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Wednesday, December 02, 2020
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Stimulus package to revive food industry

Dr. Subodh Jindal

The Covid-19 pandemic and the nationwide lockdown has severely crippled the Food Processing industry. The industry witnessed complete shut down during the first two to three weeks of lockdown, starting from 23rd March 2020. The industry which was growing at the average rate of 13.40% during 2015-19 period has virtually come to a standstill. Though the government noticed urgency of resuming agricultural and food processing activities, yet paucity of workers and lack of transportation limited the operation of processing plants. Even after 40 to 45 days of the lockdown, majority of factories and plants were working with 30-40% of their employee strength. Thus, it is paramount that the processing industry, most of them are small and medium enterprises, need government support to become fully operational. Two broad areas need to be looked into immediately. First, save the perishable crops at hand to feed consumers and second, maintain the supply chain of essential items during the crisis period to avoid panic among consumers. The All India Food Processors’ Association (AIFPA) has actively engaged industry members and the government to find a solution to the present imbroglio. Worried about the lives of farmers, lakhs of processors, particularly the Micro, Small and Medium Enterprises who feed our 135crore population and employ crores of workers, AIFPA has submitted following suggestions with the Ministry of Food Processing Industries to the revival of the food industry. Industry Concerns

A. Loss of Perishable Crops: AIFPA has repeatedly emphasized on the urgent steps required to save perishable crops at hand. The Government has made adequate arrangements for grains. But no steps have been taken for saving Fruit Crops (like mango, tomato, pineapple, papaya, guava, litchi, cherry, pear, banana, sapota, pomegranate, peach, grape, strawberry etc.) These crops are extremely important for their economic dividends to the nation, be it farm sustenance, employment, exports and consumer products all year round.

The losses include:

  1. Valuable Fruits worth lakhs of crores will be wasted.
  2. This will bring unbearable loss and suffering to farmers.
  3. Processing industry will lose a year of work as basic fruit material will not be available.
  4. Consumers will suffer, as many of their healthy daily use food products will not be available.
  5. Crores of production workers and supply chain manpower will lose jobs and become a liability.
  6. Exports will not be possible and buyers may find other sources, damaging next year business also.
  7. The entire allied activity chain of packaging materials, ingredients, additives, equipment services, processing aids, transporters, distributors, warehousing units, technology providers etc. will suffer.

B.Working Capital Loan: In the deliberations held last month, suggestions were made for financial support to enable the industry to procure the crops, raw materials and operate to save the perishables.

C. Work Permissions: In many places work permissions were granted to units, though with limited number of workers, but local authorities in some areas cancelled the permissions. This has upset the industry.

D.Workers Movement: Despite Government’s instructions, district authorities have restricted movement of workers in many areas. It is very difficult, not to mention inter-state and intra-state travel, to make movement within the district. Also, there are instances of rough treatment meted out to workers by the police.

E.Workers’ Sentiments: It is also reported that workers feel assured of getting their salary as declared by the Hon’ble Prime Minister and therefore, do not want to come to work and risk their lives. They also feel that there is no medical package for them and the normal ESI facilities will not be sufficient to treat them in case the epidemic spreads.

F.Employees’ Wages / Salary: At most places, units have paid wages / salary for the month of March. But a large section of the industry is not able to pay the wages / salary for the month of April. Incoming payments of the industry are held up and further supplies are expected to take time. Government support of ‘Wages / Salary Package’ was recommended but no action is taken yet. Payments of ESI, PF are also difficult in this position. Ministry of Labour and Employment is still pressing the industry to make full payment of wages / salary. Some States have issued directives of severe action for non-payment of wages / salary. People are seeking legal advice and approaching courts for relief. Industry is also apprehensive of the burden of Fixed Costs, Running Establishment Expenses, Property Tax, Fixed Utility Charges, Security and Statutory Compliance etc.

Steps recommended

In order to save the nation from the potential disaster as explained above, some steps have to be taken on a war footing. This may require mobilizing important policy decisions and their implementation.

1.Issuing instructions to field officers to permit operation of ‘Food Processing Units’ on priority and for movement of their workers at least within the district (unless it is a Red Zone).

2.Give permission to units manufacturing packaging materials for food industry to operate (unless it is a Red Zone).

3.Provide an ‘Employees Package’ with support for Wages/Salary, ESI, PF and COVID Medical Cover.

4.Immediate arrangement to provide ‘Working Capital Loan’ on low interest rate without collateral security for 50% value of current year requirement which may be calculated on the basis of past two years performance. Stocks may be taken as collateral to the extent possible.

This loan should be in addition to any other loan being used presently by the unit. Concerned Banks & Financial Institutions should be mandated to support food industry up to 31.03.2021 on emergency basis as national priority. It is suggested that Government may issue strict guidelines and targets to banks to provide loans to food industry for this crisis period up to 31.03.2021 in the national interest. Banks may take appropriate legal undertaking for repayment of the loans issued by them.

5.Government instructions for deferment of EMIs has been acted upon only by Nationalized Banks. Other banks have not adopted these guidelines. Moreover, no process has been started for reduction in interest rates on existing loans and OD limits which is very important for the industry to sustain. Interest subvention can also be given and later changed to PLR Rate for up to 31.03.2021.

6.Government may use existing deposits of ESI, PF, and other Schemes to fund food Industry up to 31.03.2021.

7.Immediately stop the import of fruit pulps / concentrates so that Indian produce is consumed and not wasted. Otherwise farmers will be severely hurt.

8.GST should be placed at 0% on primary processes such as Pulping, Drying, Salting, Syruping, Freezing, Ambient Controlled / Cold Storing to save fruit crops and store the same as intermediates for industrial use for a period up to 31.03.2021. i. On all other food products GST should be reduced to half its current rate up to 31.03.2021. Alternatively, GST rate may be moved one step lower, such as 28% to 18%, 18% to 12%, 12% to 5%, 5% to 0% up to 31.03.2021 to ease burden on the food industry. This will also help to reduce prices.

9.Immediately release pending refunds of Income Tax, VAT, GST to enable food industry to cover a part of its lock down losses. Large funds are lying held up with the government. Special instructions should be given to field tax authorities for this purpose. These held up funds are already causing frustration among the industry.

10.Make payment of accumulated input credit of VAT and GST to help sustain operations of food industry.

11.Waive Fixed Charges on Electricity, Water, Gas and other utilities for food industry up to 31.03.2021.

Conclusion: The Food Industry representatives feel that the people engaged in operating food industry should be accorded similar safety and security support as other essential services are provided under the current circumstances. ‘Food Warriors’ are key and vital in winning the war over COVID.

(Dr. Subodh Jindal is President, AIFPA. Views expressed are personal.)