VIDARBHA’S POWER WOES: I X ORANGE CITY: Caught between hospitality boom

 

 

The strategically located Orange City is witnessing a surge in investments in the hospitality sector, with over a dozen international and domestic players building world-class properties here. Anticipating a significant boost in tourism and business travel, they are pouring in investment. Upscale brands like Hilton’s DoubleTree and IHCL’s Ginger are leading the charge while a slew of domestic players also are building new properties to collectively increase the city’s existing hotel room capacity from 1,500 to 3,000 in the next two years. Everything looks rosy, but... This but... opens two questions that threaten their ambitions. Will rising power rates dampen their enthusiasm? Will it restrict the sector’s growth in the region? According to Tejinder Singh Renu, President of the Nagpur Residential Hotels Association (NRHA), “Yes! It will. It is a big cause of concern for all of us. High electricity tariff poses a significant challenge to hoteliers’ competitiveness in the region and this will certainly discourage the investors.” Renu termed the current power tariff for consumers in commercial category as irrational and said, “No business enterprise can survive in today’s world of cut-throat competition if power tariff soars so high. The power-intensive hospitality sector can never be an exception.”

 

For the past few years, there has been consistent hike in power tariff giving sleepless nights to consumers cutting across various categories. Residential and industrial category consumers are bearing the brunt of inflated power charges but the commercial consumers, who are being charged the highest, are the worst-affected ones. On an average, hoteliers here pay more than Rs 20/unit for power which is significantly higher than what industrial category consumers pay on an average. In contrast, the hoteliers in adjoining State of Chhattisgarh pay close to Rs 7/unit for power. It goes without saying as to which State offers better conducive atmosphere for hospitality sector to grow. Electricity costs constitute a substantial portion of hotels’ operational expenses due to high energy consumption for lighting, HVAC (heating, ventilation, and air conditioning) systems, and other amenities. Luxury features like swimming pools and spas further increase energy consumption. Interestingly, it consumes considerable power to maintain ambient temperature in hotels. Even if the occupancy is not up to the mark, the hoteliers have to maintain temperature at pleasant levels in common areas, lobbies, restaurants, etc. Sanjay Gupta, Owner of Hotel Ashok, said that energy expenses constituted 22-25 per cent of total operational cost of his hotel. “It is a very costly affair for all of us here. But, hotels in Madhya Pradesh and Chhattisgarh pay very less for power. Due to this disparity, we are losing business,” he rued. Gupta noted a rising trend of destination weddings in cities such as Jabalpur, Indore, and Raipur.

 

“Hotels in these cities offer competitive destination wedding packages due to lower energy costs in respective States. This has drawn many couples from Nagpur to choose Jabalpur, Indore, and Raipur as their wedding destinations,” he explained. Besides irrational power charges for hotel sector, Jasbir Singh Arora, Chairman and Managing Director of Hotel Centre Point, highlighted the ‘discouraging’ policies of power distribution companies for captive solar power generators. “The power distribution company records 5 per cent less generation units in SCADA and further deducts approximately 10.50 per cent units from the total power generated by the generators (hotels in this case) as distribution and transmission losses. In addition, the company again deducts 7-8 per cent from the net injected units and does not give benefit of full injected units mentioned in the electricity bill for reasons best known to the distribution company bosses,” Arora explained.

 

To mitigate costs, hotels have adopted energy-efficient measures like LED lighting, energy-efficient HVAC systems, and solar power generation. However, solar power’s effectiveness is limited by Time of Day (TOD) tariff restrictions during peak consumption hours. For quite a long time, the hoteliers were urging the Government to give industry status to hospitality sector. When the pandemic dealt a severe blow to the industry, Maharashtra Government granted hotels ‘Industrial Status’ and promised benefits like industrial tariff electricity. Despite obtaining ‘Industrial Certificates’ from the Department of Tourism, these benefits have yet to materialise. Apart from this, the recently announced Maharashtra Tourism Policy is being seen as a booster for the industry and Vidarbha region. However, its successful implementation hinges on the timely issuance of necessary Government Resolutions from various departments. The burgeoning hotel industry presents exciting opportunities for Nagpur to emerge as a major hospitality destination in India. However, the rising power tariff along with delayed implementation of policies remain significant hurdles.

 

The hoteliers want the policymakers to address these issues to ensure the industry’s sustainable growth. Power at subsidised rates to the commercial category consumers may attract more investment in the hospitality sector and create new jobs for youths. Sector-specific schemes can also safeguard the interests of hoteliers. For instance, the Government can introduce time-specific benefits to attract investment in the sector and offer incentives to those adopting solar power. The hoteliers can be allowed to buy electricity directly from power generators instead of distribution companies. But, these are all expectations. High power tariff is the reality. Due to this pinching reality, Nagpur, which also enjoys the status of being the Second Capital of Maharashtra, is caught between hospitality boom and rising energy costs. Will this cost the region dearly when it comes to development, growth, employment generation? Only time may provide the answer. (To be continued)