Retailers to FM Sitharaman: Give ECLGS benefits, 6-month moratorium, interest rate cut to fight Covid 2.0

Retail’s monthly recovery had neared pre-Covid level for the month of February as retail sales had touched 93 per cent during the month in comparison to February 2020. (Representative Image)

Credit and Finance for MSMEs: MSME-dominated retail sector has made a fervent appeal to Finance Minister Nirmala Sitharaman to prevent the sector from slipping into a position of “irretrievable financial damage”. Retailers were among the worst hit during last year’s Covid-induced lockdown and were yet to see the pre-Covid level recovery. Now, the second wave of the pandemic is likely to drag their growth down to last year’s level as several states have mandated the lockdown of malls and shopping complexes where most of the modern retailers operate.

In a submission to Sitharaman, RAI on Wednesday recommended extending the Emergency Credit Line Guarantee Scheme (ECLGS) 3.0 to retailers. The government had recently expanded the scheme’s scope to cover hospitality, travel, and tourism and extended the scheme till June 30, 2021. Importantly, the expert Committee made under the chairmanship of K.V. Kamath had last year recommended financial ratios for 26 stressed sectors for loan restructuring including corporate retail outlets. RAI recommend that this be “clarified immediately and that ECLGS funds be made available to the retail sector.”

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“We hope that even if the government enforces partial lockdown, it won’t impact the consumer sentiment and the recovery” Kumar Rajagopalan, CEO, RAI had told Financial Express Online. Monthly recovery of the retail sector had neared pre-Covid level for the month of February as retail sales had touched 93 per cent during the month in comparison to February 2020. However, amid the current situation, nearly 80 per cent retail stores are closed while few stores that remain open don’t get footfall, Rajagopalan said in a statement on Wednesday. “With zero revenues retailers are still expected to pay overheads such as salaries, electricity, and rentals. If a timely relief package is not provided by the government to ease the financial stress, then the industry will find it hard to survive this second wave.”

The association also requested a moratorium on principal and interest for six months for retail and other stressed sectors. The retail sector represents an “investment of Rs 2,50,000 crore and almost Rs 75,000 crore could turn NPA if urgent measures to ease the working capital challenges are not taken by the Reserve Bank of India and the Government of India. This will put at risk almost 3 million jobs directly in the retail sector.” It further urged the finance minister to mandate banks to give ad-hoc working capital loans of 30 per cent more than current limits so that critical payments like salaries and wages can be made and also reduce the interest rates on all loans to retailers to 6 per cent through mechanisms such as interest subvention schemes.