‘Scary scenario’: Coronavirus is breaking the back of India’s restaurant industry

If the pandemic doesn’t blow over soon, experts warn, nearly a third of the 7.3 million people employed in the food service industry will be out of work.

‘Scary scenario’: Coronavirus is breaking the back of India’s restaurant industry
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“I have seen situations like this before. When the riots of 1984 and 1992 happened, businesses were shut. So, I’m trying to stay calm. I believe the situation will improve over time,” says Harish Negi, not entirely convincingly.

Negi, 52, has been a chef for over 25 years and is currently employed by a restaurant in Delhi’s New Friends Colony. “Since my restaurant is closed for now, I just want to go to Rudraprayag where my family is waiting for me. But there is no transport,” he says, referring to his hometown in Uttarakhand. “I don’t know how long it’ll be like this.”

While he is stranded in Delhi, Negi says, he’s helping his coworkers “stay calm and motivated”. It isn’t easy, he adds, as they are worried about losing their jobs now that the food service sector has ground to a halt.

As India went into lockdown last month – first regionally and then nationally – to limit the spread of the coronavirus, restaurants were ordered shut, though they were allowed to service takeout and home delivery orders. As a result, almost overnight, millions of people went out of work, at least temporarily. And if the pandemic doesn’t subside soon enough, industry experts warn, a substantial section of the workforce might not even have workplaces to go back to.

Around 7.3 million people are employed in the country’s food service industry, as per the National Restaurant Association of India’s Food Services Report of 2019. Just a shade over half of them work in the 6,00,000 or so restaurants and eateries that make up the organised sector, that’s establishments which, for the most part, offer fixed terms of employment. In all, according to the same report, there are around 20,00,000 restaurants in the country. Together, they are estimated to generate annual revenue of Rs 4,23,865 crore in 2018-19.

The industry has expanded rather briskly in recent years, registering a compound annual growth rate of 11 percent between 2015-16 and 2018-19. In the same period, calculated similarly, the workforce grew by eight percent per year. In the coming years, it’s projected to increase by nearly six percent a year to reach 9.2 million in 2022-23. The market size of the industry, as per the NRAI report, meanwhile, is estimated to grow to Rs 5,99,784 over the next three years.

Credits: Source: NRAI Food Services Report, 2019.

Now, when the pandemic has swiftly brought the industry to its knees, those projections look unachievable, industry insiders say. If the nationwide lockdown continues for another month or beyond, they claim, restaurants, in both formal and informal sectors, will go out of business en mass or lay off workers. The only way out of this morass, they say, is for the government to provide assistance, and immediately.

What’s compounded the problem is that the food service sector was not prepared for what’s befallen it. Tejkulpal Singh, 63, president of the Bhopal Restaurant and Hotel Association, points out that the industry was braced for a downturn when coronavirus eventually arrived in India early this year, but they did not anticipate a total lockdown.

“Sales were falling for every restaurant after March 1. However, we were not expecting a complete lockdown. On March 20, we had 10 percent of the usual sales. After March 22, there were no orders for online delivery either,” says Singh, who owns three restaurants in Bhopal. “But like other restaurant owners, I am still providing my staff of almost 80 salaries and accommodation for a month.”

The Indian government has said there is no plan yet to extend the lockdown beyond April 15, but it isn’t clear how it would react if there’s a major spike in infections. If it does extend the lockdown, many restaurants would not survive, Singh says. “The owner bears the liability for salaries. Now if we do not earn anything, we won’t be able to pay our staff,” he adds. “The government must help us in such a situation. In order to save jobs, the government should contribute at least half the salaries, the rest the owner can pay.”

Credits: Source: NRAI Food Services Report, 2019.

Shubhankar Verma, who owns a restaurant each in Malviya Nagar, Delhi, and Mahagun Metro Mall, Ghaziabad, says he can cover the salaries of his staff until April 14, but barely. “I have a car for which I have to pay an EMI of Rs 46,000 per month. I also have a house for which I have to pay around Rs 73,000 per month. That’s around a lakh and half rupees I have to pay banks alone,” he explains. “If the government can stop banks from taking those payments so long as the curfew continues, it would be greatly helpful. We are not asking to be exempted from repaying the loans, we just want a moratorium until this curfew lasts.”

The Reserve Bank of India has permitted all banks to delay EMIs for term loans until June 2020, but the concessions may not be available to every borrower or, if availed, may end up being costlier.

His Ghaziabad restaurant lost around 90 percent of the business, Verma says, after the Delhi government shut down cinemas in the National Capital Region on March 14, drastically reducing footfall at the Mahagun Mall. The Malviya Nagar eatery was closed to the public on March 22, the day of the “janta curfew”, and is only servicing online orders since. “There has been a 75-80 percent decrease in online orders as well,” Verma says, explaining that customers are avoiding “outside food” for fear of getting infected, through the food or the delivery person.

‘I can’t pay rent’

A steep drop in online orders means delivery men employed by restaurants as well as food delivery services such as Zomato and Swiggy are in a precarious situation as well. Fewer orders mean most delivery persons, who are paid per trip, have seen their earnings dwindle. If this wasn’t worrying enough, they have faced harassment from police enforcing the lockdown, despite being exempt from the restrictions as essential services personnel.

