Appreciating the important place that tourism has come to occupy in the economy of the state and realizing the need for development of tourism related activities on healthy lines, the Government of Kerala has declared tourism as an “Industry”. As per the Government order, the concessions available to the tourism sector will be the following:

1. Subsidy for preparation of feasibility/project report.



2. Investment subsidy limited to 10% thereof.



3. Incentive for training local manpower



4. Augmenting availability of funds from State Financial Corporations.



5. Concession in electricity and water charges.



6. Allocation of land at concessional rate.



7. Exemption from building tax levied by the Revenue Department.

At present the concession are given only in items (ii), (iv), & (v)

The establishments eligible for the concessions mentioned above will be:

1. Approved /Classified hotels (1 to 5 star)


2. Motels (which conform to the specification of the Department of Tourism for Kerala / Central Government of India)


3. Restaurants (approved by classification committee of the Government of India).


4. Amusement Parks and Recreation Centres approved by the Government


5. Ropeways at tourist centres.


6. Purchase of luxury cars (minimum of 5 cars), coaches, boats, aircraft etc. by Tour Operators approved by the State/Central Department of Tourism.


7. Construction of structures like Koothambalam/Auditorium etc. by schools/institutions teaching Kalaripayattu and traditional art forms of Kerala.


8. Institutions teaching surfing, skiing, gliding, trekking and similar activities which will promote tourism.


9. Approved Ayurvedic centres with tourism potential.


10. Building of traditional types of boats like Chundan, Iruttikuthy, Veppu, Kettuvallam and House boats.


11. Exclusive handicrafts emporium approved by the State/Central Department of Tourism.

At present there is no scheme for approving the amusement parks, recreation centres and handicrafts emporiums by State Government. Proposals have been forwarded to the Government for approving the above centres.

Ayurvedic centres/ Hotels within the Corporation limits of Thiruvananthapuram, Kochi and Kozhikode will not be eligible for investment subsidy. They will however, be entitled to the other benefits provided by these orders. Those institutions which are getting, any form of subsidy from any department of the State Government will not be eligible, for subsidy under this scheme.

The scheme for approval of “Ayurvedic Centres with Tourism Potential” has been sanctioned by Government of Kerala recently. As per this scheme, the approved Ayurvedic centres with tourism potential mean Ayurdevic centres approved as per the scheme for approval of Ayurvedic centres in terms of G.O. (MS) No.140/98/GAD dated 23.3.98 as amended from time to time. In this scheme, the application for approval is to be forwarded to Director, Department of Tourism with relevant enclosures. A fee of Rs.2000/- is changed for approval. There is a committee constituted for approving the projects after inspection. There are also certain regulatory measures to ensure quality in service.

A committee consisting of the following officers is constituted to look into the applications for benefits received.

1. Secretary-in charge of Tourism (Chairman)


2. Secretary to Government (Industries) – Member


3. Director, Department of Tourism – Convener

The application for concessions will be placed before this committee for decision. The investments subsidy will be available for the new units and also for the expansion of the existing units.

Investment subsidy will be available for land, building, plant and machinery.

The subsidy amount is limited to 10% of the capital investment (land, building, plant & machinery) limited to Rs.10 lakhs.

The actual price paid for the land, building including development charges to the extent needed for the purpose of the tourism units will be taken into account for the payment of investment subsidy. Where land or building is held in premium lease arrangement, premium paid by lease holder will be eligible for investment subsidy. Where the land or building is already owned by the tourism unit, the market value thereof as assessed by the local body authorities will be taken for the purpose of fixing capital investment. Rent of hired building will not be taken into account. Whatever the area or cost of the land, for sanctioning subsidy, the value of land will be calculated only as 10% (maximum) of the total cost of the Project.

Promotion of Motels / way side Amenities

The department of tourism has a scheme to promote the construction of Motels/Way Side Amenities along the highways. The concept- motel is meant for providing facilities for rest, food, refreshment, toilets, parking facilities etc. to tourist and others who travel along the National Highways and State Highways. The approved motels are eligible for 15% subsidy subject to a maximum of 1 lakh rupees. The scheme is at present limited to NH 47 and M.C. roads but proposal has been submitted to the government for including all national and state highways and roads leading to tourist centres.

Assistance for Self Employment Ventures in the field of Tourism.

