The Subsidy Most Resort Promoters in MP Don't Budget For
A promoter building an 18-room resort near Satpura recently asked me whether the state gives "anything" for tourism projects. He had already finalised his design and was about to approach his bank.
He was eligible for a capital subsidy running into crores — and one design decision he had already made was about to cost him a large part of it.
Madhya Pradesh notified its Tourism Policy 2025 by order of the Tourism Department, Mantralaya, Bhopal — order no. F TD/2/0002/2025/33 dated 18.02.2025. It replaces the Tourism Policy 2016 (as amended in 2019), which stands repealed from the date the new policy takes effect, though units that were already eligible under the old policy retain their benefits under its procedures.
This article sets out what the policy provides, based entirely on the notified text.
What Counts as a Tourism Project
Clause 5 lists 25 eligible activities. The breadth is the point — this is not a hotels-only policy:
Hotels (star, deluxe and standard), health farms and resorts, health and wellness resorts, resorts and camping sites and permanent tenting units, motels and wayside amenities, heritage hotels, convention centres (MICE), museums, aquariums and theme parks, bed and breakfast and homestay units, golf courses, ropeways, water parks and water sports, amusement parks, caravan tourism, cruise tourism, house boats, film studios and film-making infrastructure, adventure sports, sound and light or laser shows, sea planes, amphibian tourist vehicles, aero sports and aero sports training centres, heritage cafeterias and motels, wildlife resorts, and gram stay or farm stay.
Clause 5.25 allows the Tourism Department to notify further activities, so the list is not closed.
The Capital Subsidy Table
Under clause 6, eligible tourism projects established and operationalised during the policy period receive capital investment subsidy on fixed capital investment as follows:
Clause Category Minimum capital expenditure approved by department Subsidy Maximum ceiling Key condition
6.1 Heritage hotel under private ownership ₹300 lakh 15% ₹200 lakh
6.2 Heritage hotel on heritage assets leased from Tourism Department ₹1,000 lakh 15% ₹500 lakh
6.3 New Deluxe / Three Star or higher hotel and resort ₹1,000 lakh 15% ₹500 lakh Minimum 50 lettable air-conditioned rooms
6.4 New Standard category hotel / mini resort ₹200 lakh 15% ₹50 lakh Minimum 25 lettable AC rooms for hotel, 10 for mini resort
6.5 New resort and wellness centre (including Ayurvedic, yoga, naturopathy) ₹500 lakh 15% ₹200 lakh Unit as per Government of India / State definition and standards
6.6 Expansion of established star / deluxe / standard hotel, resort or heritage hotel ₹100 lakh 15% ₹500 lakh Staying capacity must increase by at least 50%
6.7 Convention centre or convention centre cum hotel under MICE, 500+ seats ₹2,000 lakh 15% ₹1,000 lakh Main convention hall alone must seat 500 or more
6.8 Film studio and film-making infrastructure; museum, aquarium, theme park ₹100 lakh 15% ₹500 lakh
6.9 Adventure/water tourism, water sports, cruise and house boats, navigation infrastructure, amusement and water parks, light and sound shows, camping equipment and tents ₹05 lakh 15% ₹300 lakh Covers permanent facility — platform, jetty, equipment, parking, electricity, water supply, toilets
6.10 Wayside amenity centre on greenfield/franchisee model ₹25 lakh 15% ₹50 lakh At locations approved under the Wayside Amenities Policy 2016
6.11 Basic infrastructure (power, water, road connectivity, sewage) on land or heritage assets leased from Tourism Department ₹50 lakh 25% ₹300 lakh
6.12 Ropeway infrastructure in inaccessible tourist sites and forest tourism areas ₹100 lakh 40% ₹500 lakh
6.13 Sea plane, amphibian tourist vehicle, aero sports and aero sports training centre/academy ₹100 lakh 25% ₹1,000 lakh Subsidy for aero sports centres released one year after commencement of operations; for sea plane and amphibian vehicles, 40% on commencement and 20% in each of the second, third and fourth years
Note the two outliers. Ropeways get 40% — the highest rate in the policy. Basic infrastructure on departmental land, aero sports and sea planes get 25%. Everything else sits at 15%.
