Food Industry Takes a Hit Due to Coronavirus Small and medium enterprises have a greater concern in this scenario as banks traditionally do not lend money to them

By Sanjay Kumar

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The food industry is bracing for major adjustments and innovations as concern over the spread of the coronavirus grows rapidly as time passes. While the full extent of the impact remains uncertain, labour and supply chain disruptions are prime areas of focus. The Indian food industry is regulated at a lower rate compared to other countries. Any further increase in the intensity of this pandemic, would lead to a crisis. Most corporate offices are witnessing only between 20 to 30 per cent of the normal business volume as compared to volume observed just three weeks ago. The hit across the food services space will be significant since this industry is not immune to the economic impact of coronavirus. Parallelly, there are various sectors that are linked to this space and have been affected drastically.

Small and medium enterprises have a greater concern in this scenario as banks traditionally do not lend money to them. A huge working capital crisis has been observed in these enterprises due to the concept "Work from Home' that has come into force as a precautionary measure for the safety of the employees. In some of these cases, action has been taken to minimize the amount of food supplied as there are fewer employees in the office space. Banqueting has stopped indefinitely in order to avoid the gathering of volume, leading to the cancellation of many events, further adding to the revenue dip.

This has resulted in a significant drop in the sale of food at office cafeterias, thus directly impacting the revenue. It is important to keep in mind that companies may not have the capacity to survive such a prolonged economic slowdown and in the bargain will take comparatively longer to recover from their losses. This, at the macro level, may also result in defaulting as they are not yet well equipped with the necessary resources to remain robust in the market.

Expectations of the food industry from the government

India, on the curve for the spread of the pandemic, is still lagging behind in comparison to the rest of the world, which is good news. However, it is still probable that we will see an increase in the number of cases in the coming months.

Speaking about revival, the industry's expectations from the government is more on the fiscal side. This includes enabling consumption and bringing in the input tax credit which was abolished about 2 years ago so that the value chain becomes more organized compared to what it is currently.

It is important to keep in mind that, as announced by the government as well, COVID-19 does not spread through food. It would be wise to be patient and take the right decision that will help in reviving us together from the "Coronavirus Recession'. It is advisable to not hoard food, take precautions and leverage the benefit of the "Stay At Home' order facility.

Sanjay Kumar

CEO and MD, Elior India

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