This scheme is intended to promote self employment ventures in the field of tourism and thereby increase the infrastructure facilities required for tourists. The applicant’s age is limited to 18– 40. A minimum educational qualification of SSLC is prescribed. Preference is given to those who have passed any course in Tourism, Tourism & Travel Management, Hotel Management, Catering Technology etc. The financial assistance will be in the form of subsidy 25% of the total capital investment subject to a maximum of 25,000/- for self financing units and Rs.50,000/- for units availing loans from financial institutions.

Tourism Investment Guidance Cell

Even though incentives and concessions have been declared by the Government, due to lack of awareness among the potential investors, and due to lack of a permanent forum where such awareness can be imparted, the implementation of the policy has not achieved the desired level. By considering this fact, the Department of Tourism has recently formed a forum with the name Tourism Investment Guidance Cell to guide potential investors in Tourism Sector in a desirable manner. The Cell consists of experts form various fields required to guide the investors namely:

	A representative of KSIDC
	A representative of KFC
	A well known architect from one of the empanelled agencies of the Department.
	A marketing expert representing IATO
	Planning Officer of the Tourism Directorate as Coordinator.

The cell has proposed to have a sitting at the Tourism Directorate once a week.

Conclusion

The Department of Tourism is convinced that the tourism development in the State can only be achieved through effective public– private partnership. The Department has to act as facilitator to encourage private investments. The only way of facilitating or promoting private investment is through giving appropriate incentives and concession to the industry. We are aware of the fact that the incentives given to the industry at present is very nominal and needs a radical improvement. Also we are well aware of the fact that we have failed in effectively communicating the available incentives etc to the investors. We hope that this seminar will definitely help in improving the situation and provide a strong information base to the potential investors in Tourism.

INVESTMENT SUBSIDY TO TOURISM UNITS

One of the Concessions allowed to the Tourism Industry in G.O.(P) No. 224/86 dated 11.7.1986 is an investment limited to 10% of the investment in G.O.(P) No. 14/88/GAD dated 12 th January 1988. The Government has prescribed guidelines for payment of the Investment subsidy as follows:

1. Introduction

Government of Kerala in G.O.(P) No. 224/86/GAD dated 11.7.1986 has declared Tourism as an Industry. In the same G.O. the units which are entitled to a subsidy have been listed. This has been issued to lay down the guidelines for sanctioning and disbursing the subsidy.

1.2 Definitions

	“Classified Hotels” are those classified by the Hotel and Restaurant Classification Committee appointed by the Government of Kerala/ India.
	“Motels” mean those motels which conform to the specification and standards prescribed by the Department of Tourism Government of Kerala/ Government of India.
	Classification committee means the Hotel and Restaurant Classification Committee appointed by Government of India/ Government of Kerala.
	Tourism centers mean those centers/places recognized as having potential for development of tourism which are listed in the Travel Circuits prepared by the Government of India and places listed in the Master Plan for development of tourism prepared by the Department of Tourism Government of Kerala through the Asian Institute of Development and Entrepreneurship, Cochin.
	Ayurveda Centres with Tourism Potential mean the Ayurvedic Centres constructed at “Tourist Centres” which are built to the specifications of classified hotels and approved prior to construction by the Tourism Department/Government of Kerala.

1.3 The following may be eligible for the concessions

	Classified hotels (1 to 5 star)
	Motels
	Restaurants (Approved by classification Committee of the Government of India)
	Amusement Parks & Recreation Centres approved by the Department of Tourism, Government of Kerala
	Ropeways at Tourist Centres
	Purchase of luxury cars, coaches, boats, air craft etc by Tour Operators approved by the State/Central Department of Tourism
	Construction of structures like Koothambalam/ Auditorium etc by Schools/ Institutions teaching Kalaripayuttu and traditional art forms of Kerala
	Institutions teaching surfing, skiing, gliding, trekking and similar activities which will promote tourism.
	Ayurvedic centers with tourism potential
	Building of traditional types of boats like Chundan, Iruttikuthy, Veppu, Kettuvallam and House Boats
	Exclusive handicrafts emporia (approved by the State/ Central Department of Tourism).

Hotels within the Corporation limits of Trivandrum, Cochin and Calicut will not be eligible for the investment subsidy. Hotels situated in Central Subsidy Districts will also not be eligible for subsidy under this scheme as they are eligible for Central Investment Subsidy (Central Subsidy Districts – Trivandrum, Alleppey, Pathanamthitta (which were parts of the erstwhile Alleppey District) Trichur, Malappuram, Cannanore, Kasargode, Idukki and Wayanad).

