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Diagnostic Study Report of Kolkata Leather Cluster

Diagnostic Study Report on


Implementing BDS in the
Kolkata Leather Cluster

Submitted to:
Small Industries
Development Bank of
India

Submitted By:
Entrepreneurship
Development
Institute of India

Entrepreneurship Development Institute of India 1


Diagnostic Study Report of Kolkata Leather Cluster

TABLE OF CONTENTS
Article No. Contents Page No.
Diagnostic Study – A Snap Shot 1
1 About the Project 5
2 Introduction 5
2.1 Methodology 6
2.2 Objective 7
3 Profile of the cluster 8
3.1 Product of the Cluster 8
3.2 Geographical Location 8
3.3 Evolution of the Cluster 11
3.4 Global and National Scenario 11
Analysis of Revealed Comparative
3.4.1 16
Advantage (RCA)
3.5 Types of Firms 17
3.6 Types of BDS Stakeholders 19
3.7 Core Competency of the Cluster 20
3.8 Cluster Map 22
4 Value Chain Analysis 23
5 Analysis of Business Operation 33
5.1 Tannery 33
5.1.1 Raw Material 33
5.1.2 Market 34
5.1.3 Human Resource Development 34
5.1.4 Technology 35
5.1.5 Infrastructure 38
5.2 Leather goods 38
5.2.1 Raw Materials 39
5.2.2 Market & Design 40
5.2.3 Human Resource Development 41

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Diagnostic Study Report of Kolkata Leather Cluster

5.2.4 Technology 42
5.2.5 Infrastructure 42
5.3 Footwear 42
5.3.1 Raw material 43
5.3.2 Market 44
5.3.3 Human Resource Development 44
5.3.4 Technology 44
5.3.5 Infrastructure 45
5.4 Industrial Gloves 45
5.4.1 Raw material 45
5.4.2 Market 46
5.4.3 Human Resource Development 46
5.4.4 Technology 46
5.4.5 Infrastructure 47
6 BDS Market Scenario 48
6.1 Overview of the BDS Market 48
6.1.1 Global and Indian Perspective 49
6.1.2 Overview of the BDS Market 51
6.2 BDS Market Structure 51
6.2.1 Public BDS 51
6.2.2 Private BDS 56
6.2.3 Business Membership Organizations 58
6.2.4 Who Does Who Pays Matrix 62
6.2.5 BDS Market Structure Analysis 63
6.3 Comparative Analysis of the Service Market 64
6.3.1 Key Marketing Issues 64
6.3.2 Relative effectiveness of the markets 66
6.3.3 Potential for growth 67

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Diagnostic Study Report of Kolkata Leather Cluster

6.4 Demand analysis 68


6.5 Supply side perspective 71
BDS provisioning mismatch in the
6.6 72
perception level of firms & BDSPs
6.7 BDS market constraints 73
Demand, Supply & Transactional
6.7.1 74
Constraints
6.7.2 Current reality tree for BDS market 74
6.7.3 Outreach of some exiting BDSPs 75
SWOT Analysis of the Sub-sectors &
7 79
BDS Market
7.1 Tannery 79
7.2 Leather goods 80
7.3 Footwear 81
7.4 BDS 82
8 Vision and Strategy 83
Market Scenario under Recessionary
9 84
Condition
Participatory Appraisal of Competitive
10 86
Advantage (PACA)
Pressure Points and Scope of
11 88
Intervention
12 Annexure

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Diagnostic Study Report of Kolkata Leather Cluster

LIST OF ABBREVIATIONS
BDS : Business Development Services
BDSP : Business Development Service Provider
BMO : Business Membership Organisation
CAGR : Compounded Annual Growth Rate
CETP : Common Effluent Treatment Plant
CFTC : Central Footwear Training Centre
CLE : Council for Leather Exports
CLCTA : Calcutta Leather Complex Tanners’ Association
CLRI : Central Leather Research Institute
DFID : Department for International Development, UK
DIC : District Industries Centre
ETP : Effluent Treatment Plant
ERP : Enterprise Resource Planning
FDDI : Footwear Design & Development Institute
FDI : Foreign Direct Investment
GCELT : Government College of Engineering & Leather Technology
GoI : Government of India
GTZ : German Technical Co-operation (Deutsche Gesellschaft fur Technische
Zusammenarbeit)
IBRD : International Bank for Reconstruction and Development
IFCOMA : Indian Footwear Components Manufacturers Association
IIDF : ILPA Infrastructure Development Foundation
CLCPA : Calcutta Leather Chemicals Promotions Association
IILP : Indian Institute of Leather Products
ILPA : Indian Leather Products Association
ILTA : Indian Leather Technologists Association
ITPO : Indian Trade Promotion Organisation
JV : Joint Venture
MSME : Micro, Small and Medium Enterprises
MSMEDI : MSME Development Institute
NIFT : National Institute of Fashion Technology
PPP : Public Private Partnership
SIDBI : Small Industries Development Bank of India
SME : Small and Medium Enterprise
UNIDO : United Nations Industrial Development Organisation
VC : Venture Capital

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Diagnostic Study Report of Kolkata Leather Cluster

DIAGNOSTIC STUDY – A SNAP SHOT


Introduction Ü Project Name: Implementing BDS in MSME clusters
Ü Nodal Agency: SIDBI
Ü Facilitating Agency – EDI
Ü Supported by: DFID, IBRD, KfW, GTZ, WB
Global and National Global Scenario
Scenario
Ü Global imports of leather and leather products is
growing at a CAGR of 8.77%
Ü The global imports for the year 2002 were US$ 83.25
bn and in the year 2006 it was US$ 116.55 bn.
Ü Major importing countries are USA, Hong Kong, Italy,
Germany, France, UK and Japan.
Ü Major exporting countries are China, Italy, Hong Kong,
France, Germany, Brazil, Belgium and India.
Ü India is the 8th largest exporter of leather and leather
products and has 3% share in global trade.
Pan India Scenario
Ü India’s export basket:
Finished leather – 22%
Leather Goods – 23%
Leather Garments – 10%
Saddlery & Harness – 3%
Footwear – 42%
Ü Leather industry is among the top 10 export earners.
Ü Exports for the year 2007 – 08 was US$ 3.47 bn YoY
growth of 13.67%
Ü It employs 2.5 million people
Ü Major production centres are: Tamil Nadu, West
Bengal, UP, Punjab, Delhi, Karnataka, AP, Maharashtra
Profile of the Ü The Kolkata leather cluster produces the following
Cluster products:
Finished leather
Leather goods like bags, wallets & cases
Footwear (closed & open)
Industrial gloves
Ü No of units in each sub-sector:

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Diagnostic Study Report of Kolkata Leather Cluster

Tanneries – 224
Goods manufacturing - 1532
Footwear - 2026
Industrial Gloves - 242
Ü Turnover of sub-sectors (Rs in crore)
Tanneries – 1250
Goods manufacturing - 1800
Footwear - 1500
Industrial Gloves - 380
Ü Core competency:
- Strong export market
- Good supply of raw material
- Availability of cheap labour
- Abundant water supply
BDS Market The BDS market potential of this cluster is non-exploited.
Overview Except a few generic BDS there is little awareness and availing
services of strategic BDS.
Ü Some existing Public BDS
- Marketing: CLE, ITPO,
- Testing: CLRI
- Training: GCELT, NIFT
- Environmental Compliance: WBPCB
- Infrastructure: WBSIDC, WBIDC
- Financial Assistance: NSIC, ECGC
- Development of MSME: MSMEDI, DIC
Ü Some existing Pvt BDS:
- FREYA Design Studio
- CA & Tax consultants
- Chemical suppliers
- Machine suppliers
- C&F Agents
- Export documentation
- Quality consultants
- Testing labs
- Online B2B portals

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Diagnostic Study Report of Kolkata Leather Cluster

Ü Some existing BMOs:


- ILPA
- ILTA
- CLCTA
- IFCOMA
- ILCPA
- CLHGMA
Ü Demand constraints for BDS
- SMEs tend to get all work done on their own
- Lack of education and knowledge among
MSMEs to avail professional help
- Lack of awareness on availability of private and
public BDS
- Inability to comprehend benefits vis-à-vis cost
factor
- There is no comprehensive information bank on
BDSPs
- Lack of trust on BDSPs to share information
Ü Supply constraints for BDS
- Lack of customisation of services
- Lack of new product / service innovation
- Low initiative to target new markets
- Improper market information

Vision & Strategy Ü Plugging the demand and supply gap / constraints.
Ü Introduction of new BDS and customisation of services.
Ü Institutionalising BDS market development plan on a
long term basis
Ü Sustainability of BDS market development
Ü A clear exit strategy and ownership transfer
Scope of Ü Improving raw hides sourcing from African and Latin
Intervention American countries and feasibility study on setting up
customs bonded warehouse by engaging BDS/BMOs
Ü BDS development for joint procurement of finished
leather for goods / footwear manufacturers
Ü Strengthening ‘last’ supply chain for footwear
Ü Developing local supply base accessory for
manufacturing

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Diagnostic Study Report of Kolkata Leather Cluster

Ü Skill upgradation and ToT programmes for all sub-


sectors by involving BDS/BMOs
Ü Capacity building of BDSPs for design development and
trend forecasting
Ü BMO formation for household units
Ü Capacity building and increased implementation of TQM
(ISO 9001, SA 8000, REACH, CE, etc)
Ü Demonstration and implementation of line
manufacturing system and CAD/CAM
Ü Domestic market development through retail outlets,
franchising and market surveys
Ü Facilitating overseas market development through
marketing agents, trade fair participation and road
shows
Ü Training to improve management efficiency
Ü Implementation of productivity audit
Ü Increased implementation of IT/MIS/ERP
Ü Financial linkages of MSMEs by popularising specific
financial products could be a thrust area.
Ü Improving linkages among MSMEs and Banks / FIs
Ü Focus on energy efficiency, environmental friendly
practices, income generation, employment creation and
local economic development.
Ü Implementation of SME Ratings
Ü Training on diversification opportunities for garments /
toys manufacturing
Ü Exposure visits to benchmark cluster
Ü Implementation of better environmental practices and
improving CETP performance
Ü Facilitating improvement of worker’s welfare
Ü Training on Forex risk management
Ü Exploring possibilities to tap FDI and venture capital
Ü Capacity building of BDS / BMO including international
exposure and training
Ü Feasibility study on setting up of CFC
Ü Integrating various schemes of GoI and State Govt.
Ü Special emphasis on making the BDS market inclusive
so that the benefits are trickled down to the lower end of
the value chain.

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Diagnostic Study Report of Kolkata Leather Cluster

1. ABOUT THE PROJECT

The project – ‘Implementation of BDS in Kolkata leather cluster’ is a part of the initiative to
promote MSMEs through provisioning of quality Business Development Services in identified
clusters. Small Industries Development Bank of India (SIDBI) is the nodal agency for the project
supported by DFID, IBRD, KfW, GTZ and WB. The project aims to assist growth of the MSMEs
leading to overall local economic development and poverty alleviation.

Past interventions have proved that for the sustainable growth of a cluster, a well developed
BDS market is important. With this view SIDBI has identified several clusters in India for
implementation of BDS. Similar projects are undergoing in clusters like, leather cluster of
Chennai, Kanpur, Food processing cluster of Pune, Coir cluster of Allepey, dyes and chemical
cluster, Ahmedabad and many others. Entrepreneurship Development Institute of India (EDI)
has been selected for implementation of this project in the leather cluster Kolkata, Shantiniketan
and Chennai and dyes and chemical cluster, Ahmedabad.

The diagnostic study has been conducted with a view to facilitate implementation of
interventions for the development of Business Development Services (BDS) market in the
leather and leather products cluster at Kolkata. The report provides an understanding of the
global and national scenario, the Kolkata leather cluster and the BDS market. On the basis of
this study interventions have been designed and an action plan has been developed.

2. INTRODUCTION
Leather has evolved from a commodity of necessity to a commodity of luxury over the years.
Increasing consumption and demand for leather and leather goods indicate that there is ample
scope for growth in this sector. The global trade of the leather industry has risen to US$ 116.5
billion in 2006 from a mere US$ 4 billion in 19711. Increasing labour cost and environmental
concerns in the developed countries during the late 1970s and 1980s led to the closure of many
manufacturing units in the developed countries. This facilitated growth of the leather industry in
developing countries like Indonesia, Thailand, India, China etc.

And now, each year there is a substantial growth in the global imports and India’s contribution to
global trade.

1
Information sourced from the Council for Leather Export (CLE).
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Diagnostic Study Report of Kolkata Leather Cluster

Figure 1: Increasing export turnover of India’s leather sector

Source: Website of the Council for Leather Exports (CLE)

The leather industry is one of the top 10 export earners for the country and plays an important
role in the Indian economy. In the last few years, India’s contribution to the global market has
increased marginally. In 2002, India’s leather production accounted for 2.25 per cent of the
global trade and in 2006, it increased by meagre 0.37 per cent to 2.62 per cent. India being the
largest livestock holding country of the world it has the potential to contribute up to 10 per cent
to the global market. During 2007-08 India’s exports of leather and leather products touched
US$ 3.47 billion, a growth of 13.67 per cent over the corresponding period of last year. This
establishes the potential of the Indian leather industry.

West Bengal is one of the largest producer and exporter of leather and leather goods and
accounts for almost 25 per cent of the country’s leather exports. In 2007-08 West Bengal
exported leather and leather products worth US$ 517 million. The State has around 224
tanneries and a large number of leather goods manufacturing units, most of them being small
enterprises. Cheap raw materials, abundant water supply, economical labour and low cost of
operations are some important factors that have made West Bengal an attractive destination for
the leather industry.

2.1 Methodology

The Diagnostic Study has been conducted in two parts; quantitative survey of Business
Development Service Providers (BDSP) and Micro, Small & Medium Enterprises (MSME)
(through structured questionnaire), and qualitative discussion with focused groups and opinion
leaders. A sampling criteria covering maximum diversity of BDS hiring/ non-hiring experiences
has been adopted. The following tools have been suitably employed to gain a better
understanding of the prevalent BDS market scenario and delineate the scope of improvement:

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Diagnostic Study Report of Kolkata Leather Cluster

· Participatory Appraisal of Competitive Advantage (PACA): Participative approach for


problem identification and validation
· Revealed Comparative Advantage (RCA): To analyse the comparative advantage of the
product vis-à-vis other product/ market situation
· Usage, Attitude Image (UAI) Surveys: To understand the awareness and usage of BDS
by MSMEs.
· Value Chain Analysis: To estimate the value-addition at every stage of production
· Star Diagram: To analyse the mismatch in the perception level of BDSPs and MSMEs
· Who Does Who Pays Matrix: To understand the services rendered and the payment
structure prevalent in the cluster

These have helped in identifying the pressure points in the BDS market and enabled
concretisation of a business action plan to ensure holistic development of the BDS market and
induce competitiveness in them. In order to facilitate macro-level understanding of the BDS
market scenario, couple of Focused Group Discussions (FGD) were held in the cluster covering
diverse product-market scenario. Moreover, the findings were also disseminated among
stakeholders through validation workshops.

2.2 Objective

This in-depth diagnostic study of the Kolkata leather cluster was done broadly to assess the
existing BDS market, identify and prioritise the areas of intervention, develop a dynamic and
sustainable market for BDS. This study has been done to get a better understanding of the
cluster (including BDS) at micro and macro level.

Based on the findings of this diagnostic study, an action plan has been formulated to facilitate
the growth of the BDS market and cluster MSMEs. The action plan though being a futuristic
document, while implementation, the changing market dynamics will be taken into account. The
objective of the action plan is to facilitate capacity building of the existing and potential BDSPs
and institutions; introduction of new BDS and products in the gap area; sensitisation of the
MSMEs and their capacity building; and establishing strong linkages among the MSMEs,
BDSPs and Business Membership Organisations (BMOs).

The objective is to ensure overall development of the BDS market which in turn will lead to the
growth of the cluster. This includes creating linkages and ensuring customization as per the
requirements of the entrepreneurs, institutionalising BDS provisioning through tie-ups with BDS
facilitating institutions, industry associations, Government organisations etc. Creating industry
benchmark of best practices, proper documentation and dissemination for further replication and
multiplier effect are crucial. Sustainability of the BDS market by creating demand for them has
also been given due attention.

A strategic approach has been adopted to ensure BDS market development and easy access to
quality BDS for the MSMEs operating in cluster. The starting point involves understanding what
already exists, to build upon products and methods that would prove effective in the local

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Diagnostic Study Report of Kolkata Leather Cluster

context. It is important to probe ‘what problems do businesses have and why isn’t the present
market providing solutions to them?’

3. PROFILE OF THE CLUSTER

West Bengal is one of the States that have been associated with the leather industry from the
pre-independence era. Be it manufacturing leather goods like bags, belts, wallets, leather
footwear or batik/emboss style Shantiniketan bags; West Bengal especially Kolkata and
Santiniketan have been synonymous to the leather industry.

