Coronavirus impact: Restaurant body seeks financial bailout package

Severely hit by the coronavirus pandemic, Indian restaurant body, National Restaurants Association of India (NRAI), is seeking a financial bailout package from the Finance Minsity for the food service sector.

NRAI represents the interests of over 5,00,000 restaurants. To mitigate the health risks at restaurants in the wake of Coronavirus, NRAI had issued an advisory to all its members to shut down their dine-in operations till 31st March, 2020. The value of the food service industry in India is estimated at ₹4,23,865 crore.

Thousands of restaurateurs across several cities responded positively to the call and shut down their operations in an effort to contain the spread of virus, despite incurring financial losses in the process. The move was subsequently followed by several State Governments and City Administrations issuing directives to shut down restaurants until 31st March, 2020.

The apex body in its letter to the finance minister, Nirmala Sitharaman said that the industry at unmeasurable losses, prospect of several businesses closing down and most importantly, a scary spectre of job loss to millions in the sector employing more than seven million people. “We also need to protect our businesses from total ruin. It is a matter of our survival. We need some urgent measures so that we live to fight subsequent battles for revival of the restaurant industry.”

NRAI requested relief on the total and immediate deferment of all statutory dues, whether GST, Advance Tax payments, PF, ESIC, customs duties at the Central Government level and State excise and the renewal of liquor licenses, and VAT at the State level for a period of twelve months. “This will leave the businesses with some cash flows to take care of more pressing expenditures like wages, payment to contractual labour and small marginal suppliers such as farmers of vegetables etc,” it said.

Secondly, they requested restoration of Input Tax Credit (ITC) on GST in the sector is critically important. The industry body has been requesting this for the past several months. “As an industry, we are anyways plagued with a very high proportion of fixed operating expenses which makes our business very high-risk upon revenue fluctuations, denial of ITC makes it even worse because it increases several of our key fixed expenses like rent on property, hiring of services etc, by a whopping 18%.”

It also further demanded unemployment pay cover for their employees, especially the ones who are at the lower end of the spectrum, and are covered under ESIC scheme is requested to be facilitated by the Government through the corpus available with the ESIC or any other welfare scheme such as MNREGA. “We don’t want the employees to suffer but at the same time we are not left with enough resources to take care of their needs. We request this partnership with the Govt in the larger interest of the millions of people working in the sector,” it said.

The Indian food service industry is a largely unorganised sector. The industry employees a lot of unskilled workers.

Anurag Katriar, president of NRAI, CEO & Executive Director of deGustibus Hospitality Pvt. Ltd said, “In these times of unprecedented crisis, the fate of 7.30 million employees in F&B sector is our biggest concern. We don’t want them to suffer but unfortunately, we don’t have adequate resources to support them for long.”

The industry body has also asked for total and immediate deferment of all payments for utilities, such as electricity, water, gas etc, supplied either by state, state run corporation, PSU or private entities. One of the biggest expense for the industry is the real estate cost, and its rent.

He further added, “We, as an industry operate with a very high proportion of fixed operating expenses which makes our business very high-risk even in case of moderate revenue fluctuations. Now we are staring at almost zero revenue in the immediate term and at least drop 50% for months thereafter. We are therefore seeking support from everyone in the ecosystem in mitigating these fixed operating costs so that our losses are contained to manageable levels.

The body has further asked for a moratorium of repayment of all types of loans and facilities for a period of twelve months and an immediate suspension on interest charged on term loan or working capital for a period of three months. “The Union and the State Governments are two of the most important stakeholders and we are pinning lots of hope on them to bail us out of this unprecedented crisis. Some of our salient demands is some pay cover for the marginal employees in the sector, deferment of all statutory dues at the central and state level, moratorium on bank loans, restoration of input tax credit on GST for the sector and a general invocation of force majeure clause in view of this global pandemic,” he said.

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