Helping servicers who are out of business/emplyment

Help thro' fiscal grants and not loans 

Three Incidents: 

1. Popular Restaurant in Thiruvannamalai: I was in Tiruvannamalai in Feb 2021, when the Covid first wave had receded to manageable levels and the economy was returning to normalcy. After having had darshan of Lord Annamalai  and Goddess Unnamalai, I proceeded for lunch with my family to one of the famous restaurants, situated a few hundred metres from Ramanashram. The hospitality extended was good but the usual cheer that accompany the chef and staff was absent. The menu card carried all, but items available were barely two or three. And we were the only customers at that time (1.30 p.m.).  When I enquired, the staff informed that only a few of them are still working. The crowd to the restaurant had come down on account of lock down and the foreign tourists, who throng the town, are no longer there. The catch to the restaurant was the presence of foreign tourists and the forex encashed, who practice vegetarian in the temple town but look for quality food. The revenue came down to less than five per cent of the normal income posted by it in the previous years.  This is not a solitary case but a live example of how the hospitality industry in pilgrimage towns and other tourists spots, especially those that attract foreigners, were affected so badly due to the pandemic. While the owners suffered losses, the staff of these labour intensive service units lost their jobs. 

2. A small restaurant owner in Chennai: For shampoo cleaning of my three piece sofa-set, I searched the net and found out two or three good service providers. Only one of them offered to provide the service but surprisingly at a discount of 50% of the usual charges levied. (They quoted Rs.350 per seat for shampoo washing - three-piece sofa set has seven seats to accommodate the sitting of persons!). I got the quote from another service provider for Rs.700 per seat, just prior to COVID lock down. Please do not dismiss the story now, it has just begun. Next day, the owner and his assistant arrived on the scene. I found the assistant to be more involved and also extremely polite.  During the informal discussions, he revealed that he was running a medium sized restaurant in Pallavaram and had to close down the shop due to the COVID Pandemic and resultant lock down. He incurred a loss of Rs.5 lacs and 10 persons who were employed by him, went back to their villages.  Imagine, a person, who was owning a Rs.5 lac worth restaurant is now on casual labour, trying to earn Rs.300-400 a day.  

3. IT Person turned self-employed taxi owner: I participated in a private bank's campus interview in one of the reputed private educational institutions in Coimbatore.  Since the institute is slightly away from the city, the college arranged for my pick-up and drop back home.  The owner-cum driver of the car showed a lot of knowledge and enterprise.  During our conversations, I understood that the taxi owner, in his late twenties, is a qualified engineer and worked with an IT firm for three years.  He left the job, took a loan from the bank for purchase of a car,  registered as taxi. A tie up was entered into with the educational  institute for pick up and drop of their faculties living in the city.  He was very happy that a good income is earned and more than that being self-employed  at an young age.  Now for the last 16 months, the education institutions are closed.  Even if their staff are paid full or half salaries, the taxis which had tie ups with such institutions are not earning money.  I saw this gentleman the other day, acting as driver on call arranged through temporary drivers' forum. I did not ask him, whether he is still keeping his taxi and what about the position of EMIs, etc. 

The issue: RBI in its recent policy announcement extended liquidity available at 4% to banks for financing health sector and possibly hospitality sector also.  The regulator also announced availability of Emergency Credit Line Guarantee Scheme (ECLGS) upto 20/30% on loan outstanding to eligible borrowers.  

But the above schemes is of no use to the three firm/persons mentioned herein above -  

first one not sure of viable cash flows in the immediate future,  

the second one already packed up his restaurant business and  

the third one unable to take a decision whether to terminate the tie-up with the institute or plunge into carrying normal passengers (both are not possible now) 

There will be umpteen cases like the ones mentioned above in the service industry, who cannot be helped with bank finance schemes announced. Should not the government analyse the unpublicised problems of the individuals in the Service Industry (Significant in numbers) who suffered losses silently and also those who extend ancillary/allied services to hotels, restaurants, educational institutions, etc.  All of them can be rehabilitated with grants and not with finance.  

Why I am mentioning this now is based on similar happenings during demonetisation. Though demonetisation helped unearthing black money, brought in thousands of new tax payers, curtailed terrorism activities through fake currencies, it was also responsible for lacs of small people disappearing from cash and carry business activities.  They simply vanished from such activities and whether they are actively employed now, no one knows.  At that time, no effort was made to create a data of these people, study the impact on them and measures to rehabilitate them.  Now it is not possible to do that exercise as demonetisation took place five years back.  

A similar situation might arise if the silent losers, who never availed bank finance and the innumerable ancillary service providers to the service industry are not identified and remedial measures taken, since they will not be covered with the loan schemes announced from time to time to rehabilitate others in the industry. 

V. Viswanathan 

8th June 2021