3.1 Product of the cluster

Kolkata has a diverse range of products which mainly caters to the export market. The product
range includes:
o Finished leather
o Leather goods like bags, wallets etc.
o Footwear (closed and open)
o Industrial gloves

The local Industry comprises of various sub-sectors which operate on different value-chains. At
times, even in the same sub-sector there are units operating on different value-chains
depending upon the scale of production and various stages involved in processing. The major
sub-sectors here are tanning, leather goods, industrial products and footwear. The leather
industry is quite vast and diversified and each sub-sector has its own set of problems. However,
there are few problems which are common to the whole industry like infrastructure, finance,
modernization, marketing and deficiency of trained labour etc.

3.2 Geographical location

The cluster includes the geographical boundaries of Kolkata as well as the Calcutta Leather
Complex situated at Bantala. Majority of the tanneries are located at the newly developed
Calcutta Leather Complex. Kasba, Topsia and Tangra are the focal points for the leather goods
manufacturing units. Units specialising in manufacturing industrial gloves are primarily located at
Beleghata. Footwear units are located at Batanagar, Nungi, Janbazar, Rajabazar and College
Street area. The Chinese manufacturers are concentrated in Tangra. Innumerable household
units-cum-retail outlets of footwear can be seen on Bentinck Street, predominantly owned by the
Chinese population. Janbazaar, Rajabaazar and College Street are the hub of micro and
household units of leather footwear.

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Entrepreneurship Development Institute of India 9


Diagnostic Study Report of Kolkata Leather Cluster

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Diagnostic Study Report of Kolkata Leather Cluster

3.3 Evolution of the Cluster

The history of Kolkata leather industry dates back to 1910s when an enterprising gentleman
named Mr. B.M.Das, a graduate in Chemistry, got involved in tanning of leather. Soon, he
established Bengal Tanning Industries in the city. Britishers were quick to follow the trend and
imported machinery from England to start the National Tanning Company Limited and started
manufacturing finished leather. Prior to this, raw hides and skins were exported to Italy and
Spain and after establishment of two leather processing units, export of finished leather started.

In the year 1940, before independence, a slice of Chinese population migrated to the city and
got involved in the tanneries and shoe manufacturing. Soon, they had set up their own tanneries
in an area which is now known as Tangra. Post-independence, during 1972-73, Government of
India set up the Sitarammaya Committee which suggested export of value-added leather
products instead of exporting wet blue and semi finished leather. This marked a revolution in the
Kolkata leather cluster and it saw birth of numerous leather goods manufacturing units and then
there was no looking back for the cluster. Earlier the major export market for the cluster was
former USSR. After break up of the USSR, this market weakened and other markets in
European countries emerged stronger.

Another milestone in the journey of the leather footwear industry of Kolkata was commenced
when the Czech company, Bata Limited, started manufacturing shoes from Batanagar in 1936
and subsequently Kolkata became the hub of all footwear activities. Gradually the industry
shifted to other parts of the country like Kanpur, Delhi and Chennai.

The Calcutta Leather Complex was set up by the Government of West Bengal on the eastern
fringe of Kolkata. It is envisaged to house all activities related to the leather industry. The
capacity of the tanneries is to process 1,000 tonnes of raw hides per day. When fully functional,
the complex will generate approximately US$ 1,100 million worth of exports and employment for
10,000 people.

The previous initiatives in the Calcutta leather cluster were the formation of design development
centre (FREYA) under the UNDP project. A UNIDO project was also implemented for the
upliftment of tanneries and the cluster. Interventions have been made in the Santiniketan leather
cluster as well under the UNIDO supported Consolidated Project on SME Development in India.
MSMEDI has also worked under the UNIDO project for the Santiniketan leather cluster. A skill
development activity under the National Leather Development Programme of DIPP, Ministry of
Commerce & Industries is under process and will be implemented soon. There is scope of
complementarity with the skill development programme under NLDP of DIPP. An Indo-Italian
project, Tanning Training and service society will soon provide assistance to tanneries in the
Kolkata Leather Complex. It will help upgrade the processes and products through eco-friendly
technology and Italian expertise. It will further enable the local tanneries to attract international
collaboration and investment.

3.4 Global and National Scenario


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Diagnostic Study Report of Kolkata Leather Cluster

Global import of leather and leather products has seen constant growth over the past few years.
Growing at a compounded annual growth rate (CAGR) of 8.77 per cent, the imports have
increased from US$ 83.25 billion in 2002 to US$ 116.55 billion in 2006. The global trade of the
industry was just US$ 4 billion in 1971 and it now stands at US$ 116.5 billion in 2006. The
primary reason for this drastic increase in global trade is considerable rise in consumption of
leather items in the developed countries like USA, Europe, Australia and Japan. Out of the total
global leather products, import footwear (leather and non-leather) alone holds a major share of
62%.
Table 1: Global imports of leather & leather goods
(In Million US$)
Category 2002 2003 2004 2005 2006
Finished Leather 16506.14 18074.64 19812.96 19879.89 20738.51

Footwear (Leather & Non-Leather) 49262.51 54064.67 59658.13 66308.61 72386.57

Leather Garment 4232.43 4192.43 4004.83 3818.44 3739.77

Leather Goods 6652.29 7537.74 9288.86 10319.03 11753.21

Leather Gloves 1368.32 1484.15 1649.42 1817.22 1922.29

Saddlery & Harness 505.81 605.19 714.10 825.50 914.58


Source: CLE

Table 2: India’s export of leather & leather goods


(In Million US$)
Category 2006-07 2007-08
Finished Leather 724.00 766.93

Footwear (Leather) 974.33 1163.82

Leather Garment 309.91 343.99

Leather Goods 706.28 784.95

Footwear components 219.84 266.11

Saddlery & Harness 82.33 105.81

Source: Leather Age, 2009

Major leather and leather products importing countries in the world are USA followed by Hong
Kong, Italy, Germany, France, UK and Japan. The major global exporters are China, Italy, Hong
Kong, France, Germany Brazil, Belgium and India. India is the 8th largest exporter of leather and
leather products in the world and has less than 3 per cent share in the global trade compared to
China’s 20 per cent.

Table 3: Major exporting countries of leather & leather products and their growth

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Diagnostic Study Report of Kolkata Leather Cluster

(In Million US$)


Country 2002 2006 % Growth
China 16160.70 28541.03 76.61%
Italy 12942.28 16948.93 30.96%
Hong Kong 9117.21 11094.91 21.69%
France 2777.32 4462.98 60.69%
Germany 3032.08 4442.90 46.97%
Brazil 2389.21 3958.05 65.66%
Belgium 2062.39 3224.99 56.37%
India 1875.21 3059.43 63.15%
Spain 2806.02 3041.43 8.39%
Source: CLE

Figure 2: Global import basket and India’s export basket

Global Import Basket


Leather
18%
Saddlery
&
Harness
1%

Leather
Goods
12%

Footw ear &


Leather
Garments Component
3% s
66%

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Diagnostic Study Report of Kolkata Leather Cluster

India's Export Basket


Saddlery
& Harness
Leather 3%
Goods
23% Finished
Leather
22%

Leather
Garments
10%

Footwear
42%

Source: CLE

The Indian leather industry is spread over sub-sectors and produces a wide range of products
ranging from finished leather to leather goods to industrial gloves to fashionable shoes. Firms of
various capacities, from small artisans to prominent global players together make the industry.
India’s competitive strength in areas like easy availability of raw materials, cheap labour and
large pool of relatively skilled manpower have helped the country in making a mark in the global
market. The country which was a mere exporter of raw materials in 1960s is now known for its
value-added products. Value-added products make up for 80 per cent of the exports from the
leather industry which was only 7 per cent in 1956-57.

The leather industry plays a significant role in the Indian economy as it is one of the top 10
export earners. Total export of the Indian leather industry is US$ 3.47 billion and it employs
nearly 2.5 million people out of which 30 per cent are women. Skilled and semi-skilled workers
constitute nearly 50 per cent of the total work force.

Table 4: Global Imports and India’s export share


(In Million US$)
Category 2002 2003 2004 2005 2006
Global import 83258.79 91064.03 100206.25 108050.16 116550.80

India’s export 1875.21 2216.45 2495.37 2752.50 3059.43

% Share of India 2.25% 2.43% 2.49% 2.55% 2.62%

Source: ITC, Geneva

Table 5: Major importing countries of leather and leather products and India’s share
(In Million US$)
% India’s India’s
Country 2002 2006
Growth Share Share

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Diagnostic Study Report of Kolkata Leather Cluster

USA 20930.42 25607.91 22.35% 1.18% 1.24%


Hong Kong 8517.83 10555.99 23.93% 1.95% 2.65%
Italy 5750.59 8549.20 48.67% 4.45% 4.83%
Germany 5888.73 7983.52 35.57% 4.63% 5.14%
France 4444.47 6539.69 47.14% 1.99% 2.66%
UK 4461.10 6257.00 40.26% 5.40% 5.75%
Japan 4252.67 5785.87 36.05% 0.32% 0.21%
China 2923.01 4927.28 68.57% 0.57% 0.86%
Spain 1758.39 3264.42 85.65% 6.29% 5.69%
Belgium 1759.17 2500.09 42.12% 1.11% 1.72%
Netherlands 1630.46 2492.15 52.85% 3.12% 4.05%
Canada 1571.48 2155.23 37.15% 1.58% 1.49%
Austria 1181.15 1639.88 38.84% 1.17% 1.32%
Source CLE
India is the largest livestock holding country with 21 per cent large animals and 11 per cent
small animals. On account of abundant raw materials, largest pool of technical manpower and
enabling policy framework the industry intends to double its production in the years to come.
There are 2072 recognized slaughter houses in the country and some unauthorized slaughter
houses are also there. Compared to 1951, livestock population has increased by about 62 per
cent in the country.

The major production centres of leather and leather products are located at Kolkata and
Santiniketan in West Bengal, Chennai, Ambur, Ranipet, Vaniyambadi, Trichy and Dindigul in
Tamil Nadu, Kanpur and Agra in Uttar Pradesh, Jalandhar in Punjab, Delhi, Bangalore in
Karnataka, Hyderabad in Andhra Pradesh and Mumbai in Maharashtra.

Table 6: Major production centres of India and major products

State City Products


Chennai, Ambur, Ranipet,
Tamil Nadu Finished Leather, Footwear
Vaniyambadi, Trichy, Dindigul

Finished Leather, Leather


Kolkata
West Bengal Goods, Industrial Gloves,
Shantiniketan
Footwear
Kanpur Finished Leather, Footwear,
Uttar Pradesh
Agra Saddlery, Footwear
Punjab Jalandhar Leather, Non-leather footwear
Leather garments, Leather
Delhi Delhi
goods
Karnataka Bangalore Leather garments
Andhra Pradesh Hyderabad Finished Leather

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Diagnostic Study Report of Kolkata Leather Cluster

Maharashtra Mumbai Footwear

Table 7: Annual production of major products

Product Annual production capacity


Hides 65 million pieces
Skins 170 million pieces
Leather footwear 909 million pairs
Leather shoe-uppers 100 million pairs
Non-leather footwear 1056 million pairs
Leather garments 16 million pieces
Leather goods 63 million pieces
Industrial gloves 52 million pairs
Saddlery 12.50 million pieces
Source: CLRI

West Bengal has been manufacturing leather and leather products from the pre-independence
era. It is one of the top states for exporting finished leather goods and 60 per cent of the
country’s leather goods (bags, purses, wallets) and 90 per cent of hand gloves are exported
from West Bengal.

Figure 3: Region-wise export performance of Indian leather industry

Source: CLE Website

Table 8: Total exports of leather and leather products during 2007 - 08


(In Million US$)
Category Region Exports

Total leather and leather All India $3470


products
Eastern Region $517
*Source: CLE

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Diagnostic Study Report of Kolkata Leather Cluster

The recently inaugurated Calcutta Leather Complex is the hub of all the tanneries in the city
while, most of the leather footwear manufacturing units are located at Topsia and Batanagar.
The Chinese manufactures are concentrated in the Tangra area. Innumerable household units-
cum-retail outlets of footwear can be seen on Bentinck Street, predominantly owned by the
Chinese population. Kasba is the focal point for footwear and leather goods manufacturing units
and Janbazaar for micro and household level units manufacturing leather chappals and sandals.
Also there are a large number of small units which work as job-workers for big export houses or
foreign buyers.

3.4.1 Analysis of Revealed Comparative Advantage (RCA)


For the analysis of India’s Revealed Comparative Advantage a 2 digit HS (Harmonised System)
code categorization has been used. In this categorization HS-41 includes raw hides and skin
and HS-42 includes articles of leather.

In the year 2000 the RCAI2 for HS-41 was 2.74 and it was ranked 21st among other product
categories considered. The RCAI for the year 2003 rose to 2.92 but its ranking declined to 22nd.
Exports for HS-41 chapter have been declining due to stringent norms and discouragement of
exports of raw hides and skins. For the period 2008 –09 India’s export of raw hides and skin
was a meagre 0.4693 per cent of India’s total exports, a decline from 0.5159 per cent share in
the year 2007-08.

For HS-42 chapter RCA for the year 2000 was 5.73 and it ranked 10th among other product
categories considered. In the year 2003 the RCAI declined to 3.90 and its ranking dropped to
12th. In the year 2005 the RCA further declined to 3.25 and was not included in the ranking of
the top 10 commodities in which India had a competitive advantage. Articles of leather have
been in the list of top 10 chapters enjoying comparative advantage in India’s merchandise
exports but have always been hovering near the bottom or ranked below 10.

Chapter HS-42 has seen an increase in its share of India’s total exports. Its share has risen
from 0.8698 per cent in 2007-08 to 0.8837 per cent in 2008–09. It is interesting to note that the
ranking of silk (chapter HS-50) and precious stones (chapter HS-71) has improved significantly
on account of thrust in these sectors by the Government.

The initiatives in the leather sector by Government / donors / agencies would help in improving
the RCA ranking of leather articles in Chapter HS-42. The Kolkata leather cluster has a
significant share in India’s export turnover and the interventions in this cluster would certainly
improve its RCA and its ranking among other product categories.

3.5 Types of firms


Kolkata leather cluster houses both organised and unorganised units. The following tables show
the number of units operating in different sub-sectors.

Table 9: Sub-sector wise classification of units

2
Please refer Annexure No. 1
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Diagnostic Study Report of Kolkata Leather Cluster

Sub-sector Category No. of units


Tanneries Tanneries 224
Manufacturing Goods Manufacturer cum exporter 236

Merchant exporters 96

Fabricator cum manufacturer for the local market 1200


Footwear Large scale manufacturing units (Bata) 1

Small and medium enterprise manufacturers 19

Manufacturer cum exporter 6


Fabricator and household units 2000

Industrial Gloves Manufacturer cum exporter 31

Merchant exporter 11
Fabricator 200

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Diagnostic Study Report of Kolkata Leather Cluster

Table 10: Sub-sector wise employment and scale of operations

Size of Sub-sector No. of Employment Turnover


units units Rs. in Crore

Small Tannery units 190 7600 1000


scale
Micro Tannery Units 34 850 250

Small Leather goods 236 23600 1400


Scale manufacturing
(export oriented)

Micro Fabricator of leather 1200 3600 400


goods and units
catering indigenous
market.
Small Industrial gloves 31 4650 300
Scale manufacturer cum
exporter
Micro Fabricator of Gloves 200 6000 80
Large Footwear 1 3000 500
Scale manufacturer (BATA
India Ltd.)
Small Footwear 25 1000 600
Scale manufacturer
Micro Fabricator & 2000 10000 400
household units
manufacturing
(both close & open
footwear)

Merchant exporter
Micro Leather goods 96 1920

Micro Gloves 11 220

4024 62440 4930

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Diagnostic Study Report of Kolkata Leather Cluster

Exports

The Kolkata leather cluster contributes 60 per cent to the export of leather goods and 90 per
cent of the export of industrial hand gloves from India.

Table 11: Growth of export of West Bengal (Kolkata) leather cluster vis-à-vis
other States/clusters products
(Rs. in Crore)

Percent
Export during Export during Percentage in
State increase over
2006-207 2007-2008 Total Export
2006-2007

Tamil Nadu 5277.24 5385.30 36.11 2.05


Uttar Pradesh 4108.35 4374.33 29.33 6.47
West Bengal 2085.60 2216.55 14.86 6.28
Delhi 936.81 1005.83 6.74 7.37
Total 14339.16 14913.17 100 4.00

Table 12: Item wise export of West Bengal (Kolkata) leather cluster vis-à-vis
other States/clusters products
(Rs. in Crore)
April’07-
Items Region April’08-Nov’08
Nov’07
Eastern Region 1321.81 1686.68
Total Leather &
leather products All India 9338.02 11064.12
Eastern Region 9.39 11.76
Foot wear
All India 2933.90 3529.72
Eastern Region 99.55 93.73
Leather
All India 2207.28 2330.30
Eastern Region 1183.63 1542.08
Leather Goods
All India 2082.51 2679.88
Eastern Region 24.69 30.90
Leather Garment
All India 963.34 1292-46

3.6 Type of BDS Stakeholders

The BDS market predominantly consists of three segments: Public BDS, Private BDS and
Business Management Organizations. Apart from these, there also exists “informal BDS” which
comprises of the peer group of the entrepreneurs and they give suggestion or advice for which
no fee is charged.

