Leather industry plans to double market share

4 April 2001




The industry is keen on taking India's share in the global market to 10% by the turn of the decade, CLE chairman M M Hashim says. In dollar terms, the leather industry is looking at exports worth $3.5 billion by 2005, compared with the current financial year's estimate of $2 billion. Leather exports crossed the $1.6 billion mark during the first three quarters of the current financial year and after five years of stagnation business is once more showing a healthy rate of growth. Demand for leather upholstery and garments is picking up in the global market and after a five year gap, investments are now once more beginning to flow. The footwear industry is still a matter of concern. The current rate of growth is only around 5% and the plan is to increase it to 14% over the next five years. Industry is looking to the government to provide a boost by dereserving the leather sector. This will bring in the much-needed FDI which has so far eluded the leather sector. Apart from conversion of semi-finished leather to finished, all other segments of the industry are reserved for small scale units. Another worry of the industry is the recent anti-dumping investigation launched by South Africa against Indian leather garments. A delegation led by N L Lakhanpal, director general of foreign trade, is visiting South Africa to try and sort out this case. Hashim said the Indian leather industry is now looking at steps to increase its market share in the US. At the same time efforts are being made to tap other markets such as Chile, Argentina, New Zealand, Australia and Mexico. In the wake of the WTO agreements and the consequent free movement of goods between countries and also globalisation, several doubts have been raised. A recent notification by the Indian Ministry of Commerce permitting free export of semi-processed hides and skins, albeit with an export duty, was not welcomed by many. Also the leather industry, academia and government institutions are coming together to work out a marketing strategy to counter the threat posed by the opening of the floodgates to Chinese goods due to the WTO rules. At the inauguration of the Leather Research Industry Get-together (LERIG) organised by the Central Leather Research Institute (CLRI) and eleven industry associations, the focus is now stated to be on developing strategies to counter the threat. M Rafeeque Ahmed, president of the All-India Skin and Hide Tanners and Merchants Association (Aishtma), said that in the last few years the leather industries in China, Thailand and Indonesia had grown due to relocation of units from other countries. No heavy foreign investment had come into the leather sector in India. If this came, then the Indian industry, respected for its quality, could grow faster, he said. Dr T Ramasami, director of CLRI, said that the real competitive advantage of the Indian leather sector came from the fact that the country had access to 10% of the raw material and 50% of the technical manpower of the world. India restricted the export of raw hides and skins in the sixties at a time when the semi-processed EI (East India) hides and skins constituted the bulk of exports. Then the industry occupied the third or fourth place in the export league with shipments of around Rs1,840 million (US$42.8 million), of which semi-processed amounted to Rs1,530 million, finished leather Rs170 million and leather footwear hardly Rs100 million. Leather garments and goods were negligible in 1972. Raw hides and skins were brought from different centres including upper India to the numerous EI tanneries in Tamil Nadu, particularly to the North Arcot (now Vellore) district. The Kolkatta region had also developed a new process known as 'wet-blue', better than raw but nowhere near EI. A quota system for phasing out exports of semi-processed hides and skins was introduced in 1973. The EU lobby tried hard to stall the new policy but the Central Government stood firm in the welter of opposition. Out of exports of around Rs70,000 million today leathergoods and footwear constitute about 83% and finished leather about 15%. In 1999-2000, finished leather accounted for Rs10,350 million, footwear Rs14,330 million, footwear components Rs9,940 million and garments Rs13,800 million, leathergoods Rs16,670 million, sundry items made from leather Rs1,550 million and semi-processed practically nil. However, compelled by the WTO dispensation and the consequent EU pressure, export of raw hides and skins and also semi-processed leathers are now permitted with export duty of 50% and 15% respectively. The question arises as to whether India will revert to being exporters of raw materials? According to two objective leaders in the industry, one of whom is a UN Indian expert, since imports of raw hides and skins is freely permitted and the fact that imports are taking place to the extent of Rs15,000 million (US$ 348 million), there is no need for any such anxiety. Imported hides are also used on a large scale in footwear and consequently good quality goat skins can be exported for high value foreign exchange. There are also many sources of raw materials such as African and south east Asian countries. They are also of the opinion that foreign investments in leather, particularly in the footwear sector, are not taking place on a significant scale because of the reservation of the footwear sector for the small scale sector. But it should also be noted that for a variety of reasons, joint ventures with foreign producers have not always worked well in the leather sector. There is always the danger that production of garments, leathergoods and footwear could shift back to countries such as Italy and Spain.



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