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Restaurants Stare at Massive Losses & Layoffs, Will Govt Step In?

Here’s the fallout of the coronavirus crisis on the food services sector, which is valued at Rs 4.2 lakh crore.

Updated
India
5 min read
Here is the fallout of the ongoing coronavirus pandemic on the food services sector.
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The value of the food services industry in India is estimated to be over Rs 4.2 lakh crore, according to a report by a leading industry body. And now, as coronavirus spreads across different parts of India, the industry is reeling under the economic impact of the health crisis which has forced thousands of restaurants across the country to shut down or witness a sharp drop in footfall even if they continue operations.

From restaurant owners facing unprecedented loss and workers being worried about impending layoffs, to an urgent appeal to the Modi government by industry bodies seeking a stimulus package, here is the fallout of the ongoing pandemic on the food services sector.

Conflicting Advisories by Different Industry Bodies

On Tuesday, 17 March, the National Restaurant Association of India (NRAI) advised all its member restaurants to shut their eateries, bars, pubs, and cafes “till 31 March 2020 or till such a time when there are no new cases reported for a few days.” NRAI says it has around 1,200 members across 20 states.

“We have taken a decision of advising members to close all restaurants across India because we would otherwise be endangering a lot of employees.”
Anurag Katriar, NRAI President

But another top industry body, Federation of Hotel & Restaurant Associations of India (FHRAI) issued an advisory the following day, 18 March, saying it did not advocate for restaurant shutdowns in places where there are no government directives asking for closure.

“The advisory does not advocate the shutting down of restaurants unless there is any specific directive that may be received from the local authorities in this regard or if any establishment(s) voluntarily wishes to do so.”
FHRAI statement
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Hundreds of Restaurants Shut Down Across India

  • While NRAI’s advisory is not binding on its member restaurants or other establishments, in certain places like Delhi, government authorities have issued orders to shut down restaurants. On 19 March, Delhi Chief Minister Arvind Kejriwal announced that all restaurants will be closed in the national capital. However, they will be allowed to continue delivery services.
  • In places where malls have been directed to close down, like in Mumbai, all the eateries inside those malls have also naturally had to shut shop for the time being.
  • Several other restaurants and cafes in Mumbai have voluntarily closed down their sit-and-dine facilities, but are still receiving online orders. For example, the following is an announcement to that same effect by Candies in Bandra, one of the biggest and most popular cafes in the city.
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  • In Gurugram, the district administration on Wednesday issued a notification ordering the closure of all shopping malls, lounges and bars till 31 March. Restaurants with facilities to dine-in will only be allowed to operate at a maximum capacity of 50 seats.
  • From Saturday, 21 March, all city municipal corporations across Karnataka will prohibit restaurants and cafes from serving food in-house, Chief Minister B S Yediyurappa announced on Friday. Only take away services will be permitted. All pubs and bars will remain closed as well.
  • In Odisha, all stand-alone restaurants, bars, coffee shops and canteens were asked to close down immediately, through a state government order on 20 March.
  • In Anantnag, Jammu and Kashmir, the local administration sealed several restaurants on 18 March for staying open despite closure orders that were issued in the wake of the declaration of coronavirus as an epidemic in the Union Territory.
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But even in cities where government authorities have not (yet) asked restaurants to put down their shutters, most establishments are witnessing a rapid decrease in footfall, as people steer clear of mass gatherings and practice social distancing.

For example, the owners of a popular rooftop lounge in South Kolkata estimate that just over the last few days, there has been a 30 percent dip in customer counts. That might well be a conservative estimate, and with Kolkata recording its first positive coronavirus case, people frequenting public places like restaurants is likely to go down further.

Nationwide, the situation for restaurant owners is extremely bleak, both now and in the near future.

“Our members have reported cancellations reaching a critical stage of up to 90 percent. Forward bookings are also negligible because of the uncertainty in containing the spread of the disease globally. Hotels and restaurants are facing a catastrophic situation with revenues plunging drastically. From MICE (an industry acronym for Meetings, Incentives, Conferences and Exhibitions), to wedding tourism and other kinds of celebrations, all have been negatively impacted.”
Gurbaxish Singh Kohli, Vice President of FHRAI
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Massive Impact on Employment

The food services industry in India provides employment to an estimated 7.3 million people.

Being a highly labour-intensive industry, the plunging fortunes across the sector is expected to make a further dent on the jobs crisis in the country.

According to industry insiders, the scale of the economic impact due to the ongoing health crisis will likely result in job losses of up to a staggering 15 to 20 percent of the total workforce, stated a report in the Economic Times. Depending on how much the crisis escalates, the impact could be even higher.

In order to keep the industry afloat and minimise these losses, pan-India restaurant associations are calling upon the Modi government to take immediate measures and cushion the blow that the hospitality sector is already experiencing.

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What Are Restaurant Associations Demanding?

A statement by NRAI to The Quint said restaurant associations are currently seeking immediate relief in the form of certain steps to be taken by the central government.

NRAI is requesting the government for the following:

  • Moratorium for upcoming statutory dues
  • Delay in utility bill payments
  • Holiday/temporary stoppage on EMI payments and interest
  • Employee unemployment pay cover
  • Freeze on rental dues without breaking contract
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Federation of Hotel & Restaurant Associations of India (FHRAI) is also seeking government assistance and has written to Prime Minister Modi, requesting a stimulus package from the Centre in order to tackle the economic woes currently facing the hospitality sector.

Through a representation submitted to the Prime Minister’s Office, FHRAI has requested the following:

  • Complete GST holiday for six months from both state and central governments
  • Deferment for fiscal statutory compliance deadlines such as payment of direct and indirect taxes
  • Deferment for repayment of loans, bank EMIs, etc for a period of six months
  • Reduction of bank interest rate by almost 200 basis points with immediate full transmission for working capital
  • Relief in electricity bills in the form of waiver or subsidy of fuel adjustment charges (FAC), and electricity duty

Urging the government for a GST break, Pradeep Shetty, Joint Honorary Secretary of the FHRAI argued, “The working capital is draining rapidly and is being hit by almost 90 percent for both larger establishments and budget hotels and restaurants. Paying taxes including advance tax and GST is now straining the liquidity and is making it extremely difficult to manage day to day operations.”

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Will COVID-19 Economic Response Task Force Heed Pleas of Restaurant Associations?

In his address to the nation on Thursday evening, Prime Minister Narendra Modi announced the formation of a COVID-19 Economic Response Task Force led by Finance Minister Nirmala Sitharaman, which will have the mandate of dealing with the economic concerns arising due to the coronavirus outbreak.

“This task force will ensure that all steps are taken to reduce the economic difficulties and execute them effectively.”
Narendra Modi

Modi assured that the task force will remain in regular touch with all stakeholders, take their feedback and make decisions accordingly.

Will the task force led by Finance Minister Sitharaman heed the requests made by the restaurant associations and provide the economic relief that they are demanding be given to the food services sector?

(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)

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