As the retail industry takes a severe hit due to mandatory closure of Retail Stores across India, retailers face imminent financial crisis or insolvency due to the COVID-19 pandemic. The Retailers Association of India (RAI) says that millions of jobs are at risk. Against this backdrop, the retail industry is seeking support from the government to save the industry, which RAI claims contributes 10% to the GDP, and contributes to about 40% India’s consumption.
According to RAI, non-grocery food retailers are reporting 80% to 100% reduction in sales. And the industry has nearly 60%-70% fixed costs, with rents and salaries being a large part of the cost. This, along with low margins, leaves businesses with limited flexibility.
In the light of the crisis, the industry is seeking special support from the government, RBI and the banking industry.
From the banking industry:
The industry wants banks to extend the moratorium to 270 days for payment of instalments and interest of term loans, short-term loans, corporate loans, securitized loans, bonds, mortgages, debentures, general purpose loans effective from March 15, 2020 to December 31, 2020. This is because of the high inventory positions and low demand that will continue for months beyond the lockdown period the industry.
It also wants a moratorium of 270 days for all interest payments of cash credit lines up to December 31, 2020. Non-fund sources such as bill discounting, letters of credit must be included in the moratorium
RAI says that 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.
It also wants working capital credit lines to be made available till 31st December 2020. Additional working capital credit lines to be paid back in 3 instalments between 1st Jan 2021 and 31st March 2021.
“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,” it added.
From RBI:
RAI is seeking interest rates on all loans to retail industry to be subsidized or reduced by 400 basis points from 15th March 2020 to 31st December 2020, while also relaxing NPA reporting guidelines till 31st March 2021.
Relaxation in Statutory Payments / Accounts
RAI is seeking an increase in the period for depositing all statutory dues like Income Tax, Advance Tax, GST, ESIC, PF etc. for payments due up to 31st July 2020 by 90 days.
It also wants an extension on the mandatory reporting/statutory filing days by 60 days to 31st July 2020 for financial accounts for year 2019-20.
Employment Support:
The 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 employment of staff during the extended lockdown and recovery period after the lockdown,” RAI said.