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Diagnostic Study Report of Kolkata Leather Cluster

There are around 9 public BDS and 6 BMOs which are working in the cluster. The exact number
of private BDS opening in this cluster is difficult to ascertain.

Table 13: No of existing BDS in the cluster

Category Public BDS Private BDS BMOs


(interacted)
Marketing 2 - 1

Advocacy 1 - 1

Financial Linkage 2 5 3

Quality certification - 4 -

C&F - 5 -

Export credit 1 - -

Environment 1 - 1

Skill development 1 1 -

Technology - 5 -

* As per the interview sample

3.7 Core Competency of the Cluster

Each industry has certain geographical, locational, functional and policy advantages over other
locations which helps in fostering the cluster. Similar is the situation with the Kolkata leather
cluster which can boast of the under-mentioned USP which has given the cluster a competitive
advantage over other clusters.

Core competency of the tannery lies in the age-old tradition of tanning and the newly
developed Calcutta Leather Complex with good infrastructural facilities and abundant water
supply.

Very strong export market for leather goods and gloves: Nearly 60 per cent of the total
export of India of leather goods and 90 per cent of leather gloves are from Kolkata. The cluster
provides employment to thousands of people. Since it is one of the major exporting cluster, it
ensures quality products (especially goods and special purpose gloves) at competitive price.
This has also helped in building brand for Kolkata manufactured products and building trust
when a new exporter evinces interest in trade.

Apart from the above mentioned USP there are some other factors as well which contribute to
the competency of the cluster:

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Diagnostic Study Report of Kolkata Leather Cluster

Good supply of raw material: With India having 10 per cent of the global livestock, sourcing
raw material is not a problem for tanneries. India produces 2 billion square feet of leather by its
own sources of raw material. Calcutta is famous for its cow and buffalo leather. The industry can
boast of having an undisturbed supply of different qualities of raw hides and skins. Calcutta is
known for producing DDM Drum dried mill leather, NDM natural dried mill leather, Nappa leather
and vegetable tanned leather. Other varieties produced include Suede, Nu’ bulk, Antique and
Patent leather.

Abundant water supply: Kolkata being close to the delta region of Sunderbans, it has
abundant supply of water. Since water is a key requirement during the tanning process (it
requires approximately 20 cubic meter of water per ton of hide), high underground water levels
of Kolkata have worked as an advantage for the tannery units.

Export quality products: Most of the leather goods are exported from Kolkata hence the
quality of the products is at par with the international standards. This holds key for increasing
numbers of exports orders from the cluster.

High density of household units: There are many household units which work as fabricators
or job workers for exporters / large firms. There is good inter firm linkages. This helps in
maintaining a regular, uninterrupted supply of quality products.

Low cost of operations: Easy availability of raw materials, relatively cheap skilled and semi-
skilled labour and favourable policy framework has enabled the cluster to lower its cost of
production considerably compared to other countries.

Enormous potential for future growth (domestic and export): The above mentioned points
indicate that with proper infrastructure, technology, finance, and provisioning of quality BDS, the
immense potential of the cluster could be tapped.

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Diagnostic Study Report of Kolkata Leather Cluster

3.8 Cluster Map

The following figure represents the cluster map of the Kolkata leather cluster. The bold line
indicates good linkages and dotted line indicates weak linkages.

F.I BANK DIC MSMEDI WBIDC WBSIDC WBPCB

Raw Hides
supplier
Tannery
Chemical
supplier

Foreign
Machine Gloves Goods Buyer
suppliers Mfgrs Mfgrs

Accessories
supplier Micro Units Micro Units

Branded
Footwear Mfgrs Wholesale,
Component retail & local
supplier market
Small, Micro &
Household Units

CFTC CLE ITPO CLRI

Pvt. BDS

Generic Strategic

Cluster Map of the Kolkata Leather Cluster

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Diagnostic Study Report of Kolkata Leather Cluster

Legend
A thin-bordered rectangular box for a group of stakeholders. The
firms in a group are near similar and are not necessarily linked to
each other.

A thick/dotted-bordered rectangular box for showing a well/poorly


functioning network of inter-related stakeholders

A thick/dotted one-sided arrow to show a well/underdeveloped


linkage between two stakeholders; the point of the arrow meets
the stakeholder that receives goods/services from the other
stakeholder

A thick/dotted two-sided arrow to show a well/underdeveloped


linkage between two stakeholders that have a subcontracting
relationship

4 VALUE CHAIN ANALYSIS

Global chain and shift in trend

Countries like Italy operate at the top end of the chain with high unit value realisation. Their
advantage is in design, styling and ability to produce quality leather. Production in many
European countries including Italy declined due to high cost of environmental compliance and
labour cost. This in turn led to shifting of manufacturing to developing countries like Indonesia,
Thailand, China, India etc. Many of the machinery and chemicals used in Kolkata leather cluster
is supplied by global manufacturers having local dealers.

National Value Chain

India is the largest live stock holding country. The Indian leather industry is sustained by its rich
raw material base of cow/ buffalo hides and goat/ sheep skins. In the 1960s India was merely a
raw material exporter. The policy of the Government on restriction of export of semi-finished
product and encouragement of export after value-addition has linked leather sector to the global
value-chain. In the context of Indian economy this sector played a vital role with export of
leather and leather products amounting to Rs. 14,900 crores and employing about 2.5 million
people.

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Diagnostic Study Report of Kolkata Leather Cluster

Cluster Value Chain

Leather goods like wallets, ladies bags etc. are most important product categories in the value-
chain. Here the leather used is of superior quality and the value addition is done with design,
finishing and skilled operations. The extent of value addition for export quality ladies bag of 8 sq
ft is from Rs. 272 (cost of hides) to Rs. 1200. For industrial gloves, the type of leather used is of
low grade. The value addition is mainly done with labour cost. In the footwear sector the leather
used is of high-value and the value addition depends on the quality, design, and style of shoes.
The finished leather cost varies from Rs. 50 to Rs. 80 per sq. ft depending on the quality and
value addition during processing. The value accrued to labour is 17 per cent in case of industrial
gloves. In case of leather goods, apart from labour costs other area of value addition is design
and skilled workmanship.

Tannery

Table 14: Value chain to make 1 sq. ft of finished leather (NDM) from raw hides

Inputs Cost in Rs. Percentage

Raw Hide (medium defect) 34.00 56

Chemical 12.00 20

Labour 3.60 6

Electricity 2.80 5

Environmental Compliance 1.60 3

Overhead & Profit 6.00 10

60.00 100

The cost of finished leather varies from Rs 50 to Rs 80.

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Diagnostic Study Report of Kolkata Leather Cluster

Value Chain Diagram for tanneries

Raw hides ( C1 – medium defect)


Rs. 34 / sq ft

Soaking, liming, fleshing, deliming, chrome


tanning. (Chemical Rs 4, Labour Rs.0.30,
Electric 1.00, Environment 0.8

Wet blue
Rs. 41.10 / sq ft
Value addition – 20.9%

Splitting, Neutralizing, retanning, dyeing, fat


liquoring (Chemical Rs.7, Labour Rs. 1.30,
Electric 1, Environment 0.80)

Crust felt (Wet finished)


Rs 51.20 / sq ft
Value addition 29.7%

Stacking, Toggling, Buffing, Finishing using


pigment etc. ( Pigment binder etc Re. 1
Labour Re.1, Labour Re.1, Electric Re.0.80)

Finished leather
Rs. 54 / sq ft
Value addition 11.2 %

Overhead & margin of manufacturer

Finished leather ( After manufacturers’ margin)


@ Rs.60 / sq ft
Value addition 17.6%

In stage 1 – better storage facilities and efficient procurement system will give
better value addition

In stage 2 & 3 the value addition is maximum. With cleaner production


technology, optimization of chemical usage, energy conservation and better
backward linkage will improve value addition.

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Diagnostic Study Report of Kolkata Leather Cluster

Foot Wear
Table 15: Value chain to make a closed shoe
(Closed shoe using 4 sq. ft of leather in upper)

Inputs Cost in Rs. Percentage


Finished leather 240 48

Components 125 25

Labour 50 10

Electricity 10 2

Packing forwarding 10 2

Overhead & Profit 65 13

500 100

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Diagnostic Study Report of Kolkata Leather Cluster

Value Chain Diagram for footwear production

Basic Raw Material


Leather 4 sq ft value Rs 240

Design and Pattern Grading


Value addition: Rs 5
Value – Rs 245, (Addition – 2%)

Cutting of leather & lining by clicking machine


Value addition: Lining Rs 4, Labour Rs 5, Electricity Rs 1
Value – Rs 255, (Addition – 4.2%)

Skiving
Value addition: Labour Rs 5, Electricity Rs 1
Value – Rs 261, (Addition – 2.5%)

Shoe Upper: By stitching leather, lining, stiffener, eyelets


Value addition: Component & Consumable Rs 12, Labour Rs 10, Electricity
Rs 1
Value – Rs 284, (Addition – 9.5%)

Lasting: Closing of shoe upper with insole on last


Value addition: Component & Consumable Rs 9, Labour Rs 10, Electricity
Rs 3
Value – Rs 306, (Addition – 9.2%)

Pasting on sole
Value addition: Component Rs 100, Labour Rs 10, Electricity Rs 4
Value – Rs 420, (Addition – 47.5%)

Finishing/ Packing & Forwarding


Value addition: Packing & Forwarding Rs 10, Labour Rs 10,
Value – Rs 440, (Addition – 8.33%)

Finished Shoe after manufacturing’s margin & overhead


Value addition: Overhead Rs 60
Value – Rs 500, (Addition – 25%)

In stage 2 of value chain the pattern grading decides the quality of shoe and in
the cluster this area is neglected as no BDS is available

In stage 6 & 7 where the value addition is more, use of advance technology in
this area is required for more value added products. The micro units are lacking
in this area.

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Diagnostic Study Report of Kolkata Leather Cluster

Leather Goods

Table 16: Value chain to make export quality ladies bag


(Ladies Bag of export quality using 8 sq. ft of leather)

Inputs Cost in Rs. Percentage


Finished leather 640 53

Accessories 60 5

Labour 120 10

Electricity 10 1

Design & Marketing Freight 190 16

Overhead & Profit 180 15

1200 100

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Diagnostic Study Report of Kolkata Leather Cluster

Value Chain Diagram for leather goods

Finished leather
Leather 8 sq ft value Rs 640

Design, sampling and approval of foreign buyers


Value addition: Rs 190
Value – Rs 830 (Addition – 29.7%)

Cutting of leather & lining as per design


Value addition: Lining Rs 10, Labour Rs 5, Electricity Rs 2
Value – Rs 847 (Addition – 2.7%)

Skiving of leather
Value addition: Labour Rs 5, Electricity Rs 2
Value – Rs 854, (Addition – 1%)

Assembling & stitching


Value addition: Accessories Rs 50, Labour Rs 100, Electricity Rs 6
Value – Rs 1010, (Addition – 24.5%)

Checking & Packing


Value addition: Labour Rs 10,
Value – Rs 1020, (Addition – 1.6%)

Finished and ready for dispatch


Value addition: Manufacturing’s margin & overhead Rs 180
Value – Rs 1200, (Addition – 28%)

Stage 1: The type of leather used is of superior quality.

Stage 2: Design and sample preparation is the key area for attracting
foreign buyers and value addition is more in this area

Stage 5: The value addition in the assembling and stitching stage is


mainly by skilled labour. Scope of improvement in productivity may be
explored. Accessories are major value addition and quality of
accessories gives a better look to the end product.

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Diagnostic Study Report of Kolkata Leather Cluster

Industrial Leather Gloves

Table 17: Value chain to make a pair of ordinary industrial gloves


(One pair using 3 sq. ft. of split leather)

Inputs Cost in Rs. Percentage


Split leather (3 sq. ft) 24 67

Labour charge 6 17

Electricity 1 2

Freight 2 6

Overhead & Profit 3 8

36 100

Table 18: Value chain to make a pair of industrial special purpose gloves
(One pair using 5 sq. ft. of grain leather)

Inputs Cost in Rs. Percentage


Grain leather (5 sq. ft) 60 75

Labour charge 8 10

Electricity 1 1

Freight 3 4

Overhead & Profit 8 10

80 100

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Diagnostic Study Report of Kolkata Leather Cluster

Value Chain for leather hand gloves and special purpose hand gloves

Ordinary Gloves Special purpose Gloves


for extreme condition

Split leather 3 sq ft
Value Rs. 24 Gloving leather 5 sq ft
Value Rs. 60

Cutting as per design


Value addition: Labour Rs 1,
Cutting as per design
Electricity Rs 0.25
Value – Rs 25.25, (Addition – 5.2%) Value addition: Labour Rs 2,
Electricity Rs 0.25
Value – Rs 62.25, (Addition – 3.75%)

Stitching
Value addition: Labour Rs 4,
Electricity Rs 0.50 Stitching
Value – Rs 29.75, (Addition – 18.75%) Value addition: Labour Rs 5,
Electricity Rs 0.50
Value – Rs 67.75, (Addition – 9.2%)

Packing and forwarding


Value addition: Labour Rs 1,
Electricity Rs 0.25, Others Rs 2
Value – Rs 33, (Addition – 13.4%) Packing and forwarding
Value addition: Labour Rs 1,
Electricity Rs 0.25, Others Rs 3
Value – Rs 72, (Addition – 7%)
Finished Gloves
Value addition: Overhead &
Manufacturers’ margin Rs 3,
Value: Rs 36 (Addition –12.5%)
Finished Gloves
Value addition: Overhead &
Manufacturers’ margin Rs 8,
Value: Rs 80 (Addition –13.3%)

In special purpose gloves, the leather used is more value-added leather of better
quality. The value addition in special purpose gloves is Rs 20 per pair of gloves
and that in ordinary gloves it is Rs 12 only

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Diagnostic Study Report of Kolkata Leather Cluster
Intra Cluster Value Chain Analysis
Slaughter House Hide & Skin Merchants

Raw material requirement


100 lakhs hides / year
2200 lakhs sq ft. / year
Valuing Rs. 800 Crore @Rs.
34/Sqft

Finished leather for export Finished leather for value addition


Annual export – Rs. 130 crore of product manufacturing.
Raw material cost 56%.
Chemical 20%,
Labour 6%,
Electricity 5%,
Environmental compliance 3%,
Unit value Rs. 60/ sq ft.

Footwear (leather) Leather Goods Industrial Gloves


Annual Turnover, Annual Turnover Annual Turnover
Export – Rs.15 crore Export – Rs.1675 crore Export – Rs.380 crore
Indigenous – Rs.200 crore Indigenous – Rs.125 crore Raw material cost – 75%-67%
Raw material – 48%, Raw material – 53%, Labour charge – 10%-17%
Components – 25%, Labour Accessories – 5%, Labour – 10%, Electricity-1%
10%, Electricity – 2%, Electricity – 1%, Freight – 4%- 6%
Other – 2% Design & Marketing – 16% Unit Price – Rs. 80- Rs 36/ pair
Unit Price Rs.500/- Unit Price – Rs. 1200/- 33
Diagnostic Study Report of Kolkata Leather Cluster

5 Analysis of Business Operation


5.1 Tannery
The process of converting hides and skins
into leather is referred to as tanning. It is
the first stage of leather making process
where with the use of chemicals, raw
hides and skins are converted into semi-
finished and finished leather. This process
involves various stages and there is value
addition to the product at every stage.

There are roughly 224 tanneries located at the Calcutta Leather Complex. Around 43
tanneries export finished leather. Tanneries generally supply finished leather to the
manufacturing units and some export finished leather. There are many tanneries
which process leather only up to the wet blue stage and many tanneries process only
wet blue leather into finished leather. Some large firms also have there own
tanneries. Some of the tanneries are also available on rent where one can process
its own leather. Tannery is highly polluting sector and because of this most
developed countries have imposed restrictions on the sector. As a result of these
restrictions many tanneries have closed down. Their closure has led to set up of new
tanneries in developing countries like Indonesia, China, India, Bangladesh, etc. This
exodus has led to increased opportunities for the developing countries and at the
same time there is fierce competition among these countries to capture the market
share.

