NEW DELHI—Some of India’s biggest ice cream makers have asked the Narendra Modi government to allow them to slash workers’ wages down to MGNREGA norms rather than the much higher minimum wages, and for the government to foot 70% of their wage bills for the lockdown period and six months after.
The demand, which comes at a time when millions of Indians have been pushed to the brink of poverty by the punitive national lockdown, was made just before the Karnataka government’s decision to stop migrants from leaving the state at the alleged behest of the builders’ lobby sparked outrage.
The Indian Ice Cream Manufacturers’ Association (IICMA) made the request, along with 11 other economic relief measures, in two separate letters to the government over the past week.
India’s Rs10,000 crore ice cream industry is reeling under the loss of its peak summer business worth at least Rs 4,000 crore because of the national lockdown as well as fake news related to the coronavirus pandemic. But the companies’ demand that they be allowed to slash wages at a time when millions of Indians are struggling to survive is outrageous, said labour economists.
“If you take welfare as a tax, basically what the firms are doing is that they are shifting the burden of this tax on to the state or on to the vulnerable, hapless workers,” said K.R. Shyam Sundar, who teaches at Xavier’s School of Management in Jamshedpur.
If you take welfare as a tax, basically what the firms are doing is that they are shifting the burden of this tax on to the state or on to the vulnerable, hapless workers Prof K R Shyam Sundar, Xavier's School of Management
Sundar, however, also blamed the central government for failing to announce a “credible” relief package for micro, small and medium enterprises (MSMEs), which have been worst hit due to the lockdown.
“I think the government should be faulted for delaying issuance of any kind of a credible fiscal stimulus package as the ILO has asked for in its four pillars of policy responses. So the government in fact, by its failure, is making industries pile up their demands. There is a huge supply-demand mismatch in terms of a relief package,” he said.
While Prime Minister Modi and Finance Minister Nirmala Sitharaman have organised hectic parleys with bureaucrats and experts to discuss the contours of a second economic stimulus package for MSMEs, no announcement has been made so far.
According to the IICMA, the organised ice cream business in India includes a large number of small and medium enterprises and employs about two million people.
The need for relief
The manufacturers have asked for ice cream to be designated an “essential commodity” to ensure there are no hiccups in the supply chain. They have also asked for low interest and long-term “disaster loans” on the lines of those given by the US government for paying fixed expenses.
Other demands include conversion of working capital loans into soft loans; reduction of the goods and services tax on ice cream; and granting exemption to companies from paying statutory contributions like employees’ provident fund and GST or alternatively, the government paying them on behalf of the companies for a period of three months beginning April.
Whether the demands are accepted by the government or not, they reflect the manufacturers’ bleak outlook for the ice cream business at just the time of year when they should have been making the most profits.
Rajesh R. Gandhi, managing director of popular ice cream maker Vadilal Industries, is the current president of IICMA and has been writing to different functionaries of the Modi-led government as well as several state governments seeking help. The measures cited earlier were requested in his letters to finance minister Sitharaman on April 30 and dairy minister Giriraj Singh on May 1.
Today, the ice-cream and frozen dessert industry in India are dying. Most small and medium scale manufacturing units are on the edge of shutdown or bankruptcy. Vadilal MD Rajesh R Gandhi
In his letter to Sitharaman, Gandhi explained his rationale for requesting the measures. “Today, the ice-cream and frozen dessert industry in India are dying. Most small and medium scale manufacturing units are on the edge of shutdown or bankruptcy,” he wrote.
The Vadilal MD also claimed that, “if urgent steps are not taken to save this industry then current funds of around Rs. 5000 crores will become NPA”, but did not elaborate further.
Emphasising that theirs is a “seasonal business”, Gandhi claimed that “more than 60% of ice cream business comes between 15th March to 15th June” every year. He also argued that the business requires more costs than other industries during this season.
“As ice cream has to be maintained in a frozen state (i.e. -18°) it is mandatory to keep all cold storage in working. Therefore, the ice cream industry has to bear more electricity and plant maintenance expenses compared to other industries even in this lockdown situation.”
