Friday, April 3, 2020

Retail Industry’s Letter to the Government of India

At the outset, we want to express our gratitude to the steps taken by the Government of India to reduce the spread of Covid-19.  While the industry is committed to ensure the safety of billions of people, some challenges are faced in the recent time. Due to mandatory closure of Retail Stores across India, retailers face imminent financial crisis/insolvency in view of the COVID-19. Millions of Jobs in Retail are at risk. Against this backdrop the retail industry seeks support from Government of India to save one of the most important & critical service industry in the country.

1.      Indian Retail is one of the largest employers in the country:
a.      Indian Retail Industry has more than 15 million retailers, both small and big, traditional and modern trade. Retail employs 40-50 million Indians directly of which Modern trade employs more than 6 million Indians equaling to almost 12% of the total Retail consumption of the country.
b.      Retail contributes to approx. 40% of India’s Consumption.

2.      COVID-N19 is deeply affected retail trade:
a.      Most stores, except stores selling Essential Food & Grocery, have been asked to mandatorily shut down across the country. Garments, Saris, Electronics, Mobile Phones, Furniture, Hardware etc almost all stores are closed.
b.      Non-Grocery/Food Retailers are reporting 80% to 100% reduction in sales
c.       Economist predict that the impact on consumption post lifting of lock-down will be lower by upto 25-30% for 6-9 months after lifting of Lock-Down.

3.      Retail Industry will find it difficult to survive current crisis due to:
a.      High fixed cost
 i.    Nearly 60%-70% of costs are fixed costs. This, along with low margins, leaves businesses with limited flexibility. Rents and salaries to employees make a large part of this cost.
ii.      Current situation will lead to downscaling or shutting down operations widely
b.      Large working capital nee
i.      Large capital is invested in working capital as it is a long lead time industry
ii.      As most of this is borrowed capital, retailers are already finding themselves in deep liquidity crisis.

4.      Closure of retail businesses will affect large sections of society:
a.      Retail is a people intensive industry. 90% of Retail employees work at the stores, earning minimum wages and living a hand to mouth existence.
b.      With extended closures, these employees are at risk of being retrenched.

5.      It will also impact jobs and income for an even larger unorganized ecosystem:
a.      With close down and projected slow down of retail consumption, the entire supply chain will be under stress.
b.      Distributors, C&F, Manufacturers, Raw Material suppliers, the entire value chain will have order cancellation and loss of income.

In light of the above, we seek relief to save the retail industry and commerce of India:

1.      Special support required from RBI/Banking industry
a.      Due to high inventory positions and low demand that will continue beyond the lock-down period the industry will need longer support to survive. Banks must be mandated to extend the moratorium to 270 days for payment of installments & interest of term loans, short-term loans, corporate loans, securitized loans, Bonds, mortgages, Debentures, general purpose loans effective from 15th March 2020 to 31st December 2020.
b.      Moratorium of 270 days for all Interest payments of Cash Credit Lines up to 31st December 2020.
c.       Non-fund sources such as bill discounting, letters of credit must be included in the moratorium
d.      Banks must MANDATORILY provide 25% additional Working Capital credit lines, to tide over the shortfall due to no-revenues. This is critical for companies to pay their salaries and wages on time.
e.      Additional Working Capital Credit lines to be made available till 31st December 2020. Additional working capital credit lines to be paid back in 3 installments between 1st Jan 2021 and 31st March 2021.
f.        RBI should recommend SEBI to relax share pricing norms for QIP and preferential allotment to help companies raise capital. Significant relaxation is also required for rights issue.

2.      Interest Subsidy & Default Relief
a.      Interest Rates on all loans to Retail Industry to be subsidized/reduced by 400 basis point from 15th March 2020 to 31st December 2020.
b.      Reserve Bank of India is requested to relax NPA reporting guidelines till 31st March 2021.

3.      Relaxation in Statutory Payments / Accounts
a.      Increase the period by 90 days for depositing all statutory dues, like Income Tax, Advance Tax, GST, ESIC, PF etc. for payments due up to 31st July 2020.
b.      Extend the mandatory reporting/statutory filing days by 60 days to 31st July 2020 for financial accounts for the year 2019-20.

4.      Employment Support:
a.      Industry needs fiscal Support to ensure no job losses in the Retail Trade. Towards this, we request a 4 month (March 20 to June 20) job support subsidy at 50% of the Minimum Wages as cash support to encourage retailers to continue the employment of staff during the extended lockdown and recovery period after the lockdown is lifted.

We do hope that the Government of India will give adequate consideration to the concerns as highlighted in this representation in order to overcome probable adversities due to corona outbreak which may cause unprecedented hardship to the retail industry.

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