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Diagnostic Study Report of Kolkata Leather Cluster

5.1.1 Raw Material

Raw hides and skins are the basic raw materials needed apart from chemicals in the
processing of leather. There are traders of raw hides and skins based at Rajabazar
and Colootala who collect hides from different places within the State and also
source it from Bihar and Uttar Pradesh. The slaughter houses are mostly located in
the outskirts of Kolkata. The infrastructure at the level of dead animal collection is
very poor. In most cases the dead animals are handled roughly and at times even
dragged to the slaughter houses. This results in damaged skin and devaluation of the
ultimate finished product. On an average there is approximately 30-40 percent
wastage in finished leather because of spots/ marks and damages caused by rough
handling. However the hide/ finished leather imported from other countries have a
much low wastage (as low as 10-15 percent) which compensates for the higher
prices and the transportation costs. There is lack of consistency in the quality and
supply chain also. These traders are much unorganised in their business operations.
The chemical suppliers have their offices/ warehouses at Bantala.

BDS Perspective: There are a few raw hides and skin traders operating in the
cluster. Some of them provide embedded services to the cluster. But they operate in
a much unorganised manner. They have no active association and generally work
individually. There is a necessity to educate the people at the collection point about
better handling and storage. Proper storage facilities also need to be developed.
International sourcing of raw hides is also an important issue. Steps need to be taken
to understand the viability of international sourcing of hides from countries like
Kenya, Tanzania, Zamibia and other African and Latin American countries. It has
been reported that due to limited demand in these countries much of the raw hides
collected are buried. A feasibility study of joint sourcing of hides from these countries
needs to be conducted. If viable, steps need to be taken to set up a customs bonded
warehouse in the city.

5.1.2 Market

Finished leather produced by the tanneries is primarily consumed by the domestic


market for manufacturing leather goods, footwear and industrial gloves. However, a
small quantity of finished leather is also exported. Tanneries accept a minimum order
of 1000 sq ft and the delivery period ranges between 21 to 30 days. The goods
manufacturers generally place order specifying the type of leather and its colour.
There is no significant problem that the tanneries face in marketing of products
except in cases where demand is higher than the supply of finished leather. This at
times causes delay in delivery of finished leather.

BDS Perspective: There is no BDS in this area. Since the orders are placed directly
by the goods/footwear/gloves manufacturing units, tannery owners do not use BDS
for marketing finished leather. However, if quality BDS is introduced, the market

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Diagnostic Study Report of Kolkata Leather Cluster

potential could expand manifold. Moreover, the small quantity requirements of the
micro / household units are not catered by the big tanneries, signifying a major
supply side gap.

5.1.3 Human Resource Development

The tanning industry is quite old and except few units, most of them run in a
traditional manner. They use lot of chemicals in their initial process and high-skill is
required in the finishing stage. Most of the workers work on contractual basis and the
salary structure is very low. Also, no facilities like E.S.I, medical insurance etc. are
given to the workers. The environment in which they work is quite hazardous and
nothing much is done to safeguard the interest of the workers. This working
environment has forced many skilled labourers to move to other industries where the
pay structure is better.

Tanneries should have qualified leather technologists at various levels but there are
hardly 10 to 15 leather technologists employed in the cluster. Tanneries are
dependant on the embedded services provided by the machinery and chemical
suppliers for most of their technical requirements.

BDS Perspective: CLRI provides some skill development training and the
Government College of Engineering and Leather Technology has a B.Tech course in
leather technology. Still, there is a huge gap so far availability of skilled worker,
supervisors and leather technologists are concerned.

5.1.4 Technology

Tanning can be divided into three stages namely pre-tanning, tanning and post-
tanning. Pre-tanning and tanning operations involve several chemical processes
while post-tanning operation mostly involves mechanical operations for finishing of
leather. New machines were introduced in the market but only a few advanced
tanneries could upgrade their units. Tanning operation involves heavy usage of
chemicals and is generally considered to be a polluting industry. Different countries
are putting restrictions on use of specific chemicals and the tanneries are
customising their production process to suit the needs of the buyers. They generally
rely on the embedded services provided by the chemical suppliers for such
assistance. Foreign buyers often ask for test reports that certify that the leather is
free from restricted chemicals. Such tests are being done by testing laboratories in
CLRI, SGS, Testman and ESCAP.

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Diagnostic Study Report of Kolkata Leather Cluster

The quality of finished leather depends upon the tanning process and the quality of
raw hide and skin that is being processed. Raw hides are natural products and
absence of cow farming in India causes variation in the quality of hides. Leather
produced by Kolkata cluster is of export quality but there is scope for improvement to
obtain higher value realisation and minimising the wastage.

Tanning is a high energy consuming process. Savings in the area of energy could
minimise cost. Use of energy saving mechanism can lead to savings in the form of
carbon credits.

Use of IT systems is very minimal in the tanneries. With the use of custom-made
ERP systems operations and management can be improved extensively. ERP
system would help entrepreneurs to have better control over operations and
inventory. There is very little awareness about ERP system among the
entrepreneurs. Although there are lot of hassles the entrepreneurs face in terms of
operations management and inventory control which could have a possible solution
in ERP systems.

BDS Perspective: Private machine suppliers like Saggitarians, Harman, Focus and
others play the role of private BDS. They also provide embedded services like
technical support. Chemical suppliers like BASF, Clariant, Lamco also provide
embedded services in the area of processing and introduction of new chemicals.
ERP system consultants like Raymedi, RAMCO, ICTEAS could play an important
role in providing ERP support.

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RAW HIDES / SKINS

Water
Bactericide SOAKING Wastewater
Enzyme

Solid waste, Hair


Water
LIMING/
Lime, Sodium
UNHAIRING
sulphide, Enzyme
Wastewater

Wastewater directed to ETP and solid wastes sent to disposal yards and sites.
Water FLESHING
Fleshing / trimming

Water Wastewater
WASHING / DELIMING/
(Ammonium salts,
BATING
Bating enzymes)

,
Water, salt
Sulphuric acid, asic
PICKLING / CHROME Wastewater
chromium sulphate,
TANNING
Sodium formate and
Sodium bicarbonate

WETBLUE

Splitting / Shaving Splits, shavings, trimmings

Water, BCS/Chrome
syntan, Sodium Rechroming (Drums) /
Wastewater
formate, Sodium Neutralization
bicarbonate

Water, Syntans, Retanning / Dyeing / Fatliquoring


Wastewater
Dyes and (Drums)
Fatliquors

Mechanical operations Solid waste

Water, Solvents,
Pigments, Binders,
FINISHING (Autospray)
Wax and Lacquer
emulsion

FINISHED LEATHER

Tanning Process Flow Chart

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Diagnostic Study Report of Kolkata Leather Cluster

5.1.5 Infrastructure

There were nearly 500 tanneries operating in Tangra and Topsia area. Due to non-
compliance of environmental standards, the Supreme Court ordered relocation of
tanneries. Accordingly, the Calcutta Leather Complex was built at Bantala and some
of the tanneries were shifted. The infrastructure at the Calcutta Leather Complex is
still developing. Tannery is a water-consuming industry and easy availability of water
is a major advantage for the industry here.

The CETP at the Calcutta Leather Complex is run by the Calcutta Leather Complex
Tanners’ Association (CLCTA). Individual tannery units are also required to pre-treat
their effluent. The capacity of CETP is to treat 20 mld of water. It is reported that all
the 6 modules of the CETP do not run and the initial settlement of solid waste at the
factory level is also not properly done.

BDS Perspective: The complex was built in PPP mode with Government of West
Bengal (WBIDC) and M.L. Dalmia & Co. and is responsible for developing
infrastructure in the complex. The CLCTA runs the CETP with technical assistance
from CLRI.

5.1.6 Environment

Environment concern has become an important issue in today’s context. In the


tannery sector environment is a cause concern as it is a highly polluting industry. Lot
of chemicals and water is used in the tanning process. The effluent that is released
contains high chrome content and other harmful chemicals. It is required to pre-treat
the effluent and thereafter release for proper treatment in CETP. There is also a need
to implement environment friendly processes using lesser chemicals like the eco-
benign process for de-hairing of hides. The CETP performance is also required to be
updated with latest technology and properly maintained to ensure efficient effluent
treatment before discharging the water into the canals/ streams/ rivers.

The entrepreneurs do the pre-effluent treatment on their own. However the process
is kept behind doors and there is limited written evidence proving proper pre-
treatment. The CETP at Calcutta Leather Complex, Bantala is being run by the CLC
Tanners’ Association. There have been increasing concern on the effectiveness of
the CETP but the association claims to have an under utilised capacity. There has
been a demand from the CLC Tanners Association for proper solid waste disposal
system.

BDS Perspective: Public BDS like CLRI provide technical expertise in improving the
production process using fewer chemicals. NEERI is a public BDS which specialises
in environmental research and improving production mechanism. There is scope for
improvement in the area of environmental compliance here.

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5.1.7 Finance

Tannery sector is a capital intensive one and requires a huge amount of investment
in plant and machinery. Most existing tannery units operate mainly on own funds.
Some units do use working capital loan but most other units stay away from
institutional financing. The main reasons for this are the perceived high rates of
interest and low operating margins. The raw materials suppliers provide credit. SME
units have an adequate capital base while the fabricator units are supported by the
SME units in terms of confirm orders. The tannery owners have to purchase the
hides in cash and this limits their bank transactions.

BDS Perspective: There are a number of banks that offer financial products required
by the sub-sector. Financing the MSME sector is a thrust area among the banks.
Awareness workshops and training programmes would iron out the perception of
hassles in institutional financing.

5.2 Leather Goods

The leather goods manufacturing units mostly get


finished leather from the tanneries while some large
units process leather in their own tanneries to
manufacture products like bags, belts, wallets, purses,
ornament boxes, mobile case etc. There are around
1436 units manufacturing leather goods in the cluster.
The annual turnover of this sub-sector for the year
2007-2008 was Rs 1700 crore approx. West Bengal is one of the top States for
exporting leather goods. 60 per cent of the country’s leather goods are exported from
West Bengal.

There are around 1200 fabricators-cum-manufacturers in this sub-sector. There are


two types of fabricators, first consists of micro units which produce goods for bigger
firms and exporters. Inadequate infrastructure and finance does not permit them to
take bulk orders. The second category consists of micro units which generally serve
the domestic market and once in a while supply goods to the low end exporters.

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5.2.1 Raw Material

Finished leather is the key raw material required by the leather goods manufacturing
units. Other materials include accessories like buckles, zippers, lining etc. Most of the
finished leather comes from the tanneries of Kolkata and a small quantity is also
imported. Some manufacturers also source leather from Chennai and Kanpur. The
tanneries accept a minimum order of 1000 sq ft and take 21 to 30 days to process
the order. Due to time constraint, many manufacturers import finished leather in small
quantities to make samples. The accessories used for leather goods are imported
from Hong Kong and China because of the design, quality and cost-effectiveness.
The large firms generally import these accessories directly while the medium and
small enterprises have to rely on traders. Often there is limited choice available with
the traders.

BDS Perspective: There are very few traders/ brokers who source leather from
tanneries and supply to manufacturers. Moreover, small quantity requirement is
generally not entertained by the tannery owners. There is a need to introduction new
BDS who can run a retail outlet and supply small quantity of leather to the micro

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units. There are a few BDS who supply accessories but quality and design are not at
par with the requirements of the industry.

5.2.2 Market & Design

There are 236 units registered with CLE and most of them are 100 per cent export-
oriented. These units take part in international fairs like MIPEL, Italy. Many foreign
buyers also participate in the international fairs organised in India like ILGF, Kolkata,
Delhi and Chennai. There are some units which have a tie-up arrangement with
buyers abroad. West Bengal accounts for 60 per cent of the country’s export of
leather goods. Most of the units export to countries like Germany, USA, UK, Spain
and some Asian countries. The State recorded exports of leather products worth US$
517 million in the year 2007-08. There is immense scope for growth of this sub-
sector. Market opportunity could be explored in countries like Japan, which is one of
the largest leather products importers. In order to facilitate better market access,
participation in international fairs is important.

The design or sample is provided by the buyer and the local units try to copy the
design or develop a ‘family’ for the same design. Most exporters do not develop their

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own designs/ brands and promote them in the existing markets. There is scope for
improvement in the area of design development and awareness of global trends in
the leather sector. Lack of finance and infrastructure also barred small entrepreneurs
to venture into global market. There is a large domestic market for leather goods as
well. There are lot of leather look-alikes sold in the domestic market in the name of
leather, which is hampering the growth of the cluster/industry.

BDS Perspective: There is CLE, ITPO and ILPA who provide BDS for improving
overseas market access under various Govt. schemes like Market Development
Assistance and Market Access Initiative Scheme. But there are hardly any reliable
marketing agents who can provide focussed services. There is a huge untapped
domestic market which has high potential for growth. FREYA is the sole BDSP which
provides services in the area of designing. New BDS is required in the area of
indigenous design development, forecasting and latest trends.

5.2.3 Human Resource Development

Process Flow Chart of Leather goods are a labour-intensive sector and also
manufacturing units involve usage of good amount of machinery.
Availability of skilled worker and infrastructure are two
Design is approved by the
exporter/ buyer major gaps in the cluster. Most of the labourers come
from outskirts of Kolkata and States like Bihar and
they are basically unskilled. They pick up the skill
while working in the units. Low wage rates have
Procurement of finished
leather and components forced many skilled workers to move to other
industries. Thus there is major scarcity of skilled
worker. Lack of facilities in the areas of sanitation and
Pattern of the design is
made and leather, lining are
infrastructure has added to their problems. CLRI, IIDF
cut accordingly have undertaken initiatives to upgrade the skill levels
of the workers. To meet the future demand of the
industry, it is important to have developed human
Leather is split or skived
resource as it involves training not just worker but
also technicians and supervisors. It is crucial to
Components are pasted enhance the productivity levels to match the growth
and stitched together rate of the sub-sector.

Handle is made and lining BDS Perspective: The present BDS in this area is
attached to the bag CLRI and IIDF. There is huge requirement of BDS in
the area of HR training BDSPs like WEBCON are
After quality-check bag is providing service in other industries and can be
packed and sent
introduced in the leather sector for development of
HR base.

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5.2.4 Technology

The leather goods manufacturing units involve heavy use of machines like clicking,
skiving, splitting. There is need for the units to modernize their production process to
improve the quality and quantity of production. There is ample scope for upgrading
the machinery and technology. With the assistance of various Government schemes
the modernization process can be smoothen for the units. Since the production
pattern is run on a contract basis, the entrepreneurs are not interested in opting for
systems like line-manufacturing to get improvement in productivity. The technology
used is not at par with the best international standards which becomes a hindrance
for the sector. Machinery needs to be well equipped to significantly reduce the lead
time required to service the global orders. Line-manufacturing, productivity audit and
ERP systems can help in improving the efficiency and productivity of the units.

BDS Perspective: Machine suppliers provide embedded BDS in this area and there
is scope of introducing new BDS in this area. Existing BDSPs like machine suppliers
can be strengthened and some new BDSPs could be introduced.

5.2.5 Infrastructure

There is medium, small, micro and household level units scattered all over the city,
who are involved in manufacturing leather goods. Except for a few units located at
Kasba Industrial Estate, the infrastructure conditions in the major manufacturing
centres are in bad shape. The small units manufacture goods and supply to the large
units or cater to the requirements of the domestic market. Micro level units are
located in areas like Topsia, Tangra, Kasba, Barsat, Sodepur etc. The Government
of West Bengal has developed Calcutta Leather Complex which houses a leather
park for tanneries as well as for leather goods. Currently only tanneries have been
shifted there but there is a provision for shifting the manufacturing units as well.
FREYA has a state-of-the-art design studio which provides design services to the
leather goods manufacturers.

BDS Perspective: The present BDS is WBIDC, ILPA and IIDF. There is scope of
introduction of new BDS in this area. The Kasba Industrial Estate was built by
WBSIDC and land has been allotted to ILPA at Bantala for constructing ILPA Leather
Goods Park under PPP mode.

5.2.6 Finance

The leather goods sub-sector does not require a very huge investment in plant and
machinery. Entrepreneurs in this sub-sector require financing for working capital
requirements and packing credit. Some units are already using working capital
finance and packing credit. However the current recessionary condition has reduced
their export orders and therefore the working capital requirement. There are a

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number of units who are willing to avail institutional finance but the paper work has
kept them away. The entrepreneurs who have been allotted space at the IIDF
Leather Goods Park at Bantala have raised the issue of soft loans for setting up
units. They raised a concern that since the plant and machinery requirement is not
very intensive for the sub-sector so the IDLS scheme is not of much help.

BDS Perspective: There are a number of banks that offer financial products required
by the sub-sector. Financing the MSME sector is a thrust area among the banks.
Awareness workshops and training programmes would iron out the perception of
hassles in institutional financing. The issue of soft loans could be solved to some
extent with the use of SME rating services. SME rating services are being provided
by SMERA and ICRA. The rating agencies were of the view that a rated SME would
get benefited by reduced interest rates to the extent of 25-50 basis points.

