Economy

Retail and Wholesale Business Suffer, Transport Sector Comes to a Halt After Demonetisation

With shortages of essentials imminent, traders, wholesalers and those in the transport sector have said special camps and queues for current account holders is the need of the hour.

Representative image. Credit: Reuters

Representative image. Credit: Reuters

The reported incident of looting at a mall in northeast Delhi on November 12, after rumours of a salt shortage spread, should have served as a warning to the central government to ensure that supplies of essential food items are not disrupted by the ongoing demonetisation drive. But it appears to have had no impact at all and traders now fear that food riots and farm and industrial distress may only increase as wholesalers, transporters and retailers have all started feeling the pinch of the currency shortage.

Even as the Supreme Court has urged the Centre to reduce people’s woes due to demonetisation, the answer to the current crisis, these sections insist, lies in organising special camps for current account holders and business people where they can easily exchange their old currency and withdraw from their accounts so that they are in a better position to pay farmers, mills, drivers and other employees and trade partners. This would not only keep the circle of business moving, it would also ensure that there are no shortages and no loss of money or business to those holding perishable items.

Retailers fear mobs attacking their business

“I really fear that the day is not far off when people, who are short on cash and have gone restless, as also those anti-social elements who are waiting for an opportunity, will start attacking markets and looting shops and businesses. We saw that happening during when the salt shortage rumour spread, even though salt is available in abundant supply and is only consumed in small quantities. But now when the supply of daily essentials like milk and bread in getting reduced, such fears are becoming real,” said Devinder Singh, owner of Roobson Stores at Shipra Sun City, Ghaziabad.

Singh said what is impacting the supply chain is that residents have given out their small currency to the retailers and from whom it passed on to the wholesalers. Though the wholesalers initially had enough currency to make the payments to the suppliers, due to the overall shortage after a couple of days they too had little cash in their hands. “Now the sale to the customers has dropped by around 25%, despite many people switching to digital or card payments, while that between the retailers and the wholesalers has dropped by over 50%. Beyond that, between the wholesalers and the suppliers the business has almost come to a complete halt,” Singh said.

According to him, the day is not far when a real shortage of goods may hit the markets. Already in some places like Gurgaon, shortages of bread and wheat flour are being reported. In such a scenario, traders believe the government should act quickly to put more money into the hands of the businesses – be it retailers, wholesalers or transporters – if it sincerely wants the supply chains to not snap.

“The easiest way to to this is either create separate queues, have separate timings or organise special camps for the current account holders, where they can safely deposit, withdraw or exchange cash. This would enable large amounts of money to move out of banks and into the hands of the traders who would then be able to keep the system running through opening new credit lines for customers and suppliers and in doing so would also be breaking the bigger cash into smaller denominations, which is being done by the overstressed bank staff right now,” said Singh.

Traders want protection, quick access to cash

Praveen Khandelwal , president of the Confederation of All India Traders, concurred with Singh’s suggestion. Khandelwal’s organisation has already sent representations to the finance ministry to demand that special camps be organised for current account holders, wholesale traders and in major markets to quickly infuse large sums of cash into the system. But, he lamented, due to the absence of any participatory governance, no one has bothered to listen to the trading community as yet.

He said this would also make those dealing in large amounts of cash feel secure as a large number of people currently in the queues are those who have been engaged by black marketeers to whiten their currency through exchange. “You almost get a sense of gangs lurking around the banks and this is scary for those who want to deposit, exchange or withdraw large amounts.” Incidentally, the Centre on Tuesday announced a scheme to put the indelible ink on the fingers of those coming to exchange currency to try and curb this practice.

Khandelwal said all that the banks need to do is dedicate two or three staff members to just cater to the current and savings account holders. “It would immensely help in putting more money into circulation.”

And just the way the user fee on ATMs has been withdrawn, Khandelwal said, the trading community wants that the Centre should subsidise the transaction cost for use of debit and credit cards to encourage their use by all traders. “This move was part of the finance minister’s budget speech on February 29, after which six or seven ministries were asked to submit their proposals. It was also part of a vision document prepared by the Reserve Bank of India. So expediting it would only help promote the culture of using plastic money and digital payment modes.”

Transport comes to a standstill

What is rapidly drying up the availability of commodities in the market is the fast depletion of cash in the transport sector. As Pradeep Singhal, working president of All India Transporters Welfare Association, told The Wire, “There are about 85 lakh trucks engaged in the transportation of goods in the country and the operations of almost all of them are fast coming to a halt.”

The reason, he said, lies in the fact that transporters have run out of cash and are no longer able to provide it to their drivers. “Normally on a trip, a driver spends between Rs 15,000 and Rs 25,000 in cash on diesel, food, entries and challans. While the government has allowed use of old currency for fuel and done away with the tolls for some time, the other expenses remain and the transporters do not have adequate new currency to meet these operational costs.”

“We are not even getting access to our accounts which are linked to our PAN cards and Aadhaar numbers. It is an unannounced chakka jam. There is no question of black or white there, it is just that the government has not made any arrangements to keep the transport sector running. I fear that with almost all the movement coming to a halt we have already initiated a period of acute shortage of supplies of all essential commodities,” cautioned Singhal.

On being asked whether the receipt of payment from retailers, wholesalers or industries was also impacting the transport sector, Singhal said the pain was more due to the inability of the government and banks to supply money to the sector to meet its operational costs. “This sector works on an average credit of 30 to 90 days. So that is not the issue here,” he said, adding that putting currency into the hands of the transporters through special queues or camps was the need of the hour.