Speaking with HuffPost India, Anuvrat Pabrai, official spokesperson for IICMA, gave a slightly different set of figures from Gandhi to explain the impact of the lockdown and coronavirus on the ice cream business. He estimated that the industry cumulatively makes between Rs 10, 000 and 15,000 crore business each year and at least 40% of this happens during summer months—from mid-March till June. Almost 90% of this Rs 4,000-6,000 crore worth business was lost since mid-March, he said, mostly due to the lockdown but also, in a relatively small way, due to the fake news circulating on social media that claimed coronavirus could be transmitted through ice creams.
The fake news problem was serious enough for Pabrai to write to the national food regulator Food Safety and Standards Authority of India, requesting the body to issue a media advisory clarifying that ice creams do not transmit coronavirus.
Pabrai is the founder of the relatively small Kolkata-based Pabrai ice cream brand, which has franchises in many cities across India.
Pabrai estimates that the industry may have done as little as 10% of normal business this season, and that too because of a behemoth like Amul continuing to sell ice creams through its multi-product shops and smaller brands doing the same through their relatively few standalone outlets and some functional multi-brand hypermarkets also making sales.
The timing of the lockdown, Pabrai explained, was particularly bad because manufacturers prepare for the summer peak sales season from January to mid-March, when the season begins. But the season barely began this year before the onslaught of fake news and subsequently, the lockdown, arrived.
“One thing is certain that all the companies are going to go in the negative,” he said.
Who’s hurting more?
Interviews with manufacturers confirm that the lockdown has relatively bigger ice cream manufacturers less severely than the smaller and medium-sized ones.
For instance, the Gujarat Cooperative Milk Marketing Federation (GCMMF), which owns the popular Amul brand, suffered less as compared with many relatively smaller and standalone ice cream brands like, for instance, the Pabrai brand from Kolkata.
In an interview with HuffPost India, GCMMF Managing Director R.S. Sodhi said that Amul’s long-standing supply chain helped it tide over the crisis better than smaller players in the business, who are dependent upon a complex network of distributors and retailers. The dairy sector behemoth has the added advantage that its main business of milk and dairy products is doing better than usual.
The updated guidelines issued by the government for the third stage of the lockdown will also help Amul steadily recover its losses in the ice cream business, said Sodhi.
“In the last week of March, it was totally bad. We were 90% down. Gradually it started picking up. In April, it was 85% minus. But in May, it is only 65% less. Every day it is picking up. By the end of May, I expect ice cream will be 30-40% minus, not more than that,” the GCMMF MD told HuffPost India. When asked, he clarified that, unlike other ice cream manufacturers, the federation is not looking at cutting jobs or wages, instead it has given additional allowance to its employees for this period.
In the last week of March, it was totally bad. We were 90% down. Gradually it started picking up. In April, it was 85% minus. But in May, it is only 65% less. Every day it is picking up. By the end of May, I expect ice cream will be 30-40% minus, not more than that. GCMMF Managing Director R S Sodhi
Like Pabrai, Sodhi also attributed the fall in business to rumours and fake news surrounding consumption of ice creams and cold foods and to initial distribution problems. He said that in Gujarat and many other states, all milk products have been included in the list of “essential commodities” but that local authorities in several states were perhaps interpreting this differently to leave ice creams out of the purview. HuffPost India could not independently verify this.
Pabrai’s business has taken a different trajectory compared with the dairy behemoth. He said sales started dropping in mid-March due to the fake news and, as with most of the small and medium manufacturers in India, Pabrai ice creams also lost 90-95% business in April and expects to lose as much in May.
“Once the markets open, we don’t know how infrastructure unrolling will happen. Whether workers will be able to come back, packing material may face bottlenecks. So probably June will get half-baked sales. Then the months of July and August will see rains—these are anyway poor months for sales,” he said.
He said the festive and marriage seasons towards the end of the year see good sales but this year’s outlook is uncertain.