2.1 Commencement and duration

This scheme has come into operation with effect from 11 th July 1986. Those units that have taken effective steps after 11.7.1986 will be eligible for the subsidy.

2.2 Other Units

Tourism units will be those covered by paragraph 5 of the said G.O. Application for concessions submitted for any other projects/ scheme which does not fall within the categories mentioned in paragraph 5 of the said government Order will be examined by a Committee consisting of Secretary-in-charge of Tourism (Chairman, Secretary to Government, Industries (Member) and Director, Department of Tourism (Convener).

The other investment subsidy will be available for the new units and also for the expansion of the existing units.

3.2 Land and Building

The actual price paid for the land, building including development charges to the extent needed for the purpose of the tourism units will be taken into account for the payment of investment subsidy. Where land or building is held in premium in lease arrangement, premium paid by lease holder will be eligible for investment subsidy. Where the land or building is already owned by the tourism unit, the market value thereof as assessed by the Local body authorities will be taken for the purpose of fixing capital investment. Rent of hired building will not be taken into account.

3.3 Only the portion of the building which is used for a unit which is mentioned in paragraph 5 will be eligible. For example, shops which form part of the hotel but which are independent will not be eligible for the investment subsidy. However, books shops, curio shops etc., which are an integral part of a hotel will be eligible for subsidy if they are directly run by the unit. If a hotel has other facilities which are let out like cloth shops etc, subsidy will be given for the total area minus the land/building set apart for other shops etc.

Land: Whatever the area or cost of the land, for sanctioning subsidy, the value of land will be calculated only as 10% (maximum) of the total cost of the project.

Note: This safety clause is added to discourage claiming subsidy for agricultural waste land etc by showing it as part of a project.

3.4 Other Equipments

In calculating the value of the plant and machinery the cost of plant and machinery as erected on site will be taken into account. Transport charge, Insurance Premium, Erection cost etc., will be taken into account while computing the value of plant and machinery

3.5 Only new machinery and imported old machinery will be eligible for subsidy. In the case of new machinery, invoice price will be accepted and in the case of old machines, valuation will be made as follows: Valuation should be made on the basis of the original price minus depreciation, present market value or the actual price paid at the time of import whichever is less in the case of imported machinery. The valuation will be certified by a Charted Accountant. The effective life of the machinery imported should not have expired at the time of purchase/ transfer. It should be in good condition, capable of satisfactory production result for a period of at least 5 years from the date of purchase/transfer.

.4.1 Modernisation

A Tourism unit undertaking modernization of its building, plant and machinery will be considered for grant of investment subsidy on the value of the building additionally constructed, plant and machinery purchased by the Tourism unit as part of its modernization program, reduced by the sale value, written down value or market value of the said machinery whichever is lower. The value of the machinery may be certified by a Chartered Accountant.

 Working capital including raw-materials and other consumer stores will be excluded for computing the value of plant
   and machinery.

5. Disbursement Details

The Director, Department of Tourism shall be the disbursement agency.

5.2 Eligibility

New Tourism Units engaged in the Tourism promotion activities as defined in paragraph 5 of the Government Order will be eligible for subsidy.

5.3 Procedure for Claiming Subsidy

The following information and documents should be submitted along with the application in quadruplicate (form prescribed in annexure I) for claiming state investment subsidy under the schemes.

	Project report wherever it is prepared.
	Details of the scheme including the details of the fixed assets to be acquired
	Sanction letter from the financial institution sanctioning loan or loans taken for the purpose of implementing the project.

If the project is under implementation, a certificate from the Chartered Accountant regarding the capital expenditure incurred on the project and the certificate from an Engineer certifying the Civil Works done. This should be in the prescribed form.

6.1 The Director of Tourism with whom the application for investment subsidy is filed will examine the application and determine the eligibility of the tourism unit. After due scrutiny it will be referred to the State Level Committee under the scheme with suitable recommendations.

6.2 Essentials as regards the extent of land and building including floor space of the tourism units will be determined by the state level committee at its discretion.

6.3 Any amount of expansion or modernization can be allowed for a Tourism Unit. But each time, the investment should be more than 10% of the total investment before modernization. But the total quantum of State subsidy granted should not exceed Rs.10 lakhs for a Tourism unit.

