By Nick HernanIn a move that has rattled the global financial markets, Indian hotel owners and operators are threatening to close their doors as the country heads into a financial crisis.
In a statement, the hotel lobby group, India Hotels Association, said that in the coming days, it would file an application to the Supreme Court asking the court to “revoke” the licence of its franchisees and “revote” the Indian Hotels’ (IHA) license.
“The IHA has been in operation for over 40 years and has been granted the right to operate the country’s largest and most expensive hotel,” said IHA president and CEO Manu Gupta in the statement.
“The IAA is seeking an extension of this licence so that it can continue to operate in the country as per the franchise agreement, which is to be implemented by June 30.
This licence was granted by the Government of India in July 2013, which was then in force for another 12 months.”
While the decision may be a step in the right direction, it may not be the last one.
In October last year, a similar petition was filed with the Supreme court.
India’s Prime Minister Narendra Modi and Finance Minister Arun Jaitley are in the midst of negotiations with hotel owners to extend the franchise for another six months, which would make it the longest-running lease in the world.
The Government of the day, however, is refusing to grant any extension to the lease agreement, and has said that if a deal is not struck by June, it will not renew the lease.
“I am happy that the hotel operators have taken a decision to close down the hotels, but I do not think it will be enough to resolve the issue,” Gupta told Bloomberg.
“This will have a negative impact on the economy.
The IHA will have to look at whether or not it can find alternative business models to operate these hotels.””
It is likely that the issue will be revisited in the next few days,” he added.
The ITA’s decision to file the petition comes on the back of an earlier ruling by the apex court in which the hotel industry was ordered to give more details about its franchise arrangements and provide “more clarity” on the details of the government’s financial support package, to be paid by the hotel owners.
The hotel lobby has accused the government of being “unfriendly” towards the industry and the industry is now trying to get a deal done with the government, including setting up a special fund to help the industry.
“We will go to the court and file the application to have the licence revoked,” Gupta said.
“If they can not find a solution, we will file an appeal to the highest court in the land.”
The Government has said it will pay all the cost of running the hotels and will also provide subsidies to the industry, but this has not been agreed to yet.
The government is currently in the process of signing a financial assistance package with the IHA to help them run the hotels.
The government has also said that the IAA has not fulfilled its obligations under the franchise, which includes providing more than Rs 3,500 crore in subsidies to Indian hotels over the next two years.