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00:00Monica, we know that 60 percent of LNG comes from the Middle East and most of which actually goes through
00:06the Strait of Hormuz.
00:09That's right. This war and the disruptions that it's led to in terms of the energy supply chain is hurting
00:16India significantly.
00:17As Linda, this is a classic story of rising demand, import reliance, as you pointed out, and insufficient reserves.
00:24You know, gas is, as of now, still a very small segment of India's primary energy requirements, about six percent
00:32or so.
00:32But it's been growing on the back of schemes promoted by Prime Minister Modi's government to ensure a shift to
00:39a cleaner fuel, you know,
00:41and move households away from wood and kerosene and coal fired stuffs to, you know, LPG cylinders, as they're called
00:50here, which is liquefied petroleum gas.
00:52Now, we've seen demand rise significantly.
00:55As you pointed out, much of this demand is being met through imports specifically from the Middle East, which has
01:02been disrupted at this point in time.
01:04We don't have reserves for gas. We do have small reserves for crude oil.
01:09We've been able to diversify that sourcing base.
01:12Our gas has been a bit of a challenge for us.
01:14And this crisis in the Middle East has therefore caught the Indian government somewhat unprepared, if I might say so,
01:21because we have been struggling to make sure that there's enough gas for everyone's requirements,
01:27as a result of which we've seen cuts first to commercial establishments, as the Modi government prioritizes households,
01:34and, you know, to make sure there's enough cooking gas for homes.
01:38So commercial establishments of a variety have been impacted from fertilizers to tile manufacturers and to restaurants,
01:46which have become the face of this crisis because, you know, they are what everyday people use and they are
01:53such a large employer.
01:55And there are reports coming in from across the country on how large restaurants, small eateries, they're all struggling to
02:01cope with this.
02:03Manika, stick around. And speaking of restaurants, let's get perspective from Zorawa Kalwa, founder and MD at Massive Restaurants
02:11and vice president at National Restaurant Association of India.
02:15Thank you for joining us, Zorawa.
02:18First of all, give us a sense of how badly the restaurant industry has been impacted.
02:23We know that, you know, restaurants have removed rotis, puris from the menu already.
02:32Yeah, thanks for having me. As Manika said, we rely mostly on imports and the imports are almost completely stopped,
02:41although some good news is creeping in. But before that, let me address the size and the importance of the
02:45industry.
02:45As Manika said, we're the second largest employer of humans in India after agriculture.
02:49So that's about eight million people directly employed and another eight million through ancillary industries.
02:54We're also a contributor to the GDP in a major way.
02:57I mean, there's the fourth largest economy in the world, and we contribute between two and three percent to the
03:01country's GDP.
03:02So it's an important industry. And the fact is that it's about a 6.6 lakh crore ecosystem.
03:08That's about 71 billion a year. And 75 percent of this relies on LPG.
03:1325 percent relies on CNG, piped gas, that is, or electric.
03:17But 75 percent of all the restaurants and hotels in the country rely purely on LPG as the primary form
03:23of cooking.
03:23So it is obviously, you know, it is it can become a huge crisis if not addressed immediately.
03:30At this point in time, we're seeing shortages across the country in tier one and tier two cities.
03:34Many restaurants and hotels are facing a difficult to kind of, you know, keep to survive the weekend.
03:40And many are already shut. Many have also already moved to much smaller menus that rely on non LPG based
03:45cooking solutions.
03:46That being said, we've also been receiving some good news. So this news is fresh, right?
03:52There's a fluid situation. Things are changing by the hour, by the minute.
03:55Yesterday, the union minister for petroleum and gas, Mr.
04:00Haddi Pudi, had said that the commercial supply of LPG will start again.
04:06It's not started yet, but it appears that that's in the works.
04:08And the second thing also we've been hearing is that a big a big cargo ship carrying about one point
04:14three five lakh cubic tons of gas have reached the Mumbai ports.
04:19Another one is on the way. So there is some silver lining that we're seeing.
04:22But at this point in time, if you take a snapshot in time as of this morning, there is a
04:27major challenge being faced by a majority of the institutions that serve food.
04:31And remember, this is a country that I mean, our industry feeds the nation right in a way.
04:36So this is a this is a challenge that hopefully will be contained.