7. The State Level Committee will consist of the Secretary in charge of Tourism, Secretary, Industries (Member) Representative of Finance Secretary, Director, Department of Tourism (Convener).

8. Powers and functions of the State Level Committee. The State Level Committee will go into the merits of each case to decide whether the tourism unit qualifies for subsidy. The State Level Committee will also determine the quantum of State Investment Subsidy admissible to the Tourism Unit. The State Level Committee is authorized to sanction 10% of the investment subject to a ceiling of 10 lakhs.

9. Form of sanction letter will be in Annexure II.

10. The State Level Committee may hold as many meetings, site inspections as are considered necessary for speedy implementation of the scheme. The minutes of each meeting shall be recorded and certified copies will be sent to all members.

11. The Convener of the State Level Committee shall organize the entire work as follows:

	Organising State Level Committee meeting, maintenance of records of procedure and finalisation and circulation of the minutes, consolidation of the schemes for investment subsidy received every month from the various agencies, submission of consolidated claims to the committee.
	A register will be maintained by the Director, Department of Tourism which will show all the applications received, the amount of investment subsidy sanctioned and investment subsidy disbursed and other such details.

12. Procedure for disbursement of State Investment Subsidy

	On receipt of sanction from the State Level Committee, the Director Department of Tourism will issue a sanction letter (Annexure III) to the eligible tourism units intimating the cost of fixed capital investment and project approved by the State Level Committee as also the amount of investment subsidy sanctioned in respect of the project. Along with the sanction letter there shall be enclosed a legally enforceable agreement to be executed by the eligible tourism unit for the purpose of drawing the state investment subsidy sanctioned by the State Level Committee.
	Where the eligible tourism unit is set up by a co-operative Society or a limited company, a certified copy of the Board Resolution accepting the State investment subsidy should be filled with the disbursing agency along with the agreement duly executed as per the requirement.
	In addition to the agreement the Board resolution will be supported by the project in the prescribed form:-

A certificate from a Government Engineer, or Local authority Engineer or Engineers of the State owned Corporations like Kerala Financial Corporation, SIDECO, Industrial Development Corporation, KSIDC, etc., certifying the extent of Civil Works done in the prescribed form.

	A certificate in the prescribed form from the financial institution certifying the extent of the loan sanctioned and disbursed as also the extent of capital investment made as per the project report which are the subject matter of scrutiny at the hands of the financial institutions. These certificates should be required in all cases. Advances, stamped receipt in triplicate for the amount to be disbursed and details of the fixed capital investment in the prescribed form should be enclosed.
	Documents so furnished by the eligible tourism units shall be examined by the Director, Department of Tourism. The investment shall be disbursed to the extent admissible on the basis of fixed capital investment made by the unit.
	Disbursement of subsidy to tourism Units, assisted by the financial institutions.In the case of assisted units, the disbursement of State investment subsidy may be in installments. The last installment of the subsidy however shall not be less than 15% of the total subsidy sanctioned and it shall be disbursed only after the tourism unit is open to the tourists.
	In case where the loans have been taken from financial institutions the payments will be made directly to the financial institution after obtaining a proper receipt/ authorization etc from the tourism unit.
	Disbursement of the subsidy in the case of self-financed units. Whereas the tourism unit is set up without obtaining financial assistance from any of the institutions, State investment subsidy may be made to the extent of 85% of the estimated subsidy before the Tourism unit becomes operational on production of adequate security for the amount advanced. The remaining 15% shall be released only after the unit becomes operational.

13. Miscellaneous

13.1 Provision of recovery of State Investment Subsidy

In the event of the following, the State investment subsidy given to person or units shall be recovered from him or from it as the case may be.

	Where the tourism unit has obtained state investment subsidy by misrepresentation as to an essential fact or gives false information.
	Where the Tourism Unit goes out of business within 5 years of the date of commencement of service to the Tourist except in case where units remain out of service for a short period extending 6 months with a reason beyond their control.
	Where the Tourism Unit fails to furnish the prescribed information which it is called upon to furnish.

14. Statement of Accounts/ Information to be furnished by the Eligible Tourism Units.

14.1 The Tourism unit receiving State Investment subsidy shall furnish to the Director, Department of Tourism, Annual Audited Statement of Accounts and Balance Sheet. Such statements of account are required to be furnished for a period of 5 years from the year in which disbursement of state investment subsidy is made. The eligible tourism unit should also furnish from time to time all the information required by the Director, Department of Tourism or by the State Level Committee.

