No room here

One can have too much of a good thing, as the tourism industry is discovering just as visitors from overseas have begun dropping by in increasing numbers.

Thanks to a shortage of capacity "" tour operators put it at between 25 and 30 per cent for hotel rooms and airline seats "" several hotels/airlines have started bouncing customers who have confirmed bookings through their travel agents.

As a result, concerned travel operators have begun shooting off messages to the hotels federation.

And, as this newspaper has been reporting over the past few days, airlines are offloading passengers on sectors where there is a great shortage of seats, despite the doubling of capacity by Air-India on some sectors.

Traffic into India has not seen such a boom since the heady days of the mid-1990s, and the industry has been caught napping.

Increasing capacity is not easy in the short-run, though it is quicker for airlines than for hotels.

To its credit, the government has moved quite rapidly by liberalising the rules for operating flights to the Asean area, while the charter policy has been made more flexible. Tour operators expect the number of charters to Goa, for instance, to double in the current year.

Some measures have reduced the cost of air travel (taxes on aviation have been slashed), but paradoxically this may have contributed to the situation of excess demand.

The government has also abolished expenditure taxes on hotels as well as the service tax, so Indian hotels look less expensive in international comparisons "" and this too may have contributed to the surge in demand.

This environment of new confidence provides an opportunity to push for more changes in policy so that tourism ceases to be a Cinderella activity.

As far as aviation is concerned, while the government has announced an open-skies policy with the Asean, privately-owned domestic airlines have only now got permission to fly to Colombo.

Getting them to fly to Asean destinations too could be a while in coming. One issue that continues to hang fire is the expansion of the Indian Airlines and Air-India fleets.

As for hotels and the rest of the tourism infrastructure, a Crisil study has found that the effective level of tourism taxes in India is 21 per cent, compared to 1 per cent in Hong Kong and 5 per cent in Malaysia.

While these taxes have been slashed now, they are still high. According to Crisil, lowering the effective tax from 21 per cent to 15 per cent would create 3.9 lakh additional jobs, while lowering it to 10 per cent would create 6.7 lakh additional jobs.