Parle warns of 10,000 job cuts, blames GST
Low-priced but a high-volume category has seen a decline in sales of around 7-8 per cent because of the steep GST rate, a company official said
- Published 21.08.19, 11:19 PM
- Updated 21.08.19, 11:19 PM
- 2 mins read
Biscuits and confectionary major Parle Products warned on Wednesday that it may be forced to lay off up to 10,000 workers over the next one year because of a slowdown in demand coupled with the impact of a high GST rate on low-priced products meant for the common man.
The company, which has a total of 10 manufacturing units of its own and another 125 through third-party manufacturers, currently employs a total of around 1 lakh people directly and indirectly in its biscuits and related business.
“We have not laid off people, this would happen if things don't improve,” Mayank Shah, senior category head, Parle Products, said.
Elaborating the current challenges faced by the biscuits industry, he said the low-priced but high-volume category has seen a decline in sales of around 7-8 per cent while the low-volume high-priced segment has witnessed growth of around 8-9 per cent in the first quarter of this financial year.
As a result, he said the growth in the overall biscuits segment has come down to around 2.5 per cent from double digits earlier.
Shah said problems started for the industry when GST was implemented in 2017 when biscuits were clubbed in a single 18 per cent category in contrast to the earlier tax regime when biscuits priced below Rs 100 per kg were exempted from excise duty. The industry had approached the government to rectify it, but so far, no steps have been taken, he added.
“So, we are hopeful that the government will take an immediate action,” Shah said.
When asked if the government intervention is not forthcoming, would the lay-offs happen immediately, he said: “If at all this happens, it will eventually happen over a period of the next one year. When you see across the year demand dipping over a period, you take the action and let go of so many people.”
In the short term, he said: “We are not going to do anything and we are hopeful that the government will take immediate action and we are banking on that.”
Shah said because of the high GST, the company had to take a price hike on the low-priced category but that killed off the demand for the products. Though the low-priced category accounts for only one-fourth of the total biscuits segment, he said, because of the high volume, a lot more people are employed in its production. Therefore, a decline in demand of that segment will have implications on employment.