5.2.7 Quality

The products of the cluster are mainly exported and thereby the units need to
maintain stricter quality norms. Quality control in the sub-sector has two segments –
1) chemicals used in leather production 2) manufacturing of the products and
operational level. There are specific norms for use of chemicals for importing
countries in EU and USA. REACH policy is a new norm for EU nations which has
barred the use of certain chemicals in leather processing. There is little awareness
about the reach policy and only a few BDSPs like SGS are providing REACH testing
and certification. For the manufacturing and operational level quality control
standards like ISO 9001, ISO 14000 and SA 8000 are being followed. There are a
few units who have ISO certificates but no unit is SA 8000 certified.

BDS Perspective: There are a few existing BDS in the area of quality control and
certification. But, BDS in the area of testing and chemical certification is very less in
number and the services are also very expensive. Infact, other then some basic tests
that are done in Kolkata, samples need to be sent to Chennai or HongKong for most
other tests. Awareness workshops for ISO, REACH and SA8000 policies would
enable the entrepreneurs to adapt to higher quality standards.

5.3 Footwear
There are nearly 2022 leather footwear manufacturing
units in Kolkata. This includes small, medium and large
enterprises, manufacturer cum exporter, fabricators and
household units. There is one single large scale
manufacturing unit called Bata. There are 19 small and medium manufacturers, 6
manufacturers cum exporters and around 2000 household units including fabricators.

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Bata India Ltd is one of the leading footwear manufacturer in Kolkata and one of the
most popular shoe brands in the country. It manufactures around 60 million shoes
and exports 3 million footwear each year. Another prominent player of the leather
footwear industry in West Bengal is Khadims with 183 franchise outlets across the
country. Also, there is Sreeleather which has captured the domestic market in the
last few years. Kolkata is also famous for making leather chappals and sandals.
There are around 2000 household units and fabricators making different varieties of
chappals and sandals for low end domestic market. All these household units
operate from residential places and employ family members. These units are mostly
concentrated in Janbazaar, Nungi, Batanagar, Topsia and Bisulhat.

Footwear manufacturing is largely dependent on sub contracting/Job working. Most


of the large and medium scale unit give order to the smaller units. For example Bata
sub-contracts almost 70 per cent of its total production while Khadims out sources 80
per cent of its production. Sreeleather an important domestic market player
outsource almost 100 per cent of its production. A negotiated price is charged on per
pair basis. Large firms which export their products generally supply raw materials to
the fabricators .The fabricators stitch and paste the various components together
keeping in mind the required specification. There are few fabricators who source their
own raw materials once an order is placed but mainly cater to the domestic market.

5.3.1 Raw Materials

Finished leather, soles, heels, lasts etc. are some of the raw materials required for
manufacturing footwear. Most of the units source finished leather from the local
tanneries and some units source finished leather from Chennai because of better
quality. Bata has its own tannery to process leather and it also sources from Bihar.
Lasts are a crucial component in footwear manufacturing but insignificant presence
of last manufacturing units has forced many manufacturers to source it from Agra
and Delhi. Presence of local plastic lasts-manufacturing units could ease one of the
major pressure points of the industry. Components are also sourced from Agra and
Delhi.

BDS Perspective: There are traders who source components like soles, heels and
insoles from Agra, Delhi and even China. Lasts manufacturers are very few and they
supply aluminium and wooden lasts while the industry demands PVC lasts. New BDS
can be introduced to strengthen the supply chain.

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5.3.2 Market

Leather footwear has a significant demand in the domestic market and only a small
quantity is exported. There is a good demand for leather shoes, sandals, and
chappals for both men and women. However, lot of leather look-alikes are available
in the markets which are sold in the name of leather. Since, non-leather is very cheap
in comparison with leather there is a shift in the consumer base. The domestic
market is mainly dominated by brands like Bata, Khadims and Sreeleathers. There
are other popular national brands like Metro, Mochi, Liberty, Action, Lakhani and
Relaxo which have a considerable slice of the market.

BDS Perspective: There is no active BDS for marketing footwear abroad.


International markets can be explored by the help of newly introduced BDS. BDS
also may be introduced in the development of the domestic market.

5.3.3 Human Resource


Process Flow Chart of
footwear manufacturing Development
Design approval This sub-sector is primarily labour-
intensive as after cutting, the
Procurement of finished Pattern and leather is manually stitched or
leather and components grading of design pasted on the upper. Then the
upper is stitched or pasted to the
Cutting of the leather and sole. Most of the workers come
lining by clicking machine from nearby districts and are
generally unskilled. There is huge
demand for industry-ready worker
Leather is skived which can produce quality and
quantity as per requirement.
Component are assembled
and stitched on the upper BDS Perspective: The existing
BDS, i.e., CFTC provides diploma
courses in footwear, but there is a
Uppers cements are moulded
over insole with the help of lasts big gap in the area of skilled
development. Suitable
Bottom roughening
private/public BDS could be
and preparation introduced here.

Sole pasting by 5.3.4 Technology


stuck-on process
In this sub-sector the large
manufacturers are mainly
Product is polished and
packed
dependant on small, micro and

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household job-work units for production of footwear. There are some 2000 household
units operating from places like Janbazaar, Rajabazaar, Nungi, Batanagar etc. Most
of these units work with traditional production methods and there is a need to
introduce new machines and technology to improve productivity. Some MSME units
have advanced machines with line production system. Introduction of improved
machines and line production system will improve the efficiency of the units. Lack of
pattern grading facilities is another gap area for the industry. Many firms still get the
pattern and grading done manually. Advanced units get the pattern grading done
from FDDI/ CFTC at Agra and Delhi where CAD facility is available.

BDS Perspective: Except the machine suppliers providing embedded services there
is no other BDS providing technological services. Stream lining their facilities and
capacity building of CFTC and introduction of FDDI and CLRI in the area of technical
support for footwear is required.

5.3.5 Infrastructure

Most of the job working units here are household or micro level units which operate
from their residence. There is no separate work space. The work area is generally
with inadequate lighting arrangement. This creates a lot of problems and there is a
wide gap in terms of provisioning of basic infrastructure for such units. Units situated
in the industrial areas are better placed in this respect.

BDS Perspective: Present BDS is WBSIDC; which develops infrastructure in the


designated area, but provisioning of better infrastructure support is required here.

5.3.6 Finance

The finance requirements of the footwear sub-sector are of a varied nature. Large
sector company like Bata India is a public listed company. Medium enterprise like
Khadim’s is in the stage of public issue planning to raise finance. The requirements
of the small units are similar to the leather goods sub-sector. Mostly working capital
finance is required. The micro scale units in this sub-sector are financially very weak
and mostly work as fabricators. They get credit from raw material suppliers but they
also have to offer credit to their customers which often put them in a financial crunch.
The footwear demand is seasonal in nature. Most of the sales come from the festive
months of the year. This increases the entrepreneur’s requirement of working capital
finance.

BDS Perspective: The BDS perspective is similar to that of the leather goods sector
in the case of medium and small scale enterprises. In the case of micro units the
micro-financing schemes could be implied.

5.4 Industrial Gloves


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Industrial gloves have a good demand in the global


market. 52 million pairs of industrial gloves are
manufactured in India annually. They are generally
exported to countries like Europe, USA, Canada, Russia,
Australia and Japan. This sub-sector has 31
manufacturers cum exporter, 11 merchant exporters and
some 200 fabricators.

Industrial gloves are generally exported and the fabricators work for export houses.
The export firms supply raw materials, all cut according to the sizes, lining, threads
etc. and the fabricators stitch them together.

5.4.1 Raw materials

The main raw material required here is finished leather which is sourced from the
local tanneries. Since use of such gloves is purely for commercial purposes and they
have a temporary life span, the leather used for manufacturing such gloves is
relatively inferior in quality. Mainly split leather is used for manufacturing such gloves.

BDS Perspective: There is no supply problem of raw materials and scope for
introducing new BDS is minimal.

5.4.2 Market

In the overseas countries industrial gloves are used by the factory workers and these
have a limited life span. The leather used is of inferior quality and they are sold for
less than a Euro abroad. Since the orders are mainly in bulk, the business is dictated
by the scale economy. The market potential for special purpose gloves has not yet
been fully explored by the cluster firms. There are arm-length gloves used for special
purposes or used under extreme conditions which not many firms could manufacture
due to technicalities involved in it.

BDS Perspective: BDS is required for exploring opportunities in the high-end, value-
added gloves market and corporate BDS market could be developed who would
provide turn key technological solution for setting up of special purpose gloves
manufacturing unit.

5.4.3 Human Resource Development

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Most of the units outsource their work and the fabricators charge on a per piece
basis. The fabricators are unorganised and operate at micro level. Most of the
MSMEs units have employees working on contractual basis and when there are no
orders they do not get any employment/payment. This uncertainty factor has forced
many skilled workers to migrate to other industries where pay packages are better
and there are health and insurance benefits etc.

BDS Perspective: There is a requirement of skilled worker but no skill development


facilities in the gloves sector is available.
Introduction of new BDS can improve the Process Flow Chart
condition. of gloves

Design is approved by
5.4.4 Technology the exporter/ buyer

The technology involved in industrial gloves


manufacturing is relatively simple. It involves Procurement of finished
operations like cutting and stitching. While the leather and components
manufacturer-cum-exporter and some goods
fabricators use clicking machine to cut leather, Pattern of the design is
the small fabricator use scissors. This sub- made and leather, lining
sector uses low end technology where the are cut accordingly
value addition is minimal. It is labour intensive
and is based on bulk orders. Some units are
now gradually progressing towards niche Pieces are stitched together
manufacturing of value added special purpose
gloves which involves better technology. Thumbs piece is
stitched together
BDS Perspective: There is no existing BDS or
BMO. Networking could be established for After quality-check gloves
introduction of latest technology and improving are packed and sent
market access for value added special purpose
gloves.

5.4.5 Infrastructure

Most of the large units rely on fabricators for completion of orders. The fabricators
are generally micro units situated in congested area of Beliaghata. The units operate
in insufficient workspace, without proper layout and have no scope for expansion.

BDS Perspective: There is no BDS in this area. WBSIDC can be one of the
prospective BDS here.

5.4.6 Finance
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The industrial leather gloves segment is a volume based industry with very little
margin. The sector is almost cent percent export oriented and there is an intense
need of packing credit. Working capital finance is also an important area and there
are a number of units who use working capital finance. The micro scale units who
generally work as fabricators get some assistance in the form of advance against
order from buyers.

BDS Perspective: Facilitation of financial help and increasing awareness among


them would improve their financial health also allow them to expand. Awareness
programmes in collaboration with Banks and other financial institutions would help
improve the linakge.

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6 BDS MARKET SCENARIO


6.1 Overview of the BDS Market

Any business enterprises need assistance to improve their functioning and grow.
Such assistance/’services are known as Business Development Services (BDS).The
vision of developing markets for BDS has grown out of an emerging new paradigm in
the field of MSME promotion. There is growing emphasis on sustainable market
development and to attain this, BDS market development is the right way. BDS
market development could lead to employment generation, poverty alleviation and
ultimately Local Economy Development (LED).

MSMEs can be benefited by BDS in the form of cost reduction, improved efficiency,
market development, increased sales and better productivity. There are three types
of BDS namely:

Generic – These services are available easily and at times are available in large
numbers. Services of CAs and tax consultants etc. that are transactional in nature fall
under this category.
Strategic – Services that are strategic in nature like marketing, diversification, brand
building, testing, financial linkage, growth, project preparation etc. fall in this
category.
Embedded – Such services come bundled with some products or services. Services
like maintenance of machines, technical support etc. for which the user does not
have to pay anything extra, comes in this category.

Characteristics of BDS market development


A sound BDS market development strategy should have the following
characteristics:
Þ Focus on markets
Þ View clients as customers
Þ Market transaction relationship
Þ Greater potential for sustainability –limited use of subsidies
Þ Goal of sustainable markets
Þ Work with many – preferably private providers
Þ Roles: distinction between market facilitator and BDS providers
Þ Clear exit strategy
Þ Interventions focused on addressing market constraint
Source: Jeanne Downing

The underpinning rationale for BDS market development is self sustainability.


Therefore the development process must have a clear focus on the BDS market. The
interventions should be such that a fee based transaction mechanism develops

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between the stakeholders. This helps in reduction of use of subsidies and thus
develops a framework that has more capability to sustain on its own. The difference
between market facilitation and BDS provisioning is that the donor / implementing
agencies do not directly provide services to the market but rather facilitate the
provisioning of services through BDS providers.

6.1.1 Global and Indian Perspective

The last few years have seen a notable change in the perception of business
development services for MSME development. High profile events like Harare and
Rio conferences and more recently the virtual conference on performance
measurement in BDS have developed a growing interest in BDS market
development. BDS market development projects have been remarkably implemented
in Vietnam, Malaysia, Indonesia, Bangladesh and other countries.

In India BDS market development is a relatively new concept and some projects are
underway in the leather, food processing, pharmaceuticals, engineering, dyes and
chemicals, coir clusters etc.

Earlier interventions by donors and Government to develop BDS market mainly relied
on providing direct services to the MSMEs through public BDS or permanently
subsidizing their services. These programmes have had a less impact on the BDS
market and the outreach among MSMEs has also been low. The new approach of
BDS market development on the other hand aims to develop a market that will be
able to sustain in the long run on its own; although, initial contribution from the
donors and Government is required.

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Figure 5: Actor and their roles


Old approach: Substitute for the market

Private sector
providers
MSME
Government agency, MSME
Donor funding Donor programme,
NGO MSME

MSME

Direct provisioning of services

Figure 6: New approach: Facilitate market development

MSME

BDSP MSME

MSME
Donor / Facilitator BMOs
Govt MSME

Institutions MSME

MSME

Public funding Private funding


development agenda Commercial orientation

Direct provisioning

Facilitation of demand and supply

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6.1.2 Overview of the BDS market

The BDS market in the Kolkata leather cluster is in its nascent stage and is highly
unorganized. The BDS market research revealed that there is a significant lack of
awareness about the business development services. The presence of a large
number of unorganized players in the cluster is responsible for the underperforming
and largely inadequate BDS market.

The micro and house hold units that operate in the cluster are being managed
traditionally. They work as job workers for larger units or merchant exporters in most
cases. These units focus on cost reduction and this leaves them with a thin margin of
profit which makes it impossible for them to even consider availing fee based BDS
services. The leather products manufacturing enterprises at the micro level are
mostly directed by their customers about the quality of leather to be used and the
design to be developed. Use of machineries at this level is very minimal and the
production is generally labour intensive.

In the small and medium sized enterprises’ category there is slightly better
awareness about BDS. These units employ the services of transactional BDS like
that of the CA and tax consultants on a regular basis. Sometimes strategic BDS is
availed mostly in the areas of quality certification, marketing & promotion, design
development, technical and technological upgradation. The quality certification and
environmental consultancy services are being availed by medium and large
exporters. Marketing and promotional services are being provided by some private /
public BDS and BMO like CLE, ILPA and ITPO and there is still a large scope of
development in this area. The technical services is provided by the chemical and
machinery suppliers and are mostly embedded or bundled form.

A few big players who need highly professional support services employ their own
personnel to get their work done.

6.2 BDS Market Structure

The BDS market predominantly consists of three segments, Public BDS, Private BDS
and Business Membership Organizations (BMOs). Apart from these, there is
“informal BDS” which is offered by the peer group of the entrepreneurs without any
fee and is not accounted for many a times.

6.2.1 Public BDS

These are Government organizations that provide free or subsidized services. Some
important institutions operating in the Kolkata leather cluster in this category are;

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Council for Leather Exports (CLE): It is an outfit of the Ministry of Commerce and
Industry, Government of India having its regional office in Kolkata. It provides support
to its member to develop exports. It has 444 registered members in Kolkata. The
membership fee is based on the exports turnover. The large units pay around Rs
20,000 to Rs 25,000 as membership fees and the minimum fee is Rs 3,000. BDS in
terms of providing assistance under MDA scheme and MAI schemes is provided by
the institution. BDS amount in total (all in India estimates) Rs 15.5 crore per annum
out of which about Rs 14 crore is generated by way of Government grant and the rest
is industry contribution. The contribution from units based in Kolkata is roughly
around 20-25 per cent. It provides the following services:

· Communicating information related to export marketing: It publishes several


journals and directories every year that contain information about the industry
and global scenario. It also informs about latest trends, forecasts, buying patterns
and policy changes. It also regularly updates information on its website
www.leatherindia.org.

· Organizing trade fairs and buyer seller meet: CLE organizes international trade
fairs in India and assists members to participate in international fairs. It also helps
members to get subsidies from GoI in participation of fairs abroad.

· Marketing development assistance: CLE provides various marketing


development assistance in the form of channelizing funds provided by GoI.

· Advocacy: It serves as a point of exchange for views between the Government


and exporters.

Central Leather Research Institute (CLRI): The world’s largest leather research
institute was founded on 24 April, 1948 at Chennai. CLRI made an initiative to
foresee and link technology with both industries and academics. CLRI is the hub of
the Indian leather industry and plays pivotal role in research, designing, forecasting,
education, training, testing, planning and social empowerment. With a wide base of
competency in the field of biology, chemistry, engineering and leather sciences, the
institute has been able to gain recognition for its valuable contribute made in R&D. It
provides services in the area of testing chemical properties of leather and leather
products on a fee basis.

