Tourism Sector: Role of Competition Policies and Regulatory Reforms

BY

Dripto Mukhopadhyay

Director- Economic Research

Nielsen India

Tourism in India – Current ScenarioIndicator Values

Foreign tourists arrival in 2014

7.68 million

Growth in foreign tourists arrival over previous year

10.2 %

Domestic tourists 2014 1282 million

Growth in domestic tourists over previous year

11.9%

Foreign exchange earnings from tourism activities in 2014

INR 1,23,320 Crore Grown by 14.5% over previous

year

Share of India in World’s total foreign tourists arrival

0.68%

Share of India in World’s total foreign exchange earnings (UD$ terms)

1.58%

Source: Ministry of Tourism, Govt. of India

Tourism in India – Economic Importance

Source: Ministry of Tourism, Govt. of India

Year% Share in

DGP% Share in

Employment

2009-10 6.77 10.17

2010-11 6.76 10.78

2011-12 6.76 11.49

2012-13 6.88 12.36

Central Government’s Mission and Vision for the Tourism Sector

1) To achieve a level of 1% share of the international tourists arrivals by 2016-17

2) 1450 million domestic tourists by 2016-17

3) Promoting sustainable tourism as priority

4) Enhancing competitiveness of Indian tourism industry

5) Creating world class tourism infrastructure

6) Ensuring greater visibility for tourist facilities

7) Augmenting human resource base in the sector

“Tourism in the Third World, as it practised today, does not benefit the majority of the people. Instead it exploits them, pollutes the environment, destroys the ecosystem, bastardises the culture, robs people of their traditional values and ways of life and subjugates women and children in the abject slavery of prostitution. In other words, it epitomises the present unjust world economic order where the few who control wealth and power dictate the terms. As such, tourism is little different from colonialism”- Srisang, 1992

What are the impact of non-regulated tourism?Poorly managed tourism can lead to:

• Degradation of heritage sites

• Commodification of the sacred resources

• Create a market for prostitution and drugs

• Reduce biological diversity and environmental degradation

• Destroy habitats for wildlife

• Pollute lakes and other water bodies

• Overuse valuable fresh water resources

• Contribute significantly to global warming

• Leads to loss of scenic beauty and as a result loss of tourist attraction in long term

Promoting Sustainable Tourism as Priority

What is Sustainable Tourism?Sustainable tourism could be defined as tourism “which is developed and maintained in an area (community, environment) in such a manner and at such a scale that it remains viable over an indefinite period and does not degrade or alter the environment (human or physical) in which it exists to such a degree that it prohibits the successful development and wellbeing of other activities and processes”. - Butler (1993),

Hence, it should fulfil:

• Tourism industry must ensure that tourist visits will be maintained and tourism resources will retain their attractiveness indefinitely.

• There must be no (or only minimal) adverse environmental, social and cultural impacts.

• All these must be achieved through maintaining the principles of sustainable development.

Why Tourism Sector is Unique in Nature and A Challenging Sector

for Policy Makers?

• Tourism activities are combination of large number of sectors that cuts across all different domains of activities of common mass

• In contrary to other sectors, direct stakeholders for tourism activities are consumers, producers and host community. Unlike other sectors or industries, tourism directly affects entire community of a region positively as well as adversely, depending on the nature of activities

• Even from governance perspective, tourism activities cut across many different departments and hence fluidic in nature

• That is one of the prime reason why being top revenue earner as well as employment generating sector, it is one of the most neglected sectors among all economic activities from policy making perspective

Current Status of Tourism Policies in India

• The latest Central Government policy still in practice is of 2002!!

• A policy was drafted in 2015 - circulated as Draft Tourism Policy 2015, but it has disappeared from the tourism ministry’s official website also

• There are several boards constituted to develop or promote tourism in the country, especially to attract foreign tourists, but any regulatory authority is yet to be constituted

• Apart from Central Government, various state governments have their own tourism policies with their own perspective to promote tourism in the states. If one carefully looks at the state level policies, many of them are quite contradictory to sustainable tourism development paradigm

• My personal experience says that even the top officials of many states that are promoting sustainable tourism or eco-tourism are not even aware of the definitions or pre-requisites of developing such practices

Competition/Regulatory Policies on Tourism in India

• As can be understood easily from the from the situation, there is hardly any policy that talks of competition explicitly regarding tourism sector

• However, at the Central Government level or at the state level, there are several schemes for promoting tourism activities that can be studied for the purpose from competition enhancement perspective

• But, there is no document that talks of a regulatory aspects which is extremely crucial for tourism sector, since un-regulated tourism activities may impact severely on welfare of a larger section of the host community culturally as well as from environment perspective, while it increases welfare of the tourists (consumers) and direct service providers (sellers/producers)

• That’s where a balanced competition policy with appropriate regulatory measures are needed immediately to promote tourism activities that can be win-win for every stakeholders

The Complexities• Till now, there has hardly been any study done on tourism

sector that addresses regulatory aspects or competition aspects for Indian tourism sector

• The only study done in these areas is during mid-90s at IITTM which talks of legislations relating to tourism sector. A portion of the list of legislation involved regarding tourism sector is given in the next slide:

18. The monopolies and restrictive trade practices act, 196919. Forest conservation act, 198020. The road transport corporation act, 195021. The central excise and sale act, 195022. The Indian partnership act, 193223. The urban land ceiling act, 197624. The industries (development and regulation) act, 195125. The explosives act, 188426. The Indian penal code, 186027. The water (prevention and control of pollution) act, 1974 & the air (prevention) and control of pollution act, 198128. The Indian contract act, 187229. Development authority act30. Municipal act31. Ancient monument (site and remains) act, 1951

1. The essential commodities act, 1955,2. Code of criminal procedure, 19733. The airport authority of India act,

19944. The child labour (prohibition and

regulation) act19865. The motor vehicle act, 19886. Foreign exchange regulation act, 19737. Consumer protection act, 19868. The environment (protection) act, 19869. The prevention of cruelty to animals act, 196010. The public liability insurance act, 1991,11. The railways act, 198912. The sarais act, 186713. The immoral traffic (prevention) act, 195614. The employers liability act, 193815. The passport act, 196716. The wild life (protection) act17. The prevention of food adulteration act, 1954

What are Required to be Addressed?

• Identifying key industries/sectors that are directly linked to tourism activities and less with day to day life of common man, for instance:• Hospitality sector• Tour operators• Other tourism service providers etc.

• To look into issues that are pro- or anti-competitive• Policy distortions/conflicts affecting competition (national and/or state level

policies)• Prevailing anti-competitive practices in the tourism sector• Possible impacts of such policies and practices on welfare issues

• For tourists (consumers)• Service providers (producers)• Host community

• Suggested measures towards regulatory and competition framework on selected sectors that are directly linked to tourism activities exclusively