Authored by – Riyaaz Amlani, President, NRAI for BW BusinessWorld.
The government has been advocating for improvements in ‘Ease of Doing Business’ and for getting more investments into the country with the motto of ‘Minimum Government with Maximum Governance’. In 2016, cabinet approved the Model Shops and Establishments Act and FSSAI announced formulation of guidelines and review of food safety requirements under Schedule IV of the regulations. NRAI also collaborated with the famed ‘Make in India Week’ where NRAI set up a world class food court to cater guests from across 72 nations. Three years ago, we believed in a promise of a new India, where we could take pride and place as a developed nation. We welcomed this change with open arms, but slowly hope is giving way to despair.
The Food Services industry is feeling a little like a blindfolded man sentenced to death by a firing squad. One gunshot after another, slowly the life-force is being sucked out of our beloved business. Announcement by the Union Minister of Consumer Affairs regarding fixing food portions in restaurants and hotels, Forcing restaurants to sell at MRP, slowly but surely we are being asked to fix not just portions but also prices. Uninformed and bad in law guidelines being issued to make service charge discretionary. This will only raise prices and hurt the millions of restaurant workers who depend on service charge for basic necessities. Roof top restaurants are being sealed, Restaurants are being asked to double up as public toilets, Black Swan moments like Highway ban, which make no sense at all, beef ban, import ban on meats and agricultural produce, non issuance of licenses in Delhi and Bengaluru to new restaurants. States are now becoming fashionably pro-prohibition. Restaurants are being pushed out of turf due to dry state jingoism and incredibly high real estate prices in locations that are left.
The Investor sentiment for this sector has hit an all-time low and fresh funding has completely dried up.
According to a Grant Thornton report, “PE Investments in F&B fell 82 per cent to $29 Million (09 Deals) in 2016 from $159 Million (19 Deals) from the previous year. Several India focussed funds have tried to offload their 4-5 year old investments in F&B, but have been unable to find a buyer.”
The restaurant industry, valued at Rs 3,09,110 Crores, is the third largest after retail and insurance in the services segment according to the NRAI India Food Services Report 2016. It generates revenue that is 1.6 times of Indian railways and two times the size of IT industry and contributes over 2.1 per cent to the G.D.P. of India, and provides employment to over 6 Million Indians.
Restaurants provide for the maximum density employment opportunities to the widest variety of human resource in terms of education and skills (including differently abled persons). The industry’s present direct employment figure of 5.8 Million people is expected to reach 8.7 Million, while the indirect employment figure of 7.5-8.4 Million is projected to grow to 9.5-10.5 Million by 2021.
NRAI has been actively presenting these facts to the Government and want to make powers that be realise the enormous social impact that restaurants have on the liveability index of a city, and its contribution to contemporary culture by its patronage of performing arts such as Live Music, Electronic Music, Spoken Word, Plays and Poetry Readings. Restaurants add personality to communities and helps bring people together.
In spite of this sector’s immense socio-economic contribution, the Restaurant Industry today is the most neglected sector in the country. It is currently going through the roughest patch.
India has tremendous potential in the Food Services sector. However, there are too many environmental factors holding back the restaurant business in India. Restaurants are being regulated by multiple departments / agencies as per archaic laws – many of which are irrelevant in the present scenario. The permitted drinking age in India is the highest in the world- at 25, operational hours are limited to just 1 am and service in open areas in restaurants has been restricted. The laws are not uniform, differing as they do from state to state, and further, are open to interpretation by the authorities. The process is also not centralized and requires filing applications with the individual stakeholders, involving lot of paperwork and is thus a long and cumbersome activity. Such complex maze of approvals and licenses required and high tax brackets dampen the spirit of the sector.
The industry applauds the government’s effort to keep GST at 5% for restaurants below 50 lacs and 12% for restaurants without AC. However, high GST slab of 18 per cent for organised restaurants and 28 per cent for five star restaurants is extremely disappointing as this will not go a long way in promoting tourism and tourism related jobs.
While governments go out of their way to favour other industries, our industry – that is actively contributing to country’s image – only requests ease of doing business peacefully and not subsidies.
There is a very urgent need that the Government of India takes note of its socio-economic impact and places it on the high priority sector list; brings in the required reliefs in order to unleash the true potential of this promising sector; and works as a cohesive unit to Save the Restaurant Industry! The industry is patiently optimistic that ‘Ease of Doing Business’ will reach our sector in spite of this gloom.
