Smt. Nirmala Sitharaman,

Hon Minister for Finance.

Govt of India.

 

Subject : Dire Situation in the Beauty & Wellness Industry – Critical need for Government support to mitigate the disastrous impact of the Pandemic on the industry

Dear Madam,

The Beauty & Wellness Association (BWAI) is a not for profit body which takes up concerns and issues relating to this high growth industry, with a charter to encourage and help enterprises in this space build capabilities, compliance and modernise operations. The BWAI represents Salons, Beauty parlours, Spas, Beauty Clinics, Gyms, and Academies across India.

The Beauty & Wellness industry comprising of Salons, barber shops, beauty parlours, gyms, spas and academies employs over 75 Lac skilled workers, 2/3rd of these being women. It is estimated to have a revenue in excess of Rs. 25,000 Cr. in year ended Mar 2020 and has been a large employment generator for new jobs and lifetime earnings for skilled workers.

Massive Safety protocols training effort shown impressive track record : The industry came together to self-regulate with safety and hygiene protocols in April / May 2020 and we are happy to report that across the country salons and barber shops have not been locations for spreading the virus, with hardly any cases being reported for customers using services.

Weak Players, fragmented industry providing basic hygiene services to end consumers : Most of the services provided by the salons are in the nature of hygiene and maintenance services –e.g, a Haircut or a pedicure. However, it is not treated as an essential service and bears the brunt of restrictions on working by most state and the central government, with varying degree of hesitancy to allow reopening. Mostly comprising of smaller unorganised players, the Beauty and Wellness Industry faces huge survival challenges due to high fixed costs like Rent and Manpower. The downturn since Mar 2020 has drastically reduced the ability of businesses to survive another year of lost working days and lockdown effect.

Demand Hit Severely: Being a high touch industry, this is one of worst hit sectors due to the pandemic, and Apr 20 - Mar 21 Revenues across the country were down more than 60% over the previous year. This has meant thousands of establishments closed or being close to shutdown, while the business loss has impacted new recruitment and job creation in an industry providing a large employment opportunity for vocational skilled workers, especially women.

Business shutdown and loss of jobs: BWAI estimates that a third of all salons in urban areas shut down at least for 6 months due to the impact of the first wave in Mar-Jun 2020, which is likely to increase this year unless the industry gets some support. The closure is also estimated to have caused over 20-25 Lac Job losses, which can easily be recovered with support for the industry. A survey of retailers has indicated over 49% YoY Revenue de-growth for April 21 over April 2019.

The second wave has hit consumer confidence very badly, and till such time vaccination reaches a significant percentage of population is expected to have a severe negative impact on demand. This makes it imperative to focus on measures designed to create/ restore demand for services to pre covid levels.

It is our submission to you that greater support in terms of liquidity is required desperately for this industry survive and help it achieve it’s potential to become a world beater in terms of providing skilled manpower for services in India and the world. We envisage certain government benefit to help the industry stand on it’s feet, as well as measures to kick start discretionary demand which will directly benefit the Beauty & wellness industry.

We urge you to consider our proposals as under

1. Liquidity Enablers:

a. The government, through the CGT MSME mechanism allow collateral free cash flow based loans to enterprises in this sector to rebuild business till such time as consumer demand picks up in 6 months’ time. The loan amount can be upto 6 months of GST revenue collected by the government from the enterprise, ie, between Oct 2020 – Mar 2021. It is very important that banks be instructed to make disbursals simple as despite the benefit offered by the government last year, there have been almost zero disbursals to businesses in this sector.

b. Moratorium on Loans: Extend a 12 month moratorium on loans granted / outstanding for this sector.

c. Defer Deadlines for GST returns: 6 months’ extra time be given to file GST returns thereby allowing businesses to stand on their feet first before discharging statutory obligations.

2. Demand Generation: Consider this sector as a necessity and not luxury, and consequently reduce the GST rate from 18% which is extremely high to more reasonable 12%. This will have big impact on demand for services and increased compliance which should more than compensate for any revenue loss due to lower GST rate.

3. Wage Support: 3 months equivalent of minimum wages to be given as an advance against ESI deposits made by the business, to be directly credited to the employee accounts as wage support. This can be recovered over the next 12 months in terms of increased ESI contributions paid.

4. Vaccination support: Being a touch based business, for safety of both employees and customers, the employees be given frontline worker status to enable them to benefit from the government administered vaccine shots on priority.

The Beauty & Wellness Industry is hopeful that our suggestions will be accorded favourable consideration and the BWAI will be given the opportunity to work together with the Government to make this a fast growth and quality employment generator.