the tax concession,'' he said.

These hotels, having 14,820 rooms, will create 12 million jobs with an investment of Rs 130 billion.

Of the cleared hotels, 133 are three-star hotels with 8,500 rooms, 88 two-star hotels with 4,005 rooms, 10 single-star with 374 and two four-star hotels with 283 rooms. In the five-star category, nine projects will have 1580 rooms.

The hotels will be located at Madras (22), Thanjavur (13), Trichy (12), Madurai (25), Kanyakumari (3), Kochi (8), Kodaikanal (4), Kovalam (2), Kumbur (10), Bangalore (19), Guruvayur (3), Hyderabad (30) and Tirupati (17).

Tamil Nadu tops the list with 108 hotel projects. Of these, 89 are star hotels with 5,356 rooms. Next comes Kerala -- 78 hotels with 2,994 rooms, followed by Andhra Pradesh 53 hotels with 5,112 rooms, Karnataka 24 hotels with 2,129 rooms.

The government proposes to tap more areas in South India which have good tourism potential as it plans to generate almost two-third of the total employment opportunities in the tourism sector which was given industry status in 1986. It is the third largest forex earner of the country -- it earned $ 2,470 million in 1996.