New Delhi: Like if the recent spate of scams weren't bad enough, the government is closing in on yet another scam, this time involving the hospitality sector. Sources close to the government say it is zeroing in on misuse of foreign direct investment (FDI) in the hospitability business.
It is believed that FDI is being used for arbitrage by foreigners. The fear is that the funds, meant for hotels, are getting diverted to realty.
The industry department is currently investigating the issue to ascertain projects misusing FDI. Sources say the government is all set to take immediate action to stop the exploitation guidelines.
As per norms, there is 100 per cent FDI in hotel and tourism via the auto route. The FDI probe will be focused on flows between April 2009 and September 2010. The quantum of FDI flows into the sector during that period has been Rs 4,132 crore.
Earlier, the Reserve Bank of India had expressed its concerns on the matter in May 2010. The Central Banker stated its displeasure with the average ticket size of the FDI in some projects, deeming it “too low”.
The whole matter was brought to light with red flags being raised with the FDI in certain projects at Kochi, Goa and Delhi where the average ticket size ranged from Rs 26 lakh to Rs 19 crore. It was suspected that the funds meant for hotel projects were getting diverted to non-hotel projects.
Here are more details on the hotel projects under scrutiny:
Average FDI per hotel project in Goa at Rs 26 lakh
Average FDI per hotel project in Kochi at Rs 39 Lakh
Average FDI per hotel project in Delhi at Rs 19 crore
Ninety hotel companies in Goa got FDI between April 2009-September 2010
Eighteen hotel companies in Kochi got FDI between April 2009-September 2010
Eighty Two hotel companies in Delhi got FDI between April 2009-September 2010
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