04:40We're hopeful seeing the action being taken over the past 24 hours at this point in time.
04:45It remains a it remains a challenge.
04:48Zora, give us a sense of how much of the industry will be impacted.
04:52How might this play out? I mean, the smaller players, for instance, will find it hard to survive.
04:59Absolutely. And that's the real painful thing, right?
05:01Like the larger company still may be able to hold some kind of inventory in banks, although that's also dwindling.
05:06The smaller one does not have a robust or sophisticated vendor management system or ability to hold inventory costs.
05:14So the smaller one is the one, unfortunately, that ends up taking the brunt of it.
05:18And that's being taken into cognizance by the government and the authorities.
05:21And as a result and as a result also of the efforts that the NRAI has done, which is the
05:26body that I represent,
05:27which is the largest representation of restaurants within the country we've done.
05:32We've been proactive. We've been reaching out to the powers that be.
05:36We've been going on media outlets such as yours to spread the word that this is actually an impending crisis.
05:41This could be, if not addressed immediately, an existential crisis.
05:44So keeping all of that in mind, unfortunately, the smaller one will be affected the most.
05:50But look at the ecosystem. If the delivery kitchen stop, the entire gig economy also gets affected.
05:56So there is a lot at stake here. There's no doubt.
05:58And that's why the government is taking extreme steps and is acting fast.
06:02The pace of work and the pace of action is actually very, very quick.
06:07We just hope that the results start coming out faster, the LPG starts flowing in.
06:11And obviously, as an overarching thing to all of that, we hope the war stops.
06:19So, Rav, if I can just jump in with a few operational questions here.
06:23Do restaurants, broadly speaking, across the country have access to any LPG at this point in time?
06:28I know that, you know, the minister said what he said yesterday about making some allocations,
06:33commercial LPG allocations available to the industry.
06:36When is that going to start? Any details available?
06:40So we at the NREI have been speaking with the top leaders of the three large oil companies, right?
06:46IOC, HP and Bharat Petroleum.
06:49And they have all now, as of yesterday, the mandate had not reached them.
06:54But I think, but we spoke early in the morning.
06:56And post that, I think this information was released.
06:58So right now, the supply is dwindling.
07:01There is very limited supply.
07:03In most cases, whatever was left over with the vendors, the distribution vendors, that's what's remaining.
07:09In my system, if I were to tell you, and we're in many cities around the country,
07:12we've not been having access to any fresh supplies at the moment.
07:18Whatever we have is stock that we've already had.
07:20And that probably will not last the weekend.
07:21So, yes, there is a definite dearth of availability currently.
07:27That being said, with the new mandate being given out to ensure that commercial LPG is made available,
07:32and our internal talks with the three largest LPG producers in the country,
07:37it appears that production will also be ramped up.
07:40And the moment the clarity is given from them, see, they had been asked to prioritize domestic over commercial.
07:46That makes a lot of sense.
07:47These are war times.
07:47And we have to ensure that people's houses are fed.
07:50But at the same time, if our restaurants...
07:52No argument there, Zeravar.
07:53No argument there.
07:54I'm just trying to figure out what happens in the next few days now.
07:58If it takes a while to be able to make LPG available to your industry,
08:02are you going to see significant closures over the next 24 to 48 hours?
08:07You are an association that represents, what, 500,000 restaurants?
08:11Are we going to see a significant number of them shut down over the next two days?
08:17Unfortunately, that could be the case.
08:19And you are already seeing people to do two things.
08:22One is either move to a very restricted menu using, you know, equipment that they can serve food on.
08:27And the second is absolute closure.
08:28And, yes, that's what's happening.
08:30People are now moving to a lot of alternative forms of cooking.
08:33We at the NRAI have issued an advisory that clearly mentions how they can use other forms
08:39and actually continue their business, at least not shut it down completely.
08:42But, yes, there have already been shutdowns.
08:44And we expect more over the course, over this weekend.
08:48And, yes, this number could version even further.
08:52Zeravar, you talk about how commercial...
08:56Hass, I just want to ask a quick follow-up question.
08:59Yeah, just a quick follow-up question on when, you know, Zeravar says that several restaurants have been,
09:05you know, sort of advised to move to other forms of cooking.
09:08How easy or difficult is that to suddenly move from gas-powered ovens or gas-powered stoves
09:14to move to electric stoves?