The research and development programmes of CLRI have been categorized into:

· Leather process technology


· Leather product technology
· Environment technology
· Leather chemicals technology
· Centre for human and organizational resource development
· Core groups in basic sciences

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· Engineering for modernization and safety


· Centre for operation, management and policy for leather technology
· Enterprise for centre for eco-testing
· Skin biology
· Biomaterial development and testing

MSMEDI: It looks after the promotion of micro, small and medium enterprises in the
state of West Bengal and renders the following services:

· Consultancy (Techno – Economic and Managerial) to prospective and


existing entrepreneurs.
· EDP & skill development training.
· Information on projects and marketing & preparing viable project documents.
· Technology resource centre.
· Energy audit
· ISO consultancy work for ISO-9001:2000 certificate. It provides
reimbursement of the charges for acquiring ISO-9001 to the extent of 75% of
cost subject to a limit of Rs. 75000/-.

MSMEDI has worked for the cluster development of the Santiniketan leather goods
cluster.

District Industries Centre (DIC): Under the administrative control of Directorate of


Micro & Small Scale Enterprises, Govt. of W.B., DIC is the nodal agency for
promotion of micro and small scale enterprises in the district. Some of the
assistances and escort services provided by the DIC to the entrepreneurs are:

· Information and guidelines for setting up industry.


· Technical support for preparation of project report.
· Entrepreneurship development programme.
· Financial assistances under self employment schemes lime PMEGP.
· Acts as authority to whom entrepreneur’s memorandum is to be filed.
· NOC & COO for pollution control measures is issued by DIC for Green
category of items, (Activity of manufacturing leather goods from finished
leather falls under the Green Category).
· Though incentive is not available at Kolkata, certain category of enterprise
including leather goods manufacturing are eligible for incentive under W. B.
incentive Schemes 2007.

West Bengal Pollution Control Board (WBPCB): The West Bengal Pollution
Control Board is the statutory authority entrusted to implement environmental laws
and rules. Initially the tannery cluster was in Tiljala / Tangra area and as per the
directive from the Supreme Court majority of the tanneries were shifted to the
Calcutta Leather Complex on environmental grounds. WBPCB provides services like

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awareness programmes, technical support services for pollution measures to the


enterprises.

Govt. College of Engineering and Leather Technology (GCELT): They run a


B.Tech course on leather technology under All India Council for Technical Education.
Of-late Govt. of West Bengal has expressed its desire to expand the facilities of the
college to the leather industries in Kolkata. The college is going to install a Pilot
Tanning Centre at Bantala for education and research work for the industry. The
college is also going to provide services like training, testing, consultancy and
certification.

National Institute of Fashion Technology (NIFT): NIFT offers a three -year degree
course and a short term diploma course in leather designing. The courses include
leather garment designing, shoe designing and bag designing. It also offers designs
to exporters. A few students graduated from NIFT were absorbed by the units in the
leather cluster, Kolkata. NIFT is also working in some of the rural leather cluster
projects.

India Trade Promotion Organization (ITPO): ITPO plays an important role in the
exports of goods for the Kolkata cluster. ITPO, CLE and ILPA together had
showcased a wide range of leather products in the 14th International Leather Goods
Fair, February 2009 held at the ITC Hotels in Kolkata. 38 leading companies from
India and abroad participated in this fair. Orders worth Rs. 1.25crore was received
from foreign buyers and Rs. 2crore received from domestic buyers during the three-
day event. It also organizes the India International Leather Fair on footwear,
garments and small leather goods, in Chennai, Delhi and Kolkata.

National Small Industries Corporation (NSIC): NSIC has several schemes for the
assistance of SMEs. Some of the key areas are:

· Purchase of machinery and consortium financing with bank


· Single point registration and assistance for participation in Government
purchase.
· Financial assistance as subsidy for credit rating.

However it has weak linkage with the Kolkata Leather Cluster and there is scope for
improvement in this front.

West Bengal Industrial Development Corporation: WBIDC, formed in 1967, is the


premier agency of the State's Commerce and Industries Department to support
economic development across the state. The agency is responsible for the
development, growth, facilitation and trouble shooting of industry, investment and
infrastructure in West Bengal, apart from its role as a financial institution for large and
medium scale sector. WBIDC has established ‘Growth Centers’ with basic industrial
and social infrastructure facilities across the State.

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The Corporation is actively engaged in catalyzing investment through promotion/


marketing of West Bengal as an investment destination, assisting in the
implementation of projects through its 'Single Window Facility' called the 'State
Investment Facilitation Centre' (SIFC).

West Bengal Small Industries Development Corporation (WBSIDC): WBSIDC


was set up in 1961 for extending support and promotion of SSI in the state under the
Department of Micro and & Small Scale Enterprise, Govt. of West Bengal. It helps
micro & SSI units with well diversified activities of industrial and commercial estates
all over the state.

Besides infrastructure support, WBSIDC extends marketing assistance to the SSI


units and supply of raw materials and other promotional assistance. SSI sector
makes a significant contribution to economic growth and employment generation in
West Bengal.

Export Credit Guarantee Corporation: It was established in the year 1957 by the
Government of India to strengthen the export promotion drive by covering the risk of
export on credit. Being essentially an export promotion organization, it functions
under the administrative control of the Ministry of Commerce & Industry, Department
of Commerce, Government of India. It is managed by a Board of Directors
comprising representatives of the Government, Reserve Bank of India, banking,
insurance and exporting community. ECGC is the fifth largest credit insurer of the
world in terms of coverage of national exports. The present paid-up capital of the
company is Rs.800 crore and authorized capital Rs.1000 crore.

Table 19: Status of existing BDS providers

*Units availing
Sector Provider Services
services
Market
Export &
CLE development, trade 435
Promotions
fair participation
ITPO Trade fair organizer 50
Technical CLRI Testing 300
Training NIFT Design training 20
MSME
MSME MSME upliftment 50
development
Industrial
DIC 100
development
* These are estimated numbers; exact no. is difficult to ascertain.

It is important to highlight here that the list of activities of the public BDS mentioned
above are indicative and collected during the interaction and also sourced from their

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published literature / reports. However, actual provisioning of services and availment


by MSMEs may not be that encouraging. There is an urgent requirement to improve
/ customize services of public BDS to cater to the discerning requirements of the
leather cluster, Kolkata.

Table: 20 Pricing of Public BDS


Provider Service Pricing (Rs) approx.
3000 – 25000
CLE Marketing support membership depending
on turnover
Testing (Physical & 3000 – 3500 (for routine
CLRI
Chemical) tests)
Varies on terms and
ECGC Export Credit Guarantee
conditions
NIFT Design Training 200000 (3 year course)

6.2.2 Private BDS

There are a number of private BDS providers in the cluster providing many generic
and some strategic services. Some of the important service providers are listed
below:

FREYA under ILPA Infrastructure Development Foundation : FREYA is a design


and training institute supported by the ILPA Infrastructure Development Foundation.
Situated at the Calcutta Leather Complex it offers design and pattern-making
courses. The exporters are largely benefited as they can get designs suited to the
requirements of different countries as per their tastes and preferences and also get
patterns made at a nominal charge. Prototype of samples is also made as per the
choice of the buyer. This design studio has a library, meeting hall, and facilities for
conducting training programmes. It has a common facility centre and houses many
modern machinery which benefits the exporters. Many exporters, fabricators, small
artisans do their job-work here. The annual revenue of FREYA is approx Rs 12 lakhs
which includes revenue from training, design and CFC. 50 per cent of the revenue
comes from design, 40 per cent from training and 10 per cent from CFC.

Chemical suppliers: There are around 8 - 10 chemical suppliers who operate


closely in the cluster. These suppliers are mainly distributors or agents of chemical
manufacturing companies; national, international. In some cases these
manufacturing companies have also set up their own branch offices. These suppliers
provide embedded services in the form of technical help to the tannery operators.
They update the operators with the information about new chemicals or new usage of
existing chemicals to improve the quality of leather and compliance to country
specific standards. On an average the yearly consumption of chemicals in a tannery

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is around Rs .80 crore to Rs 1 crore. Chemical suppliers like BASF, Clariant, and
Stahl etc. provide free embedded services in the form of R&D.

Machinery suppliers: There are around 4 - 5 machine suppliers that exist in the
cluster. These suppliers provide machinery to the tanneries as well as to the goods
manufacturer. They also provide bundled or embedded services in the form of
providing solutions to the problems of their customers. The machinery suppliers’
average transaction with the units is approximately Rs 2 crore per annum. They
provide information about new technological developments. They also help their
customers to get machines custom built as per their requirements.

CAs and tax consultants: This is one BDS category which is available in
abundance and their services are also being utilized to a large extent. Usage of their
services is higher amongst SMEs only. The micro and HH units do not avail their
services as their turnover is not above the required minimum for their accounts to be
audited. Tax consultants provide services in matters like VAT return etc. They help
their clients to plan their activities that comply with tax laws. The most important and
strategic service that they provide is loan syndication and charge approx 2 per cent
of the sanctioned loan amount from their clients as fees.

C&F / Export documentation: There are a number of C&F agents and export
documentation consultants who provide generic services to the exporters in all
industries. They render services in the field of clearing, forwarding, custom
clearances, DEPB and other related services.

Quality consultants: Some estimate indicate that about 10 - 15 firms in the cluster
have been using ISO certification and other environment and quality compliances.
The service providers are few and their services are being utilized only by the SMEs.
The consultants charge approx Rs 30,000 for the services rendered for getting ISO
certification while the overall expenditure amounts to Rs 1 lakh.

Online marketing portals: Many firms are using the internet as an effective tool to
market their products to the overseas buyers. Companies like – indiamart.com,
justdial.com, alibaba.com and other such web-portals provide professional services
in this field. This helps the exporters to get better access to the overseas market.
These are free listings well as fee-based listings available. The fee based listings
charge between Rs. 7,000 to Rs. 11,000. However, there is scope for improvement
for better application of IT for business promotion.

Table 21: Status of existing BDS providers

*Units availing
Sector Provider Services
services
Accounting &
CAs & Tax consultants Auditing & Tax returns About 1000
Tax

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Quality
QSIS, SEARCH & others ISO, SA certification 10 -15
consultant
Designing FREYA Training 25 – 30
Web – Indiamart, Justdial,
Online marketing 50 – 60
marketing Alibaba
Chemical BASF, SGS, Clariant,
Process update 200
(embedded) LAMCo, etc
Machinery Saggitarians, Harman,
Technological update 500
(embedded) BryAir, Focus & others
* These are estimated numbers; exact no. is difficult to ascertain.

There are many areas where private BDS is non-functional. New BDS/ BDS products
need to be introduced here. Moreover, capacity building of private BDS and
customization of their services are important.

Table:22 Pricing of Private BDS

Provider Service Pricing (Rs) approx


Freya Design 600 per design
Indiamart Internet marketing 7000 - 10000 p.a
CAs & Tax consultants Auditing and VAT return 5000 – 7000
QSIS/ SEARCH ISO certification 100000 – 150000
Testing (Physical &
SGS 5000 onwards
Chemical)

6.2.3 Business Membership Organizations

These are associations formed within sub-sectors for joint development and
advocacy. Such associations are mostly membership based.

Indian Leather Products Association (ILPA): Set up in 1987 it is a representative


body of manufacturers’ and exporters of leather and leather products in the country.
It has been working actively for promotion of Indian leather products in the overseas
countries and is a regular participant at the international fairs and buyer-seller meets
in India and abroad. It is headquartered in Kolkata and has a regional office in
Chennai. The association has been closely involved in setting up of the Calcutta
Leather Complex, which is the largest project of-its-kind in the world. A first-of-its-kind
in the country the Leather Goods Park, spread over 50 acres of land, is being
developed with the assistance of the Government of India and the Government of
West Bengal. The association has already setup a design studio called FREYA,
exclusively managed by them. It has a plan to set-up a full fledged common facility
centre in the complex.

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Indian Leather Technologist Association (ILTA): Leather Technologists’


Association was formed in the year 1950 and it was rechristened as Indian Leather
Technologists’ Association in 1957. Its main objectives are:

· Assist and encourage application of science and technology in leather and


leather products
· Work for the most effective use of leather science and scientific methods.
· Improve and safeguard interests, professional and social status of the leather
technologists.

Indian Footwear Components Manufacturers’ Association (IFCOMA): It was


established in 1992 to bring the Indian footwear component manufacturers on a
common platform to help them understand the various opportunities, growth
potential, export initiatives, problems and hurdles to foster growth of this crucial
sector. The association sought to support and encourage the member footwear
component industries in improving their quality, services and marketing in the
domestic and international markets. Membership is open to all involved in footwear
components and accessories manufacturing. The members of IFCOMA are entitled
to benefits like

· Technical assistance
· Trade assistance
· Manpower training
· Representation of the component industry

CLC Tanners’ Association (CLCTA): The Calcutta Leather Complex Tanners’


Association was formed by the tannery owners at the Calcutta Leather Complex
located in Bantala. It’s most important service is running the common treatment of
effluent. In addition it does policy advocacy and takes care of basic infrastructural
and social issues. The members pay approx Rs 6,000 per month towards effluent
treatment and maintenance charges.

Table 23: Status of the existing BMOs

*Units availing
Sector Provider Services
services
CETP
CLC Tanners’
Tanneries (effluent 224
Association
treatment)
Market access
(Network
Footwear IFCOMA strengthening for 50
footwear
components)
Leather Goods ILPA Market access 136

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(Joint trade fair


participation /
buyer seller meet)
Advocacy
Industrial Gloves CLHGMA (Support for 150
gloves fabricators)
Technical support
(Provide contact of
technical
Technical ILTA 100
consultants;
Organizing
LEXPO fair)
Market access
(Network
Chemicals ILCPA strengthening for 15
chemical
suppliers)
* Active users who regularly utilize services of the BMOs

When compared with other BMOs, ILPA is most proactive. There is no active BMO
existing in the footwear and industrial gloves segment. Other existing BMOs need to
strengthen themselves to provide support to their members and proactively take up
joint initiative for development of the concerned sector. The significance of capacity
building of BMOs can not be neglected. Actually their secretariat should be
empowered to act as important BDS Providers in many generic and also strategic
areas. They should be converted to one-stop-shop for all BDS problems; be it
providing BDS information, facilitation and actual provisioning (to the extent
possible).

Current Institutional Matrix


The current institutional matrix depicts the relationship among the various
stakeholders in the cluster. The nature of relationship between the cluster actors is
not always very clear and direct. Some of them have very remote relationship and it
is limited to the extent of organizing some programmes, providing certain marginal
services and sometimes conducting seminar or workshop.

Based on the role of these various support institutions, associations and strength of
their inter-linkages and cooperation, they are given a full point scale. The score ‘1’
indicates there is very weak linkage between these cluster actors while score ‘5’
indicates there is a strong inter-linkage between the cluster actors. This cooperation
may be expressed in terms of joint planning, bulk purchase of raw material, solving
other’s problems, organizing seminars etc.

A strong relationship and inter-linkage among the stakeholders can not only solve
problems of the cluster but also could source technology, finance, and marketing etc.
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for overall growth of the cluster. It is therefore necessary that interlinking among the
stakeholders be strengthened by organizing meetings and motivating each other. It is
also necessary that relationship between individual enterprises be strengthened for
success of the cluster. The current institutional matrix for this cluster is shown in the
following illustration.

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Current Institutional Matrix


WBIDC/ Pvt.
Organisations CLE ITPO CLRI CFTC GCELT MSMEDI DIC NIFT CLCTA ILPA ILTA FREYA
WBSIDC BDS
CLE - 4 2 0 0 2 1 2 1 3 4 2 4 1
ITPO 4 - 1 0 0 1 1 2 1 2 4 2 3 1
CLRI 2 1 - 0 1 2 2 1 1 4 3 4 3 1
CFTC 0 0 0 - 1 1 2 1 1 0 0 1 0 1
GCELT 0 0 1 1 - 2 1 2 1 3 3 3 0 1
WBIDC/
2 1 2 1 2 - 2 2 1 2 2 2 0 1
WBSIDC
MSMEDI 1 1 2 2 1 2 - 3 2 2 2 3 3 1
DIC 2 2 1 1 2 2 3 - 2 3 3 2 1 1
NIFT 1 1 1 1 1 1 2 2 - 0 3 1 0 1
CLCTA 3 2 4 0 3 2 2 3 0 - 4 5 3 1
ILPA 3 2 4 0 3 2 2 3 3 4 - 4 5 1
ILTA 2 2 4 1 3 2 3 2 1 5 4 - 4 1
FREYA 4 3 3 0 0 0 3 1 0 3 5 4 - 1
Pvt. BDS 1 1 1 1 1 1 1 1 1 1 1 1 1 -

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6.2.4 Who Does Who Pays Matrix

Based on a detailed discussion with the entrepreneurs and BDS providers an attempt
was made to identify service providers in all segments and understand who pays for
their services. It was not possible in some cases to calculate the exact percentages.
Some BDS providers offer services that are fully subsidized and some are paid by the
users. Based on the information collected during the course of discussion a very close
account has been drawn in preparing ‘Who Does Who Pays Matrix’

BDS Who does Who pays Remarks


Chartered
Loan syndication Direct Project reports, M&A
Accountants
Sponsoring banks,
DIC, MSMEDI Public subsidy
project report
Skill development
FREYA Direct Designing
NIFT Direct Designing
Direct
CLRI Technical
Part subsidy
Direct Participation in trade
Market development CLE
Part subsidy fairs
Direct Trade fairs &
ITPO
Part subsidy exhibitions
Direct
ILTA LEXPO
Part subsidy
Testing CLRI Direct CFC, Testing
SGS Direct Testing
Part public subsidy
Infrastructure WBIDC Special parks
Direct

The matrix indicates that the users generally pay for the services where they get direct
benefits. In some of the cases like testing etc., the users are paying 100% of the BDS
charges. In case of market development and market facilitation, the cluster units utilize
Government scheme where they are supposed to contribute anywhere with 50 per cent
– 90 per cent. The same is applicable for infrastructure which is generally developed
under PPP mode.