Without prior approval of the Director, Department of Tourism any owner of a tourism industry after receiving part or whole of State investment subsidy will not be allowed to change whole or part of the Tourism unit or effect any substantial reduction or disposal of a substantial part of its capital investment within a period of 5 years after its going into operation.

16 Disposal of claims pending on the date of issue of Guidelines:

Cases which are pending on the date of issue of the Guidelines with the Director, Department of Tourism shall be governed by the various provisions of the Guidelines.

17. Interpretations

AN ILLUSTRATIVE LIST OF THE ITEMS TREATED AS FIXED ASSETS NECESSARY FOR TOURISM INDUSTRY

A. Land

	Leasehold land
	Hold land

B. Building

	Main building
	Swimming Pool
	Garage & Parking space for cars
	Conference Hall
	Public Address Room
	Clock-Room
	Book stall
	Beauty Parlour
	Barber shop
	Luggage room
	Boundary wall of the Hotel
	Road constructed within the hotel premises
	Staff quarters for Chowkidars to the extent
	Health Club
	Recreational area

C. Plant & Machinery – (including freight insurance, import duty, Sales tax, Clearing, Loading, unloading & Transport)

	Filtration plant for Swimming & Transport
	Water purification Softening Plant
	Hot water Boiler and room heating equipment
	Fume Extraction & Ventilation plant
	Air-conditioning Plant
	Cold Storage Equipment
	Cooler and refrigeration equipment
	Boundary equipment
	Baker equipment
	Sewage heating units
	Central heating units
	Mechanical cleaning equipments

D. Sanitary Installations

	Sanitary wares & fittings
	Pipe lines

E. Electrical installations

	Electric equipment
	Electric lines
	Fans & Electrical fittings
	Air circulators
	Projector & Microphones for the Conference Hall
	Lightening equipment
	Audio Visual equipments
	Audio/close circuit TVs

F. Kitchen equipment

	Fire fighting equipment
	Weighing Machine
	Telephone Equipment
	Lifts
	Safe deposits (Lockers)
	Goods carrier in the extent needed for the hotel industry
	Well / Tube well along with pumping sets and pipe lines within premises.

ANNEXURE-I

Application for disbursement under the 10% State Investments

Subsidy for Tourism Industrial Units

From

Messers,

To

Sir,

Sub: Application for 10% State Investment Subsidy

In accordance with the 10% State Investment Subsidy scheme application is being submitted herewith for grant of subsidy of Rs……………….. on Investment in fixed capital for the new unit / Expansion on the unit namely ………………………………………….

2. The scheme for the new / expansion of the unit has been approved by the following financial institution / Bank viz.

i)

ii

iii)

3. The cost of the project as approved by the above Institutions / Banks and the details of fixed assets acquired are as under:

Self Financial	Cost of the project As approved byFinancial Institutions
Total fixed capital investment   Land   Building   Plant and Machinery   Other Assets   Promotional and preoperative expenses capitalized or to be Capitalised
Margin money for working capital
Total cost

4. Employment proposed or likely to be credited is as follows:

	Management
	Supervisory / Technical
	Workers: Skilled Semi-skilled Un-skilled
	Others

5 .Expected date of commencement of commercial production

6. The following certificate has been appended.

a) A certificate from Chartered Accountants

Messrs …………………………………………………….

Certify the extent of share capital subscribed and paid up value of fixed assets if any acquired and for as stated above.

b) A certificate from an Engineer as prescribed in the Manual certifying the value of civil works.

c) Details of the plant and machinery as per the project acquired not acquired duly certified by the management in the proforma indicated in the Appendix (Below).

7. A copy of the latest audited accounts of the unit is also enclosed.

8. I/We hereby agree that I/We shall forth repay the amount disbursed to me/us this scheme, if the amount of 10% investment subsidy is found to have been disbursed in excess of the amount actually admissible for whatsoever reason. Further, we shall also be liable to pay 15% interest or at such rate as prescribed by the government from time to time on such amount and such other charges expenses which may be payable by us.

9. It is hereby further certified that I/We have not hitherto applied for or have received any amount by way of 10% grant of subsidy in respect of this unit from Government Financial institutions.

Yours faithfully,

Signature of Applicant

Name of the Signatory:For and on behalf of(Name of the unit)

APPENDIX

ANNEXURE – II