Indian Leather Industry

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A.Department of Business Administration University of Lucknow Business Policy & Strategic Analysis Term Paper Industry Profile on: Leather Industry In India Submitted toProf J. Dept. of Business Admn. K. Sem 3 rd finance 2 .B. Sharma Faculty. University of Lucknow Submitted byPallaviBhargava M.

Prof.ACKNOWLEDGEMENT I would like to take this opportunity to thank all those people who have contributed towards the completion of this term paper. I would also like to thank all my friends and family for their constant support. Sharma for the informative and interactive class sessions on strategic management. J. First of all I would like to thank my teacher. -Pallavi Bhargava 3 . K.

REFERENCES Page No. PORTERS FIVE FORCES MODEL 7. MAJOR PLAYERS 5.CONTENTS Topic 1. SWOT ANALYSIS 8. CONCLUSION 11. 4 5 6-7 8 9 10 11-12 13-14 15-16 17 18 4 . INTRODUCTION 2. ENVIRONMENTAL ISSUES 10. GOVERNMENT REGULATIONS AND SUPPORT 6. MAJOR PRODUCTION CENTERS IN INDIA 3. STRUCTURE OF THE INDUSTRY 4. COMPETITIVE ADVANTAGE 9.

ensuring jobs for over 2. Wellrecognized in the international market.50 million workforce (30% women) ‡ Promising technology inflow and Foreign Direct Investment ‡ Enormous potential for future growth (domestic as well as export) 5 . is placed third.354 billion Euros) ‡ Annual export value over Rs. with 75 per cent of the production from small and cottage sectors.354 billionEuros) and exports of Rs. the leather industry generates employment. such as tanning and finishing.e.5 million people.56 billion (3. 186. Besides being a significant earner of foreign exchange. Indian leather sector : A profile r sector: A Profile India is the largest livestock holding country 21% large animals and 11% small animals ‡ A source for 10% global leather requirement ‡ Annual production value over Rs. skills and products i. Apparently because leatherwear still enjoys agreat demand abroad and now-a-days even the domestic market is developing and consumingthe offerings of this industry.56 billion (3. is well-structured and spans various segments. livestock. 125. leather garments. 186.activities. 125. the Indian leather goods constitute about 7 per cent of India¶s export earnings.225 billion Euros) ‡ Export growth CAGR (compound annual growth rate) 8. leather products and exports. while developed markets such as the US are major consumers of leather products.46 billion (2. with an output of Rs.46 billion (2. The Indian Leather Industry is growing by leaps and bounds.225 billion Euros). including saddles and harness. One must be wondering why India isexporting so much of leather to western countries.INTRODUCTION The Indian leather industry. India.61% (5 years) ‡ About 2. The industry covers a vast spectrum of inputs. It is now poised for a big leapto double its global share from the present 3%. footwear and footwear components. one the most vibrant sector of the country¶s economy. hides and skins. tanning. leather goods.

Bata India Limited is India's largestmanufacturer and marketer of footwear products. Major production centers and Number of leather and leather products industries in U. This is the only centre in India where saddlery products are manufactured.P. Bata India secures its leather supply from two tanneries in Mokamehghat (Bihar) and Batanagar (West Bengal). The major production centres in tamilnadu are Chennai. y Uttar Pradesh U. Main plant is located in Batanagar near Kolkata. Claiming a share of 22% U.Ambur. Agra has been the biggest centre for shoe-manufacturing in the country. 11500 of which Kanpur and Agra are the two famous production centres in the world.P. The number of manufacturing industries engaged in leather products is 538 in West Bengal. Leather industry occupies a pride of place in the industrial map of Tamil Nadu. Ranipet. ranks Ist in case of Buffalo and IInd in case of Cattle having a share of 12% Thus.P. 6 . Trichy and Dindigul.Kanpur is a prominent centre for leather processing. y West Bengal West Bengal is one of the country's top states for export of finished leather goods. About 200 tanneries are located in Kanpur.. Vaniyambadi. is one of the most important states in India holding sizeable population of live stock. The tanning industry in India has a total installed capacity of 225 million pieces of hide and skins of which Tamil Nadu alone contributes to an inspiring 70%. has a very strong raw material base and all types of main raw material for leather industry are available.Kanpur tanneries specialize in processing hides into heavy leather (Sole. are to the tune of approx.MAJOR PRODUCTION CENTERS IN INDIA Major production centers in India are y Tamil Nadu Tamil Nadu has a dominant presence in the leather and leather based industries. harness and Industrial leather). U.It has 5 plants near Kolkata.P.