09:17Even that retrofitting, if it can be done for the large restaurants, would take days, right?
09:23Yes, absolutely.
09:24It cannot happen overnight.
09:25The equipment has to be ordered.
09:27It has to be plugged in.
09:28You may not have that kind of electrical load to put, because these were designed with gas in mind.
09:32So now you suddenly have to have enough electrical load in your kitchens and in your cloud kitchens.
09:36Cloud kitchens are usually very small, about 300, 400 square feet.
09:40And you might not even have the electrical load to be able to, you know, power these equipments.
09:45So it's not going to happen overnight.
09:47I'm just saying that if this goes on and if the supply lasts longer,
09:51there has to be some action taken by the industry.
09:54And the NRAI has then, as a result, issued this waiver.
09:58But like I said, I'm hopeful we don't come to that, because India only produces about 40% of its
10:03own LPG,
10:04which I believe the oil companies have been asked to ramp up to by a few percentage points.
10:09So that might go up to 50%, 55% of original requirements.
10:11But that still means you're at half.
10:13So, yeah, imports will be required.
10:15And there is no immediate, there's no, there's only, there's no band-aid solution here.
10:21This will be a slightly longer process.
10:24But yes, there will be some damage, some collateral damage, some, you know, some, I hope no livelihood loss,
10:31because this is temporary, it's a blip, and it's not lost last long.
10:34So that's our hope.
10:34And I think the action that's being taken could be resulting in ensuring that this large,
10:39large industry, that's very important, feeds the nation, continues to survive the kind of support we got in the COVID.
10:47Zorawa, you talked about how commercial gas supplies are on the way, but they come at a higher price tag.
10:55Are restaurants willing to absorb the cost, or will that cost eventually go to the consumers?
11:02Well, in the short term, they don't go to the consumers.
11:04They're absorbed by the people serving the food.
11:06I'm not aware of any increase in prices at the moment.
11:08So I don't have any information directly related to that.
11:11Commercial cylinders were always more expensive to begin with, right?
11:14Because it's for a business.
11:15Domestic cylinders, which are smaller in size, are significantly cheaper.
11:20And the larger ones that are the commercial ones were always more expensive.
11:23So I'm not sure if there's going to be an increase in price.
11:26But naturally, if you're talking about people hoarding it, and then, you know, individual vendors supplying it to restaurants and
11:32hotels at an increased cost,
11:34that happening, yes, that could be happening.
11:36But I'm not sure that the official supply of commercial LPG will be at a higher cost.
11:41I'm not aware of that.
11:43It shows the fragility of the supply chain right there, Zorawa.
11:48I'm just wondering whether restaurants, you know, can take measures to ensure that they're in a better position the next
11:54time this happens.
11:58Well, we've obviously learned, right?
12:00We learned a lot from the COVID.
12:01I didn't have a delivery business when the COVID started, and now it's one of the largest parts of my
12:05business.
12:05So we learned.
12:06We're eternal optimists.
12:08That's what the restaurant industry is.
12:10And we're hopeful that we're going to learn from this.
12:12We will have to rely on alternative forms so that if any form of our – see, we're heavily dependent
12:17on LPG.
12:1875% of all restaurants and kitchens produced 90% of their food on LPG.
12:23I think that dependence has to be rationalized and mitigated.
12:28We should look at other forms.
12:29There's another big challenge.
12:30Coal is not allowed in many parts of the country.
12:33Coal was fueling the tandoors.
12:34You mentioned the roti and the pudi in the beginning.
12:35Not the pudi, but the roti definitely is made in coal tandoors, which was banned because of pollution reasons in
12:41Delhi and Mumbai.
12:42And as a result, a small dhaba person with a small little tandoor that is serving maybe two dishes and
12:49chapatis or rotis with his food is not able to even serve that because of his lack of his gas
12:54connection.
12:55We'll have to rely on other forms of cooking.
12:58We'll have to come up with perhaps more percentage of our system being reliant on piped natural gas rather than
13:04the cylinders, which we're currently reliant on, 75% of us.
13:08And, yes, this is going to be a learning experience.
13:10And I'm hoping that – well, we're definitely going to come up with a directive and an advisory based on
13:15the learnings of this particular episode and pass that on to the entire industry at large so that we face
13:21the brunt of a situation like this much less next time around.
