Retail Industry Needs Injection, Urges RAI

Retailers Association of India (RAI) lauds all efforts of the government and the local authorities across states to curb the devastating impact of the deadly pandemic that has gripped our country. The Indian Retail Industry has been constantly supporting the government and the local authorities in the fight against COVID-19. Many retailers have come forth to serve ailing citizens and support them to the best of their capabilities.

The Indian Retail industry employs 46 million citizens of India and contributes to 10% of the nation’s GDP. Citizens employed in the retail industry and the retail businesses are both in need of urgent support to ease out their lives and livelihoods.

 “The retail industry in India has been in a perpetual paradox ever since the first set of restrictions began last year in March 2020. The businesses and the workforce in retail need to be cushioned by the government or the local authorities to ease off their hardships. The Retailers Association of India believes that the two most important and immediate steps that can prevent this industry from collapsing are to prioritize vaccination of the Last Mile Workers and to urgently provide financial support measures,” said Kumar Rajagopalan, CEO, Retailers Association of India (RAI). 

Vaccinate Lakhs To Save Crores

Millions of ‘Last Mile Workers’ of the retail industry are the constant point of contact for citizens of this nation. These are people who work in retail stores selling essential goods and medicines, workers delivering goods to customers and restaurant staff, among others. It is estimated that each Last Mile Worker (LMW) meets about 50 to 100 customers per day. Thus about 100 employees are then likely to come in contact with an estimated 7000 citizens a day.

Vaccinating the LMWs on priority is extremely important to curb the spread of the virus, and safeguarding the interests of citizens. It is good for citizens to know that the person serving them at stores or delivering items to their homes has been vaccinated and do not pose a health risk to them or their families.

To help the administrators in their efforts, RAI members have come forth to offer space inside malls and retail stores for vaccination, not just of Last Mile Workers but also of general public. Retailers are also willing to meet the cost of their employees’ priority vaccination. Submissions in this regard have been made to the State Governments and Local Authorities asking for support for mobilising the availability of vaccines for Last Mile Workers on priority.

Inject Capital Into The Industry

As the days of the lockdown drag on, it is getting increasingly difficult for retailers to retain employees and to keep their businesses afloat. Retailers need to pay salaries, minimum electricity, rentals, property taxes etc. even if the businesses are shut due to lockdown. The cash inflow of the industry has come to a standstill, while the fixed operating costs remain intact. The immense financial stress faced by the retail sector will adversely impact both livelihood and the financial institutions exposure to the sector as retailers start to become insolvent. Millions of MSME suppliers too get no payment from the industry participants.

RAI has recommended that the Ministry of Finance and the Reserve Bank of India step in to bring some relief to the mounting stress on the retail business in the wake of COVID-19-Second wave:

1.       Extend the benefits of ECLGS 3.0 to retail companies: Corporate Retail Outlets is one of the 26 sectors, selected by The Kamath panel under the ‘Resolution Framework for Covid19-related Stress’. While this was mentioned in the announcement of ECLGS 2.0 it has not been clarified in the notification which announced ECLGS 3.0. This needs to be clarified and ECLGS funds made available to the retail sector immediately. Availability of additional funding to eligible retail businesses will go a long way in contributing to retail revival and protecting jobs.

2.       Announce a moratorium on principal and interest for 6 months for the 26 stressed sectors:  Retail sector represents an investment of Rs 2,50,000 crore and almost Rs 75,000 crore could turn NPA if urgent measures to ease the working capital challenges are not taken by the Reserve Bank of India and the Government of India. This will put at risk almost 3 million jobs directly in the retail sector. Associated sectors that depend upon retail would also be similarly impacted. In the Textile sector alone, across the entire value chain almost 10 million jobs are at risk.

3.       Mandate banks to give ad-hoc working capital loans of 30% more than current limits so that critical payments like salaries and wages can be made: Non-payment of salaries could lead to significant social unrest in local areas, massive job losses. Release of additional working capital will avoid this. Further to kick-start the supply chain, additional working capital can be released to suppliers, who can restart factories and in another 8-10 weeks, the wheels of the economy can start moving ahead.

There is a strong need to ease working capital stress in respect of working capital facilities sanctioned in the form of cash credit/overdraft. Almost 70% of retailers’ expenses are salary and lease rent. Banks say that working capital funds can only be provided against current assets and retailers have exhausted the working capital limit they are eligible for based on their existing level of current assets.

4.       Provide Interest subvention to reduce the burden of interest: To help the industry deal with the higher interest burden, interest rates on all loans to the retail industry be reduced to an effective rate of 6% through suitable mechanisms such as interest subvention schemes. In the aftermath of Covid-19 lockdown, retail businesses have to deploy higher levels of capital to tide over the periods of low or no revenue. Retailers operate with very thin margins unlike manufacturing firms and have little fiscal room to absorb the increase in the interest burden.

Retail is a critical link ensuring the consumption chain keeps running on one hand and ensuring citizens’ daily needs are met on the other. It is therefore important to safeguard the interests of the industry. The retail industry is willing to play its role in the fight against the pandemic, but it needs urgent support from the government both at the central as well as local levels.