folios. these are Tanning and finishing Footwear and footwear components Leather goods Leather garments Footwear and footwear components sector India is the world's second largest producer of footwear. in addition to bags. footwear accounts for 18 percent share of total exports of leather exports. Bangalore. Kanpur and Calcutta employing skilled human resources and equipped with modern and sophisticated machinery account for a diversified range of superlative small leather goods including bags. industrial gloves etc. the capacity for the leather garment industry has been rising and ispresently 18 million pieces per annum. 7 . Major production centres are Chennai (Madras). and booties. wallets. Various types of shoes produced and exported from India include dress shoes. ballerinas. Kanpur.sports goods. At about US $ 300 million per year. Most of the modern footwear manufacturers in India are already supplying to well established brands in Europe and USA Leather garments sector The Leather Garment Industry occupies a place of prominence in the Indian leather sector. Due toincreased export demand. Modern factories have been established in the small-scale during the last decade. moccasins. ruck sacks. handbags. sports shoes. purses. travelware. shirts. pant/short. sandals. its production estimated over 700 million pairs per annum. Agra. Mumbai (Bombay). Delhi. horacchis. Indian Leather Goods Industry Items produced by this sector include. mostly in the vicinity of urban areas of Chennai. aprons and industrial leather garments. long coats. upholstery and saddlerygoods. brief cases. Delhi and Hyderabad.STRUCTURE OF THE INDUSTRY The leather industry is spread in four broad sectors. children garments. A surfeit of modern units in Chennai. motorbike jackets.The second most important product made out of leather is leather garments. handgloves and industrial gloves. The product classification of leather garments comprise of jackets. casuals. wallets. belts. waist coats. Calcutta and Jalandhar.

P 12%. The major importers of Indian saddlery are Germany. while maintaining an average growth rate of 11 per cent in the last year. 8 . this sector has a share of 20. Tanning and Finishing sector The Indian market has been fragmented with about 2200 tanneries of which 2100 are small scale units and over 8000 leather product manufacturing units. Netherlands. with an offtake of about 25 per cent of the leather goods produced in India followed by USA.53 per cent in the leather industry. Tamil Nadu accounts for 52%. Scandinavia. Andhra Pradesh and Punjab. Australia and New Zealand. From then on initiatives were taken to develop. in the state of Uttar Pradesh. Tamil Nadu. France and Italy. France. With products ranging from designer collections to personal leather accessories. Japan. Kanpur. The other important states are Maharashtra. Kanpur. UK. UK. the tanning industry largely exists in the small-scale sector with a share of 93% in the total number oftanneries in the organized sector. because of its specialisation in tanning and finishing of buffalo hides is the only centre in the country where harness leather. Indian Saddlery Industry India is one of the largest producers of saddlery and harness goods in the world. Of the total number of tanneries in India. out of which approximately 105 are 100% export oriented units. USA. is manufactured. Looking from the angle of scale of operations. which is major input for saddlery industry. The tanning industry is concentrated in three states viz. West Bengal and Uttar Pradesh. the industry and today there are over 150 units in the organised sector. is a major production centre for saddlery goods in India accounting for more than 95% of the total exports of saddlery items from India. West Bengal 23% and U. The saddlery industry was established in the 19th century primarily to cater to the needs of military and police.The major market for Indian leather goods is Germany.