This habit of utilizing BDS by making payment, partly or fully, is a positive indication
from the point of view of BDS market development. This can pave the way for
introduction of new BDS in gap areas and capacity building of existing BDS. With
proper facilitation the project can help in rolling out BDS in PPP mode.

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6.2.5 BDS Market Structure Analysis3

Entry Barrier Rivalry

LOW MODERATE

Bargaining power of the service Bargaining power of the customer


provider

HIGH LOW

The entry barriers in the BDS market are relatively low. Since it is a service industry the
investment requirements is minimal. The most important requirement to enter this
industry is knowledge and expertise. Persons with expertise can start a BDS firm with
insignificant investment. The rivalry among existing players could be considered as
moderate. In some cases like chemicals and machinery there is a good number of
players competing for the same set of customers / MSMEs. But for most other services
the providers are either non-existent or they do not have any rivals.

In the BDS market the bargaining power of the service providers is relatively high
because there are very few providers who deliver quality services or have the
expertise. There is always a high demand for quality services and thus the service
providers are in a better position to bargain. On the other hand, the bargaining power of
the customers is low because quality of service they require are provided by relatively a
few and the supply is less than the demand.

Because of lack of awareness, cost and availability constraints, MSMEs tend to use in-
house expertise or suggestions of their Peer group to solve their business problems.
However due to relatively less experience and expertise of the in-house / peer group,
the problems are either partially solved or remains unresolved. Therefore, efforts
should be made to streamline the BDS supply chain so that MSMEs can avail quality
services at an affordable price.

3
The analysis is relevant for strategic BDS

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This supply side intervention should be equally matched by the demand side
intervention. Awareness should be created amongst MSMEs on the short run and long
run benefits of utilizing BDS. To smoothen the process, some strategic services could
be introduced on a demonstration basis which could be further pursued for creating
multiplier effect in the cluster.

6.3 Comparative Analysis of the Service


Market
A usage, attitude, image, study (UAI) was conducted to help identify the constraints for
increasing demand for BDS and the market opportunities that could be exploited. It
also helped in understanding the market segments and behavior of the customers and
categories. Having conducted structured interviews of various BDS providers in all
segments including public, private and BMOs, a UAI table of the BDS market was
developed.

The BDS requirement in this cluster is multifaceted. There are different sub-sectors and
each sub-sector has units operating at different scale. Thus, the issues faced by units
in the same sub-sector can vary widely. This project can intervene to stimulate the BDS
market however, majority of the interventions need to be customized to the specific
BDS category.

6.3.1 Key Marketing Issues

The Usage Attitude Image study data was compiled into ‘Awareness, Understanding,
Reach and Retention Table’. The percentage of respondents who have at least heard
about the services form the ‘Awareness Ratio’. Among those (who have heard about
the service) percentage of MSMEs who have developed an understanding about the
service form the ‘Understanding Ratio’. Out of the understanding ration, percentage of
MSMEs, who have tried the service, form the ‘Reach Ratio’ and out of the reach ratio
the percentage of those who have continued using the service, form the ‘Retention
Ratio’.

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Table 24: Usage Attitude Image Table

Awareness, understanding, reach and retention


Services Awareness Understanding Reach Retention
Accounting & Auditing services 100% 94% 75% 98%

Tax consultancy 94% 80% 55% 60%


Product design 90% 60% 45% 30%
Technical assistance 45% 30% 35% 80%
Technology upgradation 60% 30% 20% 60%
Market development 40% 70% 10% 60%
Quality certification 30% 20% 40% 50%
Environment safety 40% 10% 30% 60%
Training & development 60% 60% 20% 5%
Internet marketing 30% 40% 60% 70%
MIS / ERP 5% 10% - -

The table indicates that the awareness level of the respondents has been high in the
generic BDS category like accounting and tax. The awareness level for strategic BDS
is moderate except for computer related services and MIS. Similarly their
‘understanding’ of the generic BDS is much higher than that of strategic BDS. Having
heard about a service but not having a clear understanding or rather a contradictory
understanding leads to misconception thereby affecting usage.

Except services of CAs and tax consultants, the reach has been very minimal. It has
been noted that some of the MSMEs developed a perception that they do not require
outside support other than some basic services. There is slight reluctance among them
to opt for fee-based services unless the problem is serious. The retention ratios also
have a very dismal picture. The primary reasons for low retention could be service
dissatisfaction or user’s focus on short term advantages. Entrepreneurs look for quick
benefits from the services they have paid for and this leads to dissatisfaction among
them. Sometimes cost minimization drive leads them to hire not-so-competent BDS
which ultimately results in service dissatisfaction. It has also been observed that the
‘retention’ ratio is higher for firms that either have to comply to certain regulations like
REACH, ISO, SA 8000 etc. or have been largely benefited from the services like
internet marketing. Technical assistance retention ratio has been higher because of the
embedded services being provided by chemical suppliers. Retention ratio for technical
upgradation has been higher as growth oriented units has to constantly upgrade their
technology and are largely embedded services.

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It is important to mention here that the MSMEs should not be using BDS only to handle
their problems. There are BDS, usage of which could substantially improve their
business performance. It can held them in developing market niche, market
penetration, brand building, diversification, adoption of state of the art technology
leading to improvement in quality and productivity, strategic alliance for developing
better business synergy, etc. These fall in the value added category services, benefits
of which can be derived in the long run. Therefore, MSMEs should understand that
they need to hire quality BDS to support their growth, expansion, modernization and
diversification plan. Efforts should be made to create awareness in this direction so
that utilizing BDS becomes a custom to support their business growth. Therefore, the
BDSPs should not be seen as a cadre of problem solving personnel rather than people
who could give a fillip to their business fortune.

6.3.2 Relative Effectiveness of the Markets

Based on the awareness, understanding, reach and retention; the overall market
penetration is depicted on a continuum from weak to effectiveness of services. This
can give an indication where the focus of intervention should lie. It is just a comparative
analysis and therefore any service rated to be highly effective might not be that
effective in the true sense. It is just relatively more effective than others

Figure 7: Relative strength of the BDS market of Kolkata leather cluster

Weak Effective
Technical Assistance
Market Development
Environment Safety
Quality Certification

Internet Marketing

Tax consultancy
Product Design
Technological

Development
Upgradation
MIS / ERP

Training &

The figure shows that the market for accounting and tax consultancy is relatively higher
and that of MIS / ERP and environment safety is lower. The continuum also shows that
the market for product design, internet marketing, training and development have a
strong potential and can be developed with some intervention. Services like technical
assistance, technological upgradation, market development and quality certification

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need a comparatively higher intervention. Environment safety consultancy needs


focused intervention. MIS / ERP consultancy service portray very weak market strength
and require a longer timeframe and multiple interventions. However, we could learn
from service market related to accounting and tax consultancy and implement similar
techniques to develop all other markets.

However, during the course of interaction the BDSPs and MSMEs could understand
that there is scope for improving effectiveness of the existing BDS. The BDSPs should
be trained on the precise requirements of the MSME cluster. Capacity building of the
BDSPs could be organised in a systemic and strategic manner. The BDSPs should be
counselled to come out from their large-industry-service prospective. This should be
facilitated to customise their services so as to suit precise requirements of the MSMEs.
MSME-BDS linkage programme should be organised so that each understands their
counterpart better. Quality of service provided by the BDSPs should also strictly be
monitored to get better penetration and customer satisfaction.

6.3.3 Potential for Development

Efforts were made to assess the potential for growth of the BDS market in the cluster
by judging the demand for services by non-users. The respondents who had not even
tried these services once were asked to rate these services as important or very
important for their growth in the future. The data has been depicted on the bar diagram
to give a perspective of the future potential for the growth of the BDS market.

Figure 8: Percentage of ‘non-users’ who say services as important for growth

Product Design

Training

Technology

Quality Cerification

MIS

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Important Very important

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The chart only depicts a rough estimate of the potential demand as many ‘non-users’
who have indicated that the service is important for their growth, might not actually use
it in real life. The figure therefore must not be taken as an absolute prediction of the
amount of services that will be used by the ‘non-users’ in the future.

The analysis shows that the market development is the most important service as said
by the non-users. Market development includes services like trade fairs, exhibitions,
advertisement, etc. Many ‘non-users’ who said that market development was very
important for growth did not use that service because of the high expenses involved.
The demand for MIS and computer automation has a relatively less potential because
the ‘non-users’ doubt the tangible benefits they could derive out of it. Technological
assistance has a higher percentage but the heavy investment required in implementing
advanced technology sometimes keeps them away. Demand for technical assistance is
higher among people in the tannery sector where they need to keep updated with the
latest chemical usage and technical developments.

Lack of adequate skilled manpower keeps the training service requirement high. The
cluster being an export dominated (especially goods and special purpose gloves) one
could manifest higher demand for internet marketing to reach foreign buyers. There is a
strong urge to develop individual designs but the low acceptance of indigenous designs
in foreign markets keep the usage level low. Taxation and accounting services
including loan syndication and financial liasoning has a higher demand because
finance is the backbone for any initiative to growth.

6.4 Demand Analysis


The major deciding factor whether to avail a service or not depends on whether or not
an entrepreneur is convinced that an expense today would lead to direct benefits today
or tomorrow. MSMEs have limited resources and they want optimum utilization of their
resources. They concentrate on using their scarce resources on core productive
purposes: purposes which fetch immediate tangible benefits. There is a need to make
these entrepreneurs aware of the fact that hiring quality services and paying for them
could definitely improve their productivity and profitability.

It has also been found that MSMEs often over estimate their competence and try to self
generate support services. Sometimes it is also because they fail to identify a
dependable service provider. The mindset of the people also becomes a handicap to
the growth of demand of external support services. Moreover, some of the
entrepreneurs are not comfortable with sharing confidential information to strangers.

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There are two categories of BDS – generic and strategic. Generic otherwise called
transactional BDS include services relating to accounting, taxes, labour and
administration. These services are regulatory in nature and are in good demand from
all sub-sectors. Other transactional services related to pollution, safety measures and
quality standards differ from sector to sector and are also regulatory in nature but their
demand varies from sector to sector. For instance, the demand for pollution related
services are high for tanneries but not for leather goods manufacturing units.

In case of strategic BDS, the perceived demand is very low. Services related to product
design, marketing, logistics, packaging, technical assistance, technological
upgradation, research and development, etc do not have a very strong exposed
demand. Such services are demanded by only a few large players. Small
manufacturers at times end up engaging their own manpower/known persons to self
generate the services.

Table 25: Demand for and availability of BDS

Sector Services availed Extent Perceived demand by way


of of services
Usage
Tanneries Testing and certification H Services providing efficient
services from CLRI & SGS sourcing of raw materials (hides
and skin)

Use of effluent treatment M Access to cheaper loans


plants at CLC

Advocacy by CLCTA L Services related to production


efficiency

Access to finance L Services relating to efficient


sourcing of chemicals and dyes

Taxation & audit related H Services facilitating proper storage


services of hides at collection level to
reduce wastage

Embedded technical services M


by chemical suppliers

Use of technical services by


ILTA L

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Goods Taxation and audit related H Training of labour and supervisors


Manufacturing services

Assistance in participation in M Technological advancement to a


domestic & international fairs cost effective production method
by ITPO / CLE / ILTA

Product designing by FREYA M Market development services by


/ foreign buyers / freelance BMOs
designers

Services of ISO consultants L Brand building of ‘Kolkata Leather’


for quality certification overseas

Use of internet marketing via L Strengthening of domestic retail


indiamart, tradeindia, alibaba, market.
justdial

Finance & loan syndication H Environmental certification of SA


services by CAs 8000 and such other standards

Services of C&F agents and H Availability of cheaper loans


export documentation experts

Embedded services of L Advocacy for VAT refund


machine suppliers in the field
of technology
Footwear & Footwear grading and design L Strengthening of grading services
components services from Kolkata in the cluster
manufacturing

Services of leather L Create awareness for the use of


technologists original leather

Training services of CFTC L Strengthening of CFTC for


providing technical manpower

L Establishment of training institutes


like FDDI

L Promotion of lean manufacturing


system

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6.5 Supply Side Perspective


The supply side perspective of the BDS market in the Kolkata leather cluster is not very
strong. Excepting some generic service providers like CAs and tax consultants and
strategic BDS like technology and design; there is dearth of quality BDSPs. The BDS
providers opined that since the cluster is not very organized, except goods and high
end gloves manufacturing / exporting units, there is hardly any perceived demand for
strategic BDS. However, there cannot be an existence of an organized cluster and a
strong demand for BDS, without pre-existence of a strong supply chain.

Initiatives should be made to customize services as per the requirement of the leather
units; micro, small and medium. There was limited drive from the perspective of the
service providers. They apparently could not comprehend the enormous potential of
the BDS market development in the leather cluster and hence could not reap the
benefits properly.
Table 26: Demand and Supply Matrix
Sub-sector Services Demand level Supply level
Tanneries Global procurement of hides High Very low
Quality improvement Low Low
Environment compliance High Low
ISO certification Moderate Moderate
Finance Moderate Low
Tax & auditing High High

Testing of chemical properties High Low

Effluent treatment Moderate Low


Infrastructure High Low
Leather goods Marketing High Low
Design High High
Skill development High Low
Promotion High Low
Finance High Moderate
Tax & auditing Moderate High
Diversification Moderate Low
Industrial gloves Technology High Moderate
Marketing High Low
CFCs High Very Low
Skilled labour High Low

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Finance Moderate Low


Diversification Moderate Low
Tax & audit High High
Footwear Pattern & Grading High Very low
Designing High Low
Skill development High Low
Domestic market
High Low
development
Procurement of lasts High Low
Finance High Low

One can argue here that the demand side intervention should be equally matched by
supply side initiative. This could help maintaining equilibrium in the BDS market.

6.6 BDS Provisioning Mismatch in the Perception


Level of Firms & BDSPs
In the diagnostic study efforts have been made to analyze the gaps that exist between
the perception of the BDSPs and entrepreneurs. The objective has been to bridge the
gap, if exists, between the expectations of the entrepreneurs and the quality of services
provided by the BDSPs. Hence, entrepreneurs and BDSPs that were covered under
the preview of the study were asked to rate the services on the parameters of utility of
products, competitive and appropriate pricing, sector specific customization, constant
innovation and upgradation of service, MSME specific expertise and links with firms in
the leather cluster. Entrepreneurs were asked to rate the current suppliers of services
on a scale of 1-5 where 1 indicates ‘least satisfied’ and 5 indicates ‘most satisfied’. The
BDS providers were asked to rate their own services on the said parameters. The
differences between the average ratings of the MSMEs and BDSPs have been plotted
in the form of a Star Diagram.

Table 27: Perception of Firms and BDSPs on BDS-Specific


Parameters MSME BDSPs
Utility of products 2.6 3.5
Competitive and appropriate Pricing 2.8 4
Sector specific customization 2.6 2.8
Constant innovation & upgradation of service 3.3 4
MSME specific expertise 2.3 3.3
Links with firms in the leather & leather
2.3 2.9
products cluster

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Figure 9: Star Diagram

Utility of products
4
3
Links with cluster 2 Competitive & appropriate pricing
1
MSME
0
BDSPs

SME specific expertise Sector specific customization

Constant innovation & Upgradation

The star diagram gives a clear picture of the prevailing gap between the perception of
the BDSPs and MSMEs while evaluating service parameters. There is a major gap in
parameters like utility of products, competitive and appropriate pricing, MSME specific
expertise and linkage. However the gap is (though existent) relatively lower in
parameters like sector specific customization, upgradation etc.

This gap should be lowered by resorting to strategic measures which form the
core of the BDS market development project.

