1. Introduction
The Government of Madhya Pradesh, through its Department of Tourism, has introduced the Capital Subsidy for Establishment of Hotels/Resorts to promote private investment in tourism infrastructure. The scheme is designed to encourage the development of new hotels and resorts as well as the upgradation of existing properties into higher categories such as Deluxe and Star-rated establishments.
This initiative aligns with the broader objective of positioning Madhya Pradesh as a preferred tourism destination by enhancing the availability of quality accommodation and modern hospitality facilities.
2. Rationale Behind the Scheme
The hospitality sector acts as a multiplier for economic development. The introduction of subsidy schemes is driven by the following key considerations:
- Tourism Development: Availability of quality hotels directly impacts tourist inflow
- Employment Generation: Hospitality projects create both direct and indirect employment
- Regional Development: Encourages investments in Tier-2 and remote locations
- Infrastructure Growth: Supports the creation of world-class tourism infrastructure
By reducing capital investment burden, the government incentivizes entrepreneurs to undertake large-scale hospitality projects.
3. Scope of the Scheme for Hotels/Resorts
The scheme is applicable for:
A. New Hotel / Resort Projects
Eligible for subsidy if they meet minimum infrastructure requirements:
- Standard Hotels: Minimum 25 air-conditioned lettable rooms
- Mini Resorts: Minimum 10 rooms
- Deluxe / Star Hotels: Minimum 50 air-conditioned rooms
B. Upgradation of Existing Properties
- Existing hotels (minimum 50 rooms) and mini resorts (minimum 20 rooms) upgrading to Deluxe or higher category
C. Expansion Projects
- Expansion of existing hospitality units, provided such expansion is initiated after the notified scheme date
4. Investment Criteria and Subsidy Structure
The subsidy is linked with the level of investment in the project. The structure is as follows:
| Subsidy Scheme | Investment (₹ in Lakhs) | Subsidy (%) | Maximum Subsidy (₹ in Lakhs) | Other Condition |
| Capital Investment subsidy for establishment of new Hotel/Mini Resort of Standard category | Minimum 200 | 15% | 50 | Minimum air-conditioned 25, lettable rooms for hotel and 10 rooms for resorts should be available. |
| Capital Investment subsidy to establish a new Deluxe / Three Star or Higher category new Hotel and Resort | Minimum 1000 | 15% | 500 | Minimum 50, lettable air-conditioned rooms should be available. |
| Capital subsidy for Heritage hotel under proprietorship | Minimum 300 | 15% | 200 | |
| Capital Investment subsidy for expansion of established Star/ Deluxe / Standard Hotel/Resort Heritage Hotel | Minimum 100 | 15% | 500 | Expansion in terms of minimum 50% increase in staying capacity will only be eligible for subsidy |
| Category of Project | Minimum Capital Expenditure, as approved by the department | Minimum Employment (for Residents of M.P.) | Percentage of Investment Promotion Assistance on capital investment made by the unit | Maximum Ceiling of Investment Promotion Assistance (Rs. in Crore) | Year wise percentage of Disbursement of Investment Promotion Assistance Amount | |||
| First Year | Second Year | Third Year | Fourth Year | |||||
| Large project | ₹10.00 crore or more | 50 | 30% | 15 | 10% | 10% | 5% | 5% |
| Mega project | ₹50.00 crore or more | 100 | 30% | 30 | 10% | 10% | 5% | 5% |
| Ultra Mega project | ₹100.00 crore or more | 200 | 30% | 90 | 10% | 10% | 5% | 5% |
The subsidy percentage increases with higher investment levels, thereby encouraging large-scale and high-quality projects.
Additional subsidies are also available for resorts in Forest Area.
5. Special Incentives for Priority Categories
To promote inclusive development, additional benefits are provided for:
- Projects in Difficult/Backward Areas
- SC/ST Category Entrepreneurs
Key Benefit:
- Additional Subsidy of 5% of project cost.
This ensures balanced regional growth and promotes entrepreneurship among underrepresented groups.
6. Project Cost – Components and Conditions
Eligible Components of Project Cost
- Civil construction (hotel building, guest facilities)
- Internal Roads, Entrance Gate, Swimming Pool
- Store, Kitchen
- Plumbing Facilities
- Boiler room and chimney
- DG Set, Power Station
- Telecommunications tower
- Fire system
- Security deposit & charges for various registrations
- Play area
- Technical know how & consultancy charges
- Plant and machinery
- Essential infrastructure required for operations Etc.
7. Ineligible Cost Components
The following costs are generally excluded from subsidy calculation:
- Cost of land and site development & landscaping
- Working capital & Capitalised Interest
- Furniture & Fixtures, Crockery
- Split AC
- Consultancy fees, taxes, and pre-operative expenses
- Transport vehicles (except specialized refrigerated units)
- Second-hand or refurbished machinery Etc.
The final decision regarding eligibility of cost components rests with the Project Approval Committee.
8. Subsidy Disbursement Mechanism
The subsidy is released in following phases, ensuring actual project implementation:
- For Hotel/Resort projects below Rs. 10 Crores – In single installment
- For Hotel/Resort projects below Rs. 10 Crores – In Four installment vis a vis 10%-10%-5%-5% in four years.
- After utilization of 50% of bank loan and promoter contribution
- Final Installment
- After completion of the project and full utilization of funds
This phased approach ensures proper monitoring and utilization of government support.
9. Timeline and Applicability
- It will be mandatory to run the units for atleast three years from the date of availing subsidy and submit a certificate every year. Otherwise subsidy amount will have to be returned as per the policy conditions.
- Application for subsidy will have to be submitted within 1 year.
- Investment made prior to three years from the date of operations shall only be considered.
Timely application and compliance with procedural requirements are critical for availing benefits.
10. Strategic Advantages for Investors
Investing under this scheme offers multiple advantages:
- Significant reduction in capital expenditure
- Improved project feasibility and bankability
- Faster payback period
- Opportunity to develop premium hospitality assets
- Alignment with growing tourism demand
11. Other projects covered under MP Tourism Policy 2025
- Water Tourism/Adventure Tourism
- Convention Centers
- Film Studio
- Side Amenities
- Ropeway
- Sea Plane
- Hot air balloons
- Golf Tourism
- Electric Cruises
12. Conclusion
The Madhya Pradesh Tourism Policy 2025 represents a well-structured policy initiative aimed at transforming the state’s tourism landscape. By providing substantial financial support and encouraging private participation, the scheme creates a win-win scenario for both investors and the economy.
For entrepreneurs and investors, understanding the nuances of eligibility, cost structure, and compliance requirements is essential to maximize benefits and ensure successful project execution.
For optimal benefit, investors should:
- Structure project cost carefully to maximize eligible components at the time of ideation stage of the project.
- Align financing with subsidy release stages
- Ensure strict documentation and compliance
- Explore dovetailing opportunities with other schemes
The author can be reached at +91-9407557572 & kartik@ackassociates.com.
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