At a time when concerns about overall demand slowdown has intensified, biscuits major Parle Products feels that if immediate steps are not taken to boost consumption, it may lead to retrenchment of its 8,000-10,000 direct and indirect employees.
The company currently has one lakh direct and indirect employees.
It has urged the government to reduce GST on biscuits that are priced at ₹100 per kg or below. Mayank Shah, Category Head, Parle Products, said, “Since the implementation of GST, biscuits priced at ₹100 per kg or below have been put in the 18 per cent GST slab. The industry has been urging the government that this category of biscuits is typically consumed by lower-income consumers and should not be taxed at a similar level as premium biscuits that are priced above ₹100 per kg.”
In the previous tax regime, biscuits – priced at ₹100 per kg or below, – were taxed in the 12-14 per cent range. The lower priced biscuits were also exempted from excise duty and only attracted sales tax..However, under the GST regime all categories of biscuits have been put in the 18 per cent tax slab.
He further added that the company did not take a price hike for the past one and half year, in the anticipation that there will be correction in the GST tax rates. But was eventually forced to hike prices by about 5-7 per cent in December last year.
“Biscuits is an extremely price-sensitive category and the price hike has severely hit demand. This coupled with the overall slowdown in the economy and consumer sentiment has further aggravated the situation for us,” Shah said.
Biscuits priced ₹100 per kg and below, which have a higher penetration in the rural regions, has seen a 7-8 per cent decline in volumes in the last quarter, according to industry estimates.
“We are hopeful that the government will intervene as they have been positive towards the industry’s demand.. But in the worst case scenario,we would be forced to take production cuts and this could lead to lay off of 8,000-10,000 direct and indirect employees. This may happen over the course of one year,” Shah added.
Factors such as weak macro-economic environment, liquidity crunch hurting wholesalers besides lower government spending leading to slowdown in rural consumption has adversely impacted FMCG industry's volume growth.