Wildlife Resorts: A Separate and Better Table
Clause 6.15 provides a distinct schedule for wildlife resorts established within the boundaries of notified national parks, tiger reserves and sanctuaries — at 20%, higher than the general 15%:
Category Forest area Minimum capital expenditure Minimum rooms Subsidy Maximum ceiling
A Kanha, Bandhavgarh, Pench Tiger Reserve, Ratapani Tiger Reserve and adjacent national parks and sanctuaries ₹5.00 crore 10 20% ₹1.00 crore
B Panna and Satpura Tiger Reserve and adjacent national parks and sanctuaries ₹3.00 crore 07 20% ₹2.00 crore
C Sanjay Dubri Tiger Reserve, Kuno National Park, Veerangana Durgavati Tiger Reserve, Madhav National Park, Gandhi Sagar and other protected areas, and all other national parks and sanctuaries of the state except those in categories A and B. New entry routes (safari gates) of category A and B forest areas are treated as category C ₹1.00 crore 05 20% ₹3.00 crore
The structure is deliberately inverted: the less-developed the circuit, the lower the entry threshold and the higher the ceiling. A promoter in a category C area needs only ₹1 crore of approved capital expenditure and five rooms, and can draw up to ₹3 crore.
The Extra 5% Provisions
Three separate clauses add 5% on top:
Clause 6.16 — remote and difficult new areas. Projects in remote or difficult new locations get an additional 5% capital subsidy. More importantly, in these areas the minimum capital investment threshold is reduced by 50%, the minimum number of rooms is halved, and — the provision worth reading twice — the maximum ceiling on subsidy does not apply at all. The Tourism Department is empowered to define which areas qualify.
Clause 6.21 — SC/ST entrepreneurs. Tourism projects established under 100% ownership of SC or ST category entrepreneurs receive an additional 5% capital investment subsidy.
Clause 6.29 — electric cruise. An additional 5% capital subsidy on approved project expenditure, to encourage electric cruise vessels.
Large, Mega and Ultra-Mega Projects
Clause 6.19 provides an alternative route — Investment Promotion Assistance — for bigger projects:
Category Minimum capital expenditure Minimum employment (MP residents) Assistance Maximum ceiling Year 1 Year 2 Year 3 Year 4
Large ₹10 crore or more 50 30% ₹15 crore 10% 10% 5% 5%
Mega ₹50 crore or more 100 30% ₹30 crore 10% 10% 5% 5%
Ultra-mega ₹100 crore or more 200 30% ₹90 crore 10% 10% 5% 5%
For heritage hotels, both the minimum investment and the minimum employment requirement are 50% of the above.
The critical restriction: a unit claiming Investment Promotion Assistance is not entitled to capital subsidy in any other category under the policy. This is an either/or election, and for a project sitting near ₹10 crore it needs to be worked out on numbers before the application is filed — 30% disbursed over four years against 15% is not automatically the better deal once you discount for timing and the employment condition.
Conditions That Decide Eligibility
Employment — clause 6.14. New Deluxe and Standard category hotels must give 70% of jobs to residents of Madhya Pradesh to be eligible for capital subsidy at all.
Continuous operation — clause 6.18. A unit receiving subsidy must remain continuously operational for 3 years from the date of receiving it, and must file a self-declaration by 15 April each year as proof. If it closes earlier, subsidy is clawed back: 80% if it shuts within one year, 60% within two years, 50% within three years.
Application timing — clause 6.18(ii). The application for capital subsidy must be made within one year from the date the unit commences operation.
Investment window — clause 6.18(iii). Only investment made within a maximum of three years before the unit commences is counted for subsidy calculation.