Mahesh Anand, 27, from Palwal in Haryana, is a deliveryman for Swiggy in Delhi. He can barely make rent now, Mahesh worries, let alone sustain a family of four. “I used to earn nearly Rs 7,000 a week. This week, I got only Rs 1,300. I don’t think I will be able to even pay rent this month. It’s Rs 6,000,” he says. “On top of this, I am stopped several times by policemen while I am out making deliveries. We all fear being beaten up but there’s no choice. I have to keep doing the work, else I won’t be able to feed my wife and elderly parents.”

Credits: Source: NRAI Food Services Report, 2019.

It’s not just the people directly employed in the restaurant industry who are hit by the pandemic. Those down in the supply chain such as vegetable growers, grocery suppliers, butchers are also suffering.

Pankaj Khatri, 29, owns a company which supplies crockery, tissue paper and toothpicks to at least 25 restaurants in Jaipur city. Khatri says the sales began to drop even before the lockdown. “Right after the first case of coronavirus was reported in the city in March, the occupancy of restaurants fell because people preferred staying at home. This hurt our business directly and our sales started to go down almost a week before the lockdown.”

In recent days, news reports have detailed how it has become hard for people in the food services supply chain like farmers, butchers, green grocers, and milkmen to sell their produce.

Khatri complains that its sudden imposition left suppliers with no time to prepare for the lockdown. “I believe the next three to four months will be very difficult for us,” he says. “And then it will take considerable time to get back to business as usual.”

Good times are past

It isn’t surprising that the bulk of India’s food service industry is concentrated in metros, given their vast populations and relative prosperity. Delhi alone has at least 95,287 restaurants, Mumbai has 87,650, Bengaluru 42,307, Kolkata 38,838, according to the NRAI report.

In major cities especially, despite the shocks of demonetisation and the Goods and Services Tax, the food service industry has boomed in the past decade, thanks in good part to the popularity of online delivery services, which helped restaurants expand their customer pools while generating jobs, even if mostly for gig workers. As per the NRAI, the sector attracted investments of around $2.4 billion in the past six years. The growth was reflected in tax collections. In 2018-19, the organised food service sector alone paid an estimated Rs 18,000 crore in taxes, according to the NRAI report.

Still, the last two years have been tough for the industry, especially the organised sector, owing mainly to the denial of input tax credit on GST which has raised operational expenses, points out Anurag Katriar, CEO of deGustibus Hospitality, Mumbai, and president of the NRAI.

‘A scary scenario’

Sidhant Kapoor, 25, studied culinary arts in New Delhi, and worked at several top restaurants in Delhi for over two years. Sometime last year, he decided to start his own restaurant in Amritsar. After a few months setting it all up, he planned the launch for April 3. It wasn’t to be.

“Starting my own venture was a crazy journey full of sleepless nights, long and tiring days planning the minutest details of ambience, decor, the floor plan of the kitchen, the dishes to be served, the recruitment of staff, even the crockery,” he says. “But I suspended all activities on March 20. I foresaw a prolonged lockdown after seeing what was happening in other countries. I will resume all operations for the launch only after the situation stabilizes.”

Sidhant has invested most of his savings in his restaurant but it is mired in uncertainty now. “The economy is going for a toss, and every single person will take a hit,” he says. “For sure.”

Katriar agrees. “We employ over seven million people in this industry which makes us one of the largest job providers in the country. But, at the same time, the restaurant business model is the most vulnerable because we have very high operating expenses. So, the chances of going down with even minor revenue fluctuations are high, and presently we are virtually looking at zero revenues,” he says.

What’s his assessment of the impending damage? “At this time, it’s difficult to say how many companies will be able to pull through, but around 30 percent job losses is definitely a reality if this crisis continues beyond a month,” he responds. “Many small companies are expected to shut down since they might not have the money to keep going. So, if we have 30 percent job losses, for example, that means well over two million people going out of work. That is a scary scenario.”

More worryingly, Katriar points out, it would be hard for the laid off workers to find another job anytime soon since Indians working in the food service industry abroad are also coming back. “Suddenly, we have a scenario where businesses are shut and there’s uncertainty as to when it will get back on its feet. Then, there’s an oversupply of manpower in an industry that cannot afford any fixed expenses. It is a very tough and grim scenario.”

So, what can be done to mitigate the damage? “The government has to come into the picture now,” Katriar says. “First, they can defer all statutory payments and EMIs. Deferring statutory payments would leave us with enough cash to deal with the problems of the people. At a time when most of India is on EMIs, deferring the clock by a month can also help. Once the pressure of EMIs is taken away, the basic necessities of the people in this country can be taken care of.”

In addition, the labour ministry needs to provide compensation of some kind to workers covered under the Employee State Insurance Act, he argues. “This is a war like situation and the government has to open the war chest to fight this. So that, in the immediate term at least, the problems of the people are taken care of,” he explains. “As far as larger commercial problems are concerned, we do not really know the extent yet, we don’t know what the future holds for us.”

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