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Confusion prevails over new govt regulations on hotels

LiveMint logoLiveMint 12-05-2017 Soumya Gupta

Mumbai: New regulations that the government has been formulating for hotels and restaurants have made owners of smaller establishments resent “interference”, and left them at a loss over how to comply with rules that seem impractical.

In January, the ministry of consumer affairs asked restaurants to drop mandatory service charges, although it did not issue any official order or press release. However, in a tweet on 21 April, consumer affairs minister Ram Vilas Paswan declared that service charge was now “completely voluntary”.

Some states have started enforcing Paswan’s orders. The Karnataka government is undertaking a drive to ensure hotels do not add a service charge, Mint reported on 25 April.

The move, criticized by restaurant and hotel owners across the country is, however, seen to have a greater impact on high-end restaurants and much less on the smaller ones.

“We do not levy a service charge, we never have. A lot of smaller restaurants do not have this charge,” said Imran A. Daduji, who runs the Shamia Restaurant at Rizvi Nagar in Santa Cruz, Mumbai.

There is also a major variation in where earnings from service charge end up, said Pradeep Jain, FSSAI chairperson of the Indian Hotel and Restaurant Association.

“Some restaurants are taking service charge, some are not,” he said. “Some share it with staff, some do not, and some share a part of it.”

Often small, traditional restaurants, such as Mumbai’s “lunch homes”, which cater to office-goers, do not add a service charge. Besides, the legal status of the ministry’s orders is not clear to many restaurant owners.

“The ministry has issued guidelines on service charge. However, these are guidelines, and they are not mandatory,” an official from the department of consumer affairs said, who did not wish to be named.

In a circular issued by the department of consumer affairs dated 21 April, 2017, the ministry asked hotels and restaurants to stop adding a service charge without the “express consent” of consumers.

The ministry argued that these businesses usually include cost of service in their prices. The circular suggested that hotels/restaurants leave “service charge” blank in receipts, allowing customers to fill it in if they like.

“The (removal of) service charge is an advisory and we have asked a legal team to look into this,” said Adarsh Shetty, president of the Indian Hotel and Restaurant Association. “We will study this advisory and act according to the legal team’s suggestions.”

“Service charge is not levied in regular, stand-alone restaurants anyway,” Shetty said, adding it is charged only in high-end restaurants to maintain service levels.

Restaurant and hotel proprietors are also apprehensive about minister Paswan’s new proposal to regulate the portions of food offered.

“These people bring some idea from outside the country, direct from London or America,” Daduji said, adding that “the government has brought so much regulation to restaurants”. Most restaurant owners agree that it would be hard for food portion regulations to break through decades of established portion norms. “In general, when you order 1 plate of idlis in south India, they will serve you three idlis,” Jain said. “But in Mumbai, you will get two. Some things are going on for years together.”

Restaurants anticipate it would be challenging for them to make changes to dishes that they are known for.

“For certain items like gravy dishes, regulating portions is possible,” a Mumbai-based restaurant owner said, requesting anonymity. “For some things like a fish fry, our customer is expecting a complete slice of fish. To change that portion will be difficult. Of course, with every kind of regulation, there is always someone objecting. Then things settle down.”

It is not clear whether the government will issue an order to regulate food portions. Restaurant owners said no authorities have been in touch with them.

In an interview with The Hindu BusinessLine on 24 April, Paswan said his ministry was not making portion control “mandatory”.

According to Shetty, the consumer affairs ministry has taken the proposal back. “Honorable minister Paswan had said the media misinterpreted what he said,” he said, without elaborating further.

Most restaurant owners resent what they see as intrusion into their business.

“The government should refrain from all this,” Jain said. “We are not a regulated business with controlled price. On one hand, we are going with free economy, then this. Let the market decide!”

“Food portion control is totally non-practical,” Shetty said. “It is also not necessary. People take everything left over home now.”

“The entire situation on service charge is extremely confusing,” said Sanditi Gargya, a Mumbai-based fashion designer who walked out of an outlet of a Mexican restaurant chain because they asked her to confirm whether she was willing to pay a 10% service charge before taking her order.

“It’s not clear if removing service charge is an order or a suggestion, so I am not sure what stand I can take in a restaurant if they insist on a service charge,” said Gargya.

She said a lot of restaurants have food portions or calorie counts written on their menus now. “Or you just ask,” she added. “For instance, a plate of malai tikka, we ask how many pieces we get in a half plate or in a full plate. But I am not sure how food portions will be regularized everywhere without also fixing prices. Won’t that let restaurants charge whatever they want?” asks Gargya.

Restaurant owners say this is not the first time that the government has tried to regulate food portions or prices. The Indira Gandhi government during ‘Emergency’ in 1975-77 had enforced a single price for common food items nationally.

“Even back then, there were rules like only 270 grams of rice can be served at something like 80 paise,” Daduji said. “But people always worked around it. They (restaurant owners) would still offer more rice.”

“During Emergency, there was a major hue and cry on price rise,” Jain said. “The government had set certain standards, like tea that had to be sold in specific quantity and price only.” Other food items that were regulated at the time included masala dosa, idlis, and medu vada, Jain added.

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