13:25So, Rav, I know that Haslinda mentioned to you about rising prices.
13:31You know, gas prices are up across the world.
13:34Eventually, that's going to feed into your costs as well, plus the disruption of these last few days.
13:40You know, even if you curtail menus, you are going to lose some customers.
13:44You know, we're going to see costs across the supply chain go up.
13:48So, talk to us about how you see that being passed on to customers because there is a broader economic
13:54impact of this on the economy in terms of inflation.
13:57And the second thing I want to talk to you about is if you do see disruptions between even emergency
14:02supplies coming your way, are you fearful of labor returning back to their homes in smaller towns and villages because
14:10the restaurant industry does depend a lot on migrant labor?
14:15Yeah, we've seen this before, right, America?
14:17We saw this during the COVID in 2020 and the second phase in 2021.
14:22Yes.
14:23So, if this lasts long, then naturally, if the input costs go up, say, for the next six months, you're
14:30going to have to see many price revisions, right?
14:31Because, remember, our industry runs on thin margins.
14:35It's not like we have crazy margins.
14:36We have limited margins and we have to play within those margins.
14:39And anyway, there are major constraints as a result of, you know, this war.
14:43Not just the cost of LPG, but the cost of common goods could also go up.
14:47If crude gets affected right now, it appears that in India we don't have those limitations.
14:51But if that happens, then obviously the cost of even basic fruits and vegetables would go up.
14:56Imported food would definitely be going up.
14:58So, a lot of our restaurants rely on imported items such as cheeses that will perhaps become more expensive.
15:03If this goes on for a longer time, then menu revisions will happen.
15:07And the cost of ordering in or dining out could potentially be impacted.
15:12But that all remains to be seen.
15:14Last time in the COVID, this did not happen because we were able to somehow mitigate.
15:18There was many other people supporting us.
15:20Landlords not charging rent, et cetera, et cetera.
15:22If the entire ecosystem works together, then you may not have the passing on of the increased cost to the
15:28consumer.
15:28But obviously, if we're left out in the lurch and there's no support from, you know, other parts, other people
15:37of the ecosystem,
15:37then you could see eventually this carries on that the price of the things will go up because costs of
15:42not just LPG.
15:43I think if this goes on for a long time, the cost of even fruits and vegetables and basic items
15:47could go up.
15:53Okay, all right.
15:54So, I have one final question from me, and that is that, you know, this is an industry, like you
15:59said,
15:59has faced significant challenges over the last five years.
16:03Things like COVID, things like, you know, sort of quick commerce or 10-minute delivery and cloud kitchens, and now
16:11this.
16:11What do you see being the broader impacts on entrepreneurs like you who have large restaurant chains across the country?
16:20What do you see this industry emerging as at the end of all of this?
16:26Stronger than ever.
16:27That's what happened during the COVID.
16:28I think it shows the resilience that the industry has.
16:30Like I told you, if you're in the restaurant business, you better be an eternal optimist.
16:34So, that's what we are, and we're very hopeful for the future of this country.
16:37I think the current economic and consumption trends of this country bowed to the fact that all the companies
16:42that are serving food of high quality around the country are only going to burgeon from here.
16:47So, we're very hopeful about the future, for sure.
16:48If you ask me what is going to happen a month from now, I think there might still be remnants
16:52of this crisis remaining.
16:53I'm hoping that the LPG issue will be resolved.
16:55But overall, the industry has just started out.
16:58We're at the nascency phase still, if you compare us with the Chinese or the American markets
17:02or even the other Southeast Asian markets.
17:04We're still a small fraction of what those markets are.
17:07Although the consumption at the urban level is going to burgeon to an incredible amount by 2030.
17:12I think we're going to increase, we're going to have the largest urban domestic consumption market in the world by
17:182030 or 2032, is what I've read.
17:21So, yes, the long-term prognosis is brilliant.
17:24We came out not unscathed.
17:26We came out hurt and damaged and bruised after the COVID.
17:29And we're expecting to come out hopefully much stronger than that this time around because I hope that this can
17:34be resolved sooner.
17:35But, yes, overall, deeply optimistic about the future of the industry.
17:39And we hope that this crisis is resolved soon.
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