Falling demand and lack of government support are expected to be the reason for Parle Products considering a massive layoff of about 8000-9000 employees.
The consumption of biscuits in the rural market, which accounted for sales worth more than Rs 10,000 crore, has fallen drastically owing to the increased Goods and Services Tax (GST).
The Company has been requesting a reduction in the GST on biscuits priced at Rs 100 per kg or below, which are available for Rs 5 a pack in the market. The tax was 12 per cent earlier, but now, with the introduction of GST, the tax is fixed at 18 per cent, for all categories of biscuits, irrespective of their price. This has forced Parle to increase the price of the biscuits by five per cent. This naturally caused a drop in sales. The multiple biscuit brands meant for the mid- and low-income consumers bring in the maximum revenue for the Company. Only if the GST hike is withdrawn by the Government can business hope to pick up.
However, in the absence of any positive action on the part of the Government, the Company, which has a workforce strength of a lakh, will have to downsize.
These issues are posing a challenge to all biscuit manufacturers and not just Parle. Even Britannia has noticed a drastic fall in sales, so much so that customers are refraining from buying even the economical packs that cost merely Rs 5.