: Situated in Unnao near Kanpur RSL Industries Ltd. :It was established in 1962. : Based in Chennai.one of the largest export house in India Farida Shoes Ltd.is the leading leather and leather footwear exporters in India with a turnover of approximately 170 million USD. the company has emerged as a frontrunner in the manufacturing and marketing of leather and leather footwear.: the company has its production unit in Chennai Presidency Kid Leather Ltd. tamilnadu Hindustan Lever Ltd. Farida shoes ltd. situated in Chennai. T.Today.MAJOR PLAYERS Tata International Ltd.: the company has its production unit in Chennai 9 . Abdul Wahid &Company :the company is based in Chennai. The company has its headquarters in Delhi and production unit at Kanpur. Super House Leather Ltd.:subsidy of Hindustan Unilever Ltd. :Mirza International Limited (formerly known as Mirza Tanners Limited) was incorporated on 5th September 1979. Mirza Tanners Ltd.

y Several leather goods have been de-reserved from the small Scale Sector. y Free export of raw hides & skins. y Policies to facilitate modernization / up gradation: In June 2005 the government initiated aRs. the Government has given support to wellequippedtraining institutions to encourage training programmes to be given jointly with reputedforeign enterprises and experts. y Establishment of µdesign centres¶ at individual manufacturing units. 2788. technology upgrade. To encourage training of unorganized artisan workers. These includes raw material augmentation. The CLE serves as a bridge between Indian leather exporters andbuyers all over the world. y Free import of raw hides & skins. The assistance will be to the extent of 30% of project cost for Small scale industry (SSI) units and 20% for non-SSI units. 25 % of the project cost is provided to the units under the market access initiative scheme of the Ministry Of Commerce and Industry. whereby all leather tanning and product units will be eligible for modernization assistance. 10 . the Council functions under the Ministry of Commerce.82 Million Euros) µmodernizing scheme¶ called the µIntegrated Leather Development Programme¶. and promotion of environmental cleaner processing options.the various measures taken by the government are as followsy De-licensing of integrated tanneries that convert raw hides and skins into finished leather. the Indian Government has placed an emphasis on the utilization of the available raw materials to maximize returns. Government of India. The regulatory body for this industry is Council for Leather Exports (CLE) The Council for Leather Exports was set up in July 1984. A non-profit company registered under the Indian Companies Act. with the special emphasis on integrated development of the tanning sector. 1956. y Concessional duty on imported machinery and chemicals.45 million (50. semi-finished and finished leather. The Council's activities also include promoting Foreign Direct Investments and Joint Ventures in the Indian leather industry. It has introduced a number of initiatives.GOVERNMENT REGULATION & SUPPORT With an eye on the potential of the sector. The Council is entrusted with export promotion activities and overall development of the Indian leather industry. quality standardization and human skills development. semi-finished and finished leather and leather products. to facilitate improvement in design capabilities: Under this scheme.

due to presence of various leather substitutes. Barriers to entry in this industry is not high due to cheap labour cost. The large population of cattle. gloves. some of the leather available in India is premium quality andmuch sought after. India has among the lowest cost of labour among key footwear producing countries. The bargaining power of these countries has increased due to stiff competition from other exporter countries like China and Italy. Bargaining power of buyers :Indian leather industry basically is a export based industry catering to US and European countries. In addition..Leather products cater to countries like Germany. 11 . hence the threat of substitute is not very high since the product is considered as a niche product in these countries. goat andsheep that the country possesses ensures that India has ten percent of the world¶s raw material base. and low capital investment. valets etc. etc.PORTER¶S FIVE FORCES MODEL Threat of substitutes :In this industry the threat of substitute is moderate.In footwear sector and leather goods sector there is a moderate threat from rexine and canvas shoes. Multinationals like Irving shoes and Liberty have entered in the domestic market. handbags. skilled labour is quite relevant to industriessuch as manufacturing of leather goods and footwear that are manufacturing of leathergoods and footwear which are relatively labour intensive. These factors increase bargaining power of suppliers. Bargaining power of suppliers : India is the largest livestock holding country with 21 percent of the large animals and 11percent of small animals in the world. UK. buffaloes.China is the biggest threat to indian leather industry due to its cheap labour.leather substitutes like rexine and canvas.Fast changing fashion trends are difficult to adapt by the small scale sector hence the competition has increased in the domestic market as well as international market. Barriers to entry:India¶s advantage as a source of low cost. US. Competition :the competition has increased due to entry of multinationals in domestic market.