Renovation and upgradation — clause 6.17. An existing Standard hotel or mini resort upgraded to a Deluxe hotel (minimum 50 rooms) or resort (minimum 20 rooms) qualifies for the relevant new-unit category, requiring minimum fresh capital investment of ₹10 crore. An existing Deluxe unit upgraded to 4-star or higher (minimum 75 rooms) or a resort (minimum 25 rooms) requires minimum fresh investment of ₹25 crore. Only investment made after the policy came into force counts.
Beyond Capital Subsidy
Responsible tourism — clause 6.20. Certification from the Eco Tourism Society of India is reimbursed at 100% of cost, up to ₹1 lakh. Pollution control mechanisms set up per Pollution Control Board guidelines get 25% subsidy up to ₹50 lakh, provided the investment exceeds ₹10 lakh.
Stamp duty and registration — clause 8. For heritage tourism projects on private land, there is 100% exemption from registration and stamp duty on the built-up area of the heritage building and up to one hectare of adjoining land. Beyond one hectare, normal duty applies. The exemption is given as reimbursement after the hotel commences. On government land and departmental assets leased for tourism projects, no stamp duty or registration fee is payable at all.
Land and heritage assets — clause 9. Government land and heritage assets are transferred free of cost to the Tourism Department and allotted to investors on 90-year or 30-year lease, or licence for 5 to 30 years, through open tender. Reserved price is ₹10 lakh per hectare within municipal corporation and municipality limits and planning areas, ₹5 lakh per hectare elsewhere, and ₹1 lakh for heritage buildings with appurtenant land.
Parity with industry — clause 19. Tourism projects get electricity at industrial rates, diversion fee at industrial rates, water from natural sources at industrial rates, and property tax and development charges levied by local bodies at industrial rates. Land reserved for amenities in industrial areas developed by the commerce and industry, MSME and IT departments can be allotted for tourism units at industrial rates.
Where This Goes Wrong in Practice
Room count decided before the subsidy clause is read. The single most expensive mistake. A resort designed with 48 rooms falls short of the 50 required under clause 6.3 and drops to a category with a far lower ceiling. A wildlife resort with 6 rooms in a category B area misses the 7-room threshold entirely. These are design decisions, and they are cheap to change on paper and impossible to change after construction.
Missing the one-year application window. The unit commences, the promoter turns to operations, and the clause 6.18(ii) deadline passes. There is no cure for this.
Capital expenditure incurred more than three years before commencement. On a long-gestation resort — and 24 to 36 month construction periods are normal — early expenditure can fall outside the three-year window under clause 6.18(iii). This has to be planned from the start, not discovered at claim stage.
Treating the subsidy as a source of funds in the project report. It is not available at construction stage and cannot appear in the means of finance. Your term loan and margin must fund 100% of the project. The subsidy improves your returns; it does not reduce what you need to raise.
Choosing Investment Promotion Assistance without doing the arithmetic. For a project just above ₹10 crore, 30% over four years with a 50-employee condition may or may not beat a straightforward 15%. Run both.
In Summary
MP Tourism Policy 2025 provides capital subsidy of 15% across most tourism categories, 20% for wildlife resorts inside notified forest areas, 25% for basic infrastructure on departmental land and for aero sports and sea planes, and 40% for ropeways — with an additional 5% for remote areas, SC/ST entrepreneurs and electric cruise, and with ceilings removed entirely in remote and difficult new locations.
For anyone planning a resort, homestay, adventure tourism unit or wayside amenity in Madhya Pradesh, the decisions that determine how much of this you actually receive — room count, category, phasing of capital expenditure, and the timing of your application — are all made at the drawing board stage.
Which is exactly why the project report should be prepared before the design is frozen, not after.
Disclaimer: This article is based on the Madhya Pradesh Tourism Policy 2025, issued by the Tourism Department, Government of Madhya Pradesh, vide order no. F TD/2/0002/2025/33 dated 18.02.2025. It is for general information and educational purposes and does not constitute legal or financial advice. The Tourism Department is empowered under the policy to determine guidelines, procedures and conditions and to amend them from time to time. Readers should verify current provisions with the Madhya Pradesh Tourism Board or a qualified professional before taking any financial decision.
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