Millennium Post

Leather industry needs a push

It is no doubt, the flavour of the season to wrest the best benefits by domestic export constituencies, with the new five-year Foreign Trade Policy for 2014-19 continuing to be in work in progress mode even a few months past its due date of announcement. The National Democratic Alliance (NDA) led by the BJP can bolster India’s leather industry both for its export potentials in general and the untapped and unmet demand from domestic users of leather products ranging from finished leather, footwear, leather garments, leather goods and saddler and harness items to footwear components in particular.

Despite the modest overall export growth in the current fiscal, it is the leather export segment that has consistently come out with a laudable show on the foreign trade front, by clocking double-digit growth for the past couple of years, a salutary trend it is maintaining this fiscal too. In 2013-14, export of leather and leather manufactures logged a robust 16.49 per cent growth, fetching a valuable foreign exchange receipt of close to $5.7 billion, against $4.9 billion in 2012-13, the inaugural of the current 12th Five Year Plan. What is particularly noteworthy is that the country’s leather exports bucked the insipid tardy trend manifest in most export products and markets by posting a wholesome 22 per cent growth during the first half of the current fiscal with export receipts provisionally put at $3.5 billion, compared to $2.9 billion in the corresponding half of last fiscal. No wonder, the Council for Leather Exports (CLE) Mr Rajendra K. Jalan sounds gung-ho over the good show so far on the export front to contend that, ‘we will be able to reach an export value of $7.32 billion during the current year which will be a major achievement’.

Echoing similar sentiments of robust optimism, the Federation of Indian Export Organization (FIEO) president, Mr Rafeeque M. Ahmed said the country had been posting consistently double-digit growth in leather exports and it presaged well for the leather industry. Incidentally, Mr Ahmed who heads the Chennai-headquartered Farida Group of companies that manufacture and market high quality men and women footwear and finished leather with an estimated annual turnover of $170 million has made a modest start to export leather goods to China last year.

Starting with a $15 million export of leather goods to the Middle Kingdom in a fiercely competitive and considerably huge market like China, Mr Ahmed said that though less-developed countries like Bangladesh which enjoys duty-free entry into China is posing pricing difficulty for Indian leather products of diverse variety, the Indian authorities can take up with their Chinese counterparts the crucial issue of getting  the high 17 per cent import duty it imposes on Indian leather goods pared down.

As India currently suffers a huge trade deficit with China, the surefire way to get market access to China is to get round the Chinese mandarins the need for bringing down the applicable import duty on Indian leather wares so that its export of these items can be increased over the long haul. Mr. Ahmed said India need not worry over influx of Chinese goods into India if it goes ahead forging a free-trade pact under which duty barriers are brought down in both the countries so that quality goods that are price-competitive could find free entry in both countries.

This would be an effective answer to the counterfeit goods currently inundating Indian markets with consumers getting a grip over their track record of poor performance and absence of after-sale service so that market places and forces would automatically spurn such spurious goods by a natural process of elimination of the bad and selection of the best. He said Indian leather industry should diversify more into life-style products and home-furnishings as the overseas demand on these items continue to be considerable and lucrative.     

With the Modi  government being serious about reviving manufacturing activity and according primacy in the overall national output through the launch of ‘Make in India’ campaign, Mr. Ahmed felt that labour-intensive industries such as leather and garments would help in this exercise. He said the need for scaling up manufacturing activity in these industries can get a real leg-up and a lot of incentives from the authorities through purposeful and useful policy interventions on several fronts including provision of raw materials at affordable cost, flexible labour policy and an enabling environment for hassle-free conduct of trade, both in the domestic and overseas markets. He said the authorities had already approached the leather industry for suggestions and the CLE would be forwarding them their genuine concerns and demands on these counts.  In this context, the domestic leather industry seeks the continuation of all existing schemes for the leather segments under the FTP, besides a few additional ones in the forthcoming foreign trade policy.

One of the additional measures the export segment wants is the inclusion of 6 per cent duty credit scrip for Ladies and Children footwear as there is humongous leeway for export of these items and they constitute a substantial chunk and share of about 70 per cent in the global footwear market.

The industry is also pleading for re-allowing import of second hand capital goods under Export Production Capital Goods (EPCG) Scheme. This will definitely go some if not a long way in enabling the labour- intensive but capital-starved industries in the lower and middle segments to reduce the machinery input costs and focus on churning out price-competitive export wares.

The leather industry is hopeful that its litany of concerns would be genuinely addressed and the industry, both for domestic sales and overseas markets, would find the tasks on hand manageable and rewarding by redeploying returns and remain invested over the long time to provide the muscle and sinews for the domestics manufacturing sector.  

It is time the authorities turned their focus on this labour-intensive industry for all the support it seeks so that this would not only help the industry but in the process also render the ‘Make in India’ mantra a veritable and pragmatic proposition, policy wonks say.

Meanwhile, the CLE has mapped the leather and products industry within the country by commissioning studies through professional networks on four important segments including study on raw hides and skins, tanning industry, study on leather products manufacturing industry, study on footwear manufacturing industry and study on domestic retail industry for footwear, leather goods and accessory industries.

These studies have since been forwarded to the Department of Industrial Policy and Promotion (DIPP) to take a swift call on their funding and commissioning. The industry is quite confident that the resultant strength, weakness, opportunities and threats (SWOT) analysis would help forge appropriate responses for emerging competitive across products and markets.

As the country holds a minuscule share of 3.05 per cent in the global leather trade of $160 billion, more needs to be done by the authorities to enable the industry leave its footprints across the global market by process and product improvements. With the country’s leather industry estimated at $11 billion comprising of $6 billion export and $5 billion of domestic sales, more needs to be done under the Indian Leather Development Programme (ILDP) that is designed to augment raw material base through modernization and technology upgradation of leather units, addressing ecological concerns, human resource development, bolstering traditional leather artisans and infrastructure constraints and putting in place institutional facilities. IPA

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