‡ Exposure to export markets. ‡ Exporter-friendly government policies. ‡ Tax incentives on machinery by Government. ‡ Lack of modern finishing facilities for leather. WEAKNESSES ‡ Low level of modernisation and upgradation of technology. 12 . ‡ Comfortable availability of raw materials and other inputs. ‡ Less number of organised product manufacturers. ‡ Low level of labour productivity due to inadequate formal training / unskilled labour. ‡ Difficulties in accessing to testing. ‡ Unawareness of international standards by many players as maximum number of leather industries are SMEs. ‡ Horizontal growth of tanneries. designing. ‡ Environmental problems. ‡ Massive institutional support for technical services. designing and technical services. and the integration of developed technology is very slow. ‡ Well-established linkages with buyers in EU and USA.SWOT ANALYSIS STRENGTHS ‡ Existence of more than sufficient productive capacity in tanning. ‡ Managements with business background become quality and environment conscious. ‡ Easy availability of low cost of labour. ‡ Presence of qualified leather technologists in the field. manpower development and marketing.

‡ Fast changing fashion trends are difficult to adapt for the Indian leather industries. ‡ Improving quality to adapt the stricter international standards. Thailand. ‡ Growing fashion consciousness globally.There is lot of scope for diversification into other products. Indonesia. ‡ Limited scope for mobilising funds through private placements and public issues.) ‡ Non.tariff barriers . leather garments.(The performance of global competitors in leather and leather products indicates that there are at least 5 countries viz. 13 . China. Vietnam and Brazil. namely.Developing countries are resorting to more and more non ± tariff barriers indirectly.OPPORTUNITIES ‡ Abundant scope to supply finished leather to multinationals setting up shop in India. ‡ Growing international and domestic markets. which are more competitive than India. THREATS ‡ Entry of multinationals in domestic market. ‡ Use of information technology and decision support software to help eliminate the length of the production cycle for different products ‡ Product diversification . as many businesses are family-owned. ‡ Stiff competition from other countries. goods etc.

buffaloes. skilled labour is quite relevant to industries such as manufacturing of leather goods and footwear that are manufacturing of leather goods and footwear which are relatively labour intensive. Demand side advantages : _ Large and growing domestic market 3. The twin advantages of low cost and technical skills offer India distinct competitive advantages of low cost and technical skills offer India a distinct competitive advantage in this industry. Some of these advantages are: 1. India has among the lowest cost of labour among key footwear producing countries. Regulatory / policy related advantages _ Government Regulation _ Government Support _ Licensing Policy 14 . The large population of cattle. goat and sheep that the country possesses ensures that India has ten percent of the world¶s raw material base.COMPETITIVE ADVANTAGE Competitive Advantages of Leather Industry The leather industry can benefit from several characteristics of the Indian Market and the corresponding advantages they offer. Supply side advantages Availability of low cost skilled labour :India¶s advantage as a source of low cost. Abundance of raw material : Availability of supporting institutionsIndia is the largest livestock holding country with 21 percent of the large animals and 11 percent of small animals in the world. some of the leather available in India is premium quality and much sought after. IN addition. In India to low costs. Availability of supporting institutions : 2. India also has the world¶s largest technically trained manpower in leather craft.

India has among the lowest cost of labour among key footwear producing countries.4 222.46 0.58 0.58 0.75 5.26 5.68 0.68 0.01 Korea Taiwan Hong Kong Portugal Brazil Indonesia Romania China Vietnam Thailand Pakistan India 243. skilled labour is quite relevant to industries such as manufacturing of leather goods and footwear that are manufacturing of leather goods and footwear which are relatively labour intensive.76 20.90 28.85 218.19 15 . Labour costs in le 297.73 61.254 8.76 24.88 24.16 1.19 0.63 8.1 7.48 0.Supply Side Advantages Availability of low cost skilled labour India¶s advantage as a source of low cost.88 28.254 5.

In order to avoid this stinking odour proper ventilation of slaughtering halls. both surface and underground. Chrome is the most dangerous and long-lasting chemical pollutant. metallic trace elements and microbiological organisms. The common effluent plants have been established in all areas of where tanneries are clustered. ‡ Effect on Groundwater Most parts of India are facing anthropogenic groundwater pollution.ENVIRONMENTAL ISSUES The leather industry has been traditionally considered as a heavy polluting industry in the tanning and finishing stages of the chain. Although compliance is effective achieving the required norms of total dissolved solid from the tannery effluent is a problem. Pollution of water resources. The overexploitation of groundwater in some parts of the country induces water quality degradation. Pesticides. for it has created an acute scarcity of safe drinking water in many countries. chemical precipitation methods are practiced for the removal of chromium from the effluent. They are produced during washing. Wastes and chemicals released to water system are the main pollution concerns for the leather industry. This is due on the one hand to the considerable odour nuisance and on the other to the dyes and other chemicals (particularly chromium compounds) used in the tanning process which complicate the wastewater treatment operation. Currently. dehairing and tanning of the leather. the slaughter house premises always give a particular stink. ‡ Bio-accumulation of Chrome The presence of chromium in the effluent is a major concern for the tanning industry. The other membrane separation and ion exchange methods available are unfeasible due to their cost. Therefore. Others are sulphides and solvents. washing of the floors with non-poisonous disinfectants and if need be use of aerobic deodorants must be provided at each slaughter house. Such types of pollution are mainly enrichments of various chemical parameters such as nitrate. by indiscriminate discharge of spent wastes of chromium-based industries has become a serious global concern. but that leads to the formation of chrome-bearing solid wastes. Untreated industrial effluents discharged on the surface cause severe groundwater pollution in the industrial belt of the country. 16 . ‡ Odour The tropical climate of our country enhances the process of degeneration of any tissue material remaining as a waste in the premises of the slaughter houses. hardness. chemicals and organic materials are the main sources of pollution. This poses a problem of supply of hazard-free drinking water in the rural parts of the country. The Indian government has numerous laws in place that effect the leather industry. y Tanneries Tanneries harbour the greatest risk potential for the environment.

based in Mumbai. ‡ Indian Leather Industry Foundation (ILIFO) Another Association promoted by the industry with the basic objective of providing pollution related services to the industry. is the largest animal rights organization in the world. educating policymakers and the public about animal abuse and promoting an understanding of the right of all animals to be treated with respect. It trains people in skills of running effluent treatment plants put up by tanneries. Germany and Mumbai. was launched in January 2000. England. Italy.. wear.‡ People for Ethical Treatment of Animals (PETA) PETA has more than 800. 17 . experiment on or use for entertainment.000 members and with offices in the United States. It conducts awareness programme in for workers¶ safety and occupational health hazards. PETA India operates under the simple principle that animals are not ours to eat. PETA India.

Well recognized in the international market. The Indian leather industry. including saddles and harness.56 billion (3. leather products and exports.225 billion Euros). employment potential and growth. one the most vibrant sector of the country¶s economy. ensuring jobs for over 2. with an output of Rs. Besides being a significant earner of foreign exchange. activities. One must be wondering why India is exporting so much of leather to western countries. such as tanning and finishing. The Indian Leather Industry is growing by leaps and bounds. the Indian leather goods constitute about 7 per cent of India¶s export earnings.354 billion Euros) and exports of Rs. tanning. 125. with 75 per cent of the production from small and cottage sectors. skills and products i. Apparently because leatherwear still enjoys a great demand abroad and now-a-days even the domestic market is developing and consuming the offerings of this industry. leather goods. India.5 million people. leather garments. livestock. footwear and footwear components.CONCLUSION The leather industry occupies a prominent place in the Indian economy in view of its substantial export earnings. The industry covers a vast spectrum of inputs. It is now poised for a big leap to double its global share from the present 3%. 18 . while developed markets such as the US are major consumers of leather products. is well-structured and spans various segments.46 billion (2. the leather Industry generates employment. hides and skins.e. 186. is placed third.

fibre2fashion.com) 19 .org) Council for Leather Exports (http://www.thehindubusinessline.bioone.org) All India Association of Industries Science Tech Entrepreneur E-Zine (DST & FICCI) http://www.com/2006/12/01/stories/2006120101341100.References y y y y y y y y y y y y National Labour Institute National Institute Of Occupational Health (http://www.ibef.com) International Council of Tanners Indian Investment Centre India Brand Equity Foundation (http://www.eximebankindia.com) Exime Bank: Research Brief (http://www.htm United Nations Development Programme (NLDP) BIOONE Online Journals Access Control (http://www.ijoem.