6.7 BDS Market Constraints

The BDS market constraints can be classified into demand constraints, supply
constraints and transactional constraints. The major constraints of the BDS market in
the Kolkata leather cluster are depicted in a tabular form below.

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6.7.1 Demand, Supply & Transactional Constraints

Table 28: Demand, supply and transactional constraints

Transactional
Demand constraints Supply constraints
constraints

MSMEs tend to get all work


done on their own
Lack of customization as Micro units do not have access
considering it to minimize
per leather industry to service markets
cost

Lack of education and


knowledge among MSMEs Low initiative to target new Past prevalence of subsidy
to avail professional help markets driven services limiting growth.

Lack of trust on BDS


Prospects in other Informal services being availed
providers to share
industries providing quick within peer group by micro
competitive information
returns enterprises

Inadequate culture of common


Inconsistency among
sourcing of BDS – no past
MSME networks to take a
Improper market information record.
consortia approach

6.7.2 Current Reality Tree of the BDS Market


The existing BDS market in the leather cluster is relatively weak because of a host of
reasons like lack of initiative from the BDSPs to customize their services as per the
requirement of the MSMEs. The demand for BDS is not properly projected which in
turn makes the market appear less lucrative. The awareness level of the MSMEs in
terms of realizing a need for BDS is also very low. BDS market development in the
initial stage should be triggered by a joint initiative of the MSMEs to support service
provisioning.

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Figure 9: Current reality tree of the BDS market

Lack of
initiative from
the BDS
providers

Weak
Lack of joint Demand for
initiative by the
BDS BDS not
entrepreneurs Market properly
projected.

Lack of
knowledge and
awareness

6.7.3 Outreach of Some Existing BDSPs

The outreach of the most public BDS and Government agencies are relatively low. The
most proactive organization specific to the cluster is Council for Leather Exports (CLE).
It has the maximum outreach among public BDS. It has a good outreach in the areas of
advocacy and market access in terms of trade fair participation. CLE also has a strong
inter-organization linkage with ILPA. CLRI provides service in the area of chemical
testing, training, research and development but there is scope for improving the
outreach. But CLRI has a strong inter-organization linkage with ILPA and especially
with CLCTA.

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Table 29: Outreach of some existing Public BDS / Government agencies

MSME
BDS Provider CLE CLRI ITPO DIC NIFT GCELT
DI
Advocacy M - - - - - -
Raw material selection/
- - - - - - -
procurement
Market access M - M - - - -
Product & process – technology
L L - L - L L
upgradation
Training & Skill development L L - M - L L
Quality L L - M - - -

Socio-environmental compliance L L - L - - -

Design development L - - - - L -
Patent procurement - - - L - - -
Legal issues L - - - - - -
Finance/loan syndication L - - - M - -
MIS/ ERP - - - - - - -
Taxation & auditing - - - - - - -
Others - - - - - - -

BMOs have a moderate reach to its members. In this category ILPA has a better
outreach than all others. ILPA is a proactive organization with active participation from
its members. It provides value added services in the area of policy advocacy, market
information, design development and even infrastructure. ILPA has a strong linkage
with the Government agencies/ Public BDS. CLC Tanners’ Association has a moderate
outreach in terms of environmental compliance through operation of CETP. It has
strong linkage with CLRI and ILTA.

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Table 30: Outreach of some existing BMOs

BDS Provider ILPA CLCTA IFCOMA ILCPA


Advocacy M L L L

Raw material selection/procurement - L L M

Market access M - L M
Product & process – technology
- - L L
upgradation

Training & Skill development L - L L

Quality - - L L

Socio-environmental compliance - M - -

Design development M - - -
Patent procurement - - - -
Legal issues L L - -
Finance/loan syndication L - - -
MIS/ERP - - - -
Taxation & auditing - - - -
Others - - - -

The outreach of private BDSPs in the cluster is low in strategic areas but moderate to
high in generic areas. BDS like that of tax consultants and chartered accountants have
very high outreach. Embedded services of machine and chemical suppliers also have
high outreach. However, services of technical, quality consultants and designers have
limited outreach.

Table 31: Outreach of some existing Private BDS

CAs & Techni


tax Testi cal Machine Chemical Quality
BDS Provider FREYA
consulta ng consul suppliers suppliers consultants
nts tants
Advocacy - - - - - - -
Raw material
selection/ - - - - - - -
procurement
Chemical testing - - H - - M -
Market access L - - - - - -

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Product & process –


technology L - L H M M L
upgradation
Training & Skill
L - - - L L -
development
Quality - - M - L M L
Socio-environmental
- - - - - M L
compliance
Design development M - - L - - -
Patent procurement - - - - - - -
Legal issues - L - - - - -
Finance/loan
- M - - - - -
syndication
MIS/ERP - - - - L - -
Taxation & auditing - H - - - - -

Others - - - - - - -

The above analysis clearly indicates that strategic measures should be initiated in
order to get a better outreach scenario. BMOs should be made more proactive and
facilitated to graduate to provide value added services to its members other than policy
advocacy. The outreach of the public BDS should be improved and their facilities
should be better utilized. The demand supply gap in the private BDS market should be
bridged up by resorting to strategic measures.

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7. SWOT ANALYSIS OF THE SUB–SECTORS & BDS MARKET

7.1 Tannery

Strengths Weakness

o Abundant water supply


o Inconsistent quality of raw material
o Availability of raw material
o Improper handling of dead animals at the point of collection
o Skilled labour at low cost
o Maximum raw material sourced from outside Bengal, from
o Infrastructure at Calcutta Leather Complex
UP, Bihar, Chennai leading to higher transportation costs
o Strong backward linkage (chemical and machinery
and longer lead time
supplier)
o Low initiative for compliance to environmental standards
o Availability of support organisations like CLCTA,
o Limited access to institutional finance.
ILTA
o Extensive use of traditional methods of production
o Proximity to sea and port
o Chemical testing and testing services not up to mark

Opportunities Threats

o Stiff competition from other developing countries like


o Closure of tanneries in developed countries
Indonesia, Vietnam etc.
o Assistance available from different Govt, agencies
o Stricter international quality standards
o Growing international market
o Increasing concern for environmental safety and pollution
o Growing demand in the domestic market
control

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7.2 Leather Goods (including gloves)

Strengths Weakness

o Productivity is low since the process is labour intensive and less


usage of machinery
o Export oriented quality (good demand overseas)
o Low initiative for individual design development
o Availability of good quality of finished leather for
o Poor access to institutional finance (applicable to units in the
bags and goods
unorganised sector)
o Skilled labour at low cost
o Good quality of accessories not manufactured locally
o Good infrastructure at Kasba Industrial Estate
o Low productivity of labour due to inadequate training
o Proximity to sea and airport
o Low awareness of fashion levels
o Distance factor
Opportunities Threats

o Growth in foreign trade o Increasing competition from other countries


o Growing domestic market o Increasing cost of raw materials
o Govt. support incentive to develop export market o Global downturn
o Increasing demand for natural leather products o Frequent changes in fashion trends make adaptation difficult

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7.3 Footwear

Strengths Weakness

o Use of traditional methods of production


o Very few organised manufacturers
o St45rong manufacturing base
o Low mechanisation
o Presence of Bata India Ltd., large manufacturer
o Poor technical upgradation and quality assurance in
having ‘best practices’
micro unit
o Huge domestic market
o Shortage of skilled labour
o Enormous number of household units working for
o Seasonal fluctuation in demand
larger units sub contracting relationship
o Very little support services like that of CFTC Agra,
FDDI Delhi

Opportunities Threats

o Expanding domestic market


o Increasing export market o Increased use of PVC substitute of leather
o Increase in import demand o Growing demand for low price footwear
o Growing R&D and upgradation of technology o Stiff competition from China
o Growing awareness for comfort and safety o Footwear industry slowly drifting out of West Bengal

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7.4 BDS Market


Demand Supply
o Relatively high ‘awareness’ of services
o Relatively high basic ‘understanding’ of
o Providers exist in all BDS markets
services
o There are availability of providers offering services large
Strengths

o Some entrepreneurs are able to diagnose


industry/sector
their problems and choose appropriate
o Embedded services availed to a large extent
services
o Growing leather industry could become an exciting area
o Economic trend is fuelling demand for BDS
to venture into
o Desire to be at par with the international
counterparts

o Lack of perceived need for services


o Low value realization of services
o Too much reliance on peer group for
o Lack of providers in most strategic areas
Weaknesses

information
o Lack of initiative amongst providers to tap new market
o Present business culture nurtures habit of
o Lack of initiative for service customization.
solving business problems internally
o Lack of introduction of new BDS product(s).
o Mindset limits the outreach for fee based
o Poor marketing & awareness
services
o Low operating margins under recession pose
a handicap

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8. VISION AND STRATEGY

The Inter Ministerial Group for leather sector constituted by the Department of
Industrial Policy and Regulation, Government of India has envisaged increasing India’s
export in the leather sector from the present level of US$ 3.47 billion to US$ 7 billion in
2012. Kolkata leather cluster has a major contribution in the leather goods and
industrial gloves export. Kolkata leather cluster aims to increase export with a
synergized plan to realize cost and compliance related competitive advantage as well
as serve enhanced market access.

As a short term and long term goal of the BDS market development project, due
attention will be given in terms of fostering growth in the MSME and BDS market,
improving competitiveness of the MSMEs and BDSPs, energy efficiency, financial
linkages, environment friendly manufacturing practices, income generation,
employment creation and local economic development.

The vision for different sub-sectors from the BDS perspective is as follows:

· Tanneries: Increased use of BDS for improved quality, better


environmental practices and energy conservation.
· Leather goods: Increased use of quality BDS for improving market
access, design development and better production processes.
· Leather footwear: Improved functioning of units (especially micro units)
through BMO/BDS and quality up-gradation
· Leather gloves: Increased use of BDS for testing services and value
added products manufacturing.

Efforts will be made to introduce a ‘systematic change’ in the BDS market. Hence as an
implementing agency the focus will lay in facilitation of BDS market development and
need based hand holding by the implementing agency. Efforts will be made to facilitate
transactions between MSMEs and BDSPs, seeking to develop viable market niches;
niches which are based on product (BDS) coverage, quality and sustainability.

Financial linkages for MSMEs would be one of the thrust areas. Focused effort will be
made to popularize cluster specific financial products. Integration of various schemes
of the Government of India and the State Government for improving competitiveness of
the MSMEs would be attempted. Efforts would be made to roll out BDS in private public
partnership (PPP) mode.

Attempts will be made to institutionalize BDS market development plan on a long-term


basis. Sustainability of the BDS market development strategy will be considered

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seriously. Exit strategy will be built within the implementation plan and linking,
networking and capacity building would deliver results.

Special emphasis will be laid in making the BDS market development project truly
inclusive. Efforts will be made to ensure trickling down of benefits of the BDS market
development even for the firms operating in the lower strata of value chain. Attention
will be paid on social capital development as it provides base for enterprise and
successful BDS delivery.

The demand and supply side interventions will make the BDS market development
project holistic. The demand side intervention would include:
· Sensitization
· MSME-BDS linkages
· Financial linkages
· Capacity building of local BMOs
· Tools for demand boosters etc.

Supply ride intervention would include:


· Capacity building of the existing BDS (including financial BDS)
· Introduction of new BDS
· Better packaging of services
· Streamlining delivery mechanism
· Transaction boosters etc.

9. MARKET SCENARIO UNDER RECESSIONARY


CONDITION

The whole world is suffering from the global economic downturn. And with world trade
dwindling, the worst hits are the export oriented units. In the Kolkata leather cluster,
leather goods and industrial gloves are mostly destined for export. Most of these
products are exported to the European countries which are witnessing recession. This
in turn has led to a fall in orders and existing clients are bargaining for heavy discounts.
Some entrepreneurs reported that there have been cancellation of orders, no or very
low repeat orders and even tough bargain for discounts for existing orders and even for
goods that have already been shipped. Some exporters are supplying goods even at
break even cost just to keep their buyers happy. The condition has worsened by highly
volatile exchange rate.

A perfect cure for recession is beyond the scope of this project. However some
activities have been planned to help MSMEs to fight recession. Exploring new markets

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for export will help broadening their base. It will help exporters to spread their exposure
across the globe thus limiting risk. For instance reports indicate that the countries in the
Middle East, South East Asia, Brazil, Russia and Australia are less affected by the
global meltdown. The domestic market itself has shown strong signs of resistance and
recovery from recessionary conditions. Exploring market development and expansion
within the country could prove worthwhile here.

Diversification would also be an effective solution. If MSMEs diversify into


manufacturing of other value added leather products like garments and toys they would
be able to cash in on the opportunities available. If MSMEs are trained to manufacture
high value added products and deepen their specialisation in manufacturing hi-tech
gloves they would get an edge over their competitors and a better negotiating power
with the buyers. Interventions in the area of value addition, deepening specialisation
and diversification could prove beneficial.

To mitigate the foreign exchange risks MSMEs need to be trained in hedging and
trading in currency future contracts. This would secure them against high volatility in
exchange rates.

India is increasingly becoming an attractive investment destination. There is a good


opportunity to tap FDI in this sector and forming joint ventures with companies abroad.
Reports indicate that there would be a second generation exodus of tanneries and
leather goods manufacturing units from the developed countries and with the facilitation
of BDS, some of them could be attracted in our country.

The Government is gearing up to assist the sectors that have been suffering due to
recession and advocacy by BMOs and associations could also prove worthwhile.

The market development; domestic and overseas, value addition, fine tuning
specialisation and identifying product and market niches, tapping FDI for technology
upgradation and achieving scale economy etc. can be done for the benefit of MSMEs
by involving right kind of BDS. Therefore, provisioning of quality BDS could prove
beneficial for overcoming market recession. Once the situation is improved, growth of
MSMEs could be triggered by resurgent BDS market.

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10 Participatory Appraisal of Competitive


Advantage (PACA)
We followed the Participatory Appraisal of Competitive Advantage (PACA) process to
diagnose the problems of the cluster and to validate our findings. The PACA process
followed is presented hereunder:

Ü PACA Fieldwork (1st week to 3rd week April 2009)


· The project team conducted brain storming sessions to gather
information about the cluster.
· In depth interviews were conducted with stakeholders from all segments.

Ü Results Workshop (4th week April to 2nd week May 2009)


· Elaborate diagnosis was done.
· Practical proposals were framed.

Ü PACA Presentation (26th, 27th & 29th May 2009)


· Diagnosis and proposals presented before the local stakeholders
· Feedback received for implementation

Summary of responses at the PACA Presentation cum Validation workshop;


(It includes only a few important suggestions that emerged from the workshop)

Stakeholder Leather Goods Manufacturers, ILPA, CLE

(26th May 2009)

Issue Feedback

What are the key ¯ The demand – supply gap need to be reduced.
issues to be
¯ Introduction of new product and customisation is required.
addressed to
develop the BDS ¯ Awareness regarding cost benefit and BDS usage to be
market? spread.

¯ Demonstration need to be initiated.

¯ There is an urgent need to develop skilled manpower.


Lack of skilled manpower hinders the growth plans of the
industry. The project needs to focus on skill development
through involving right BDS.

¯ Its important to strengthen the design BDS. Giving

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international standard to the design studio of the cluster


would be expected

¯ Testing services are cumbersome. Testing facilities are


out of reach and very expensive. Except some basic
tests, samples need to be sent to Chennai or even Hong
Kong. Setting up of a testing laboratory within the Calcutta
Leather Complex is pivotal.

¯ Present infrastructure is not ideal for international


standards.

What are the issues ¯ Special emphasis should be given on financial liasoning,
hindering banking loan syndication.
services in the
¯ Working capital requirement of the MSME sector needs to
cluster?
be addressed prudently.

¯ MSME rating should be introduced urgently.

¯ There is a need for soft loans as envisaged by the


entrepreneurs.

¯ Land purchased by the units for relocation should suffice


the collateral requirement.

¯ It is difficult to convert most schemes from text to action.


There needs to be a speedier mechanism to do it.

Stakeholder Tannery owners, CLRI, CLC Tanners Association

(27th May 2009)

Issues Feedback

Global sourcing ¯ Feasibility for importing hides needs to be explored by


involving right BDS.

¯ Focus should be on importing wet blue rather than raw


hides.

¯ The customs bonded warehouse needs to be of high


standards with cold storage facility; Quality BDS needs to
be introduced to take the project on a turn key basis.

Environment & ¯ The performance of the CETP needs to be improved;


Energy Involvement and public BDS is needed.

¯ Infrastructure at the CLC needs to be improved; BDS

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need to be identified and inducted.

¯ Implementation of energy audit would help to improve


energy efficiency; BDS (energy audit) needs to be
inducted.

Stakeholder Group of BDS(FREYA, Machine suppliers, Chemical


suppliers, Leather technologists and bankers

On 29th May 2009)

Issues Feedback

How to improve ¯ Organize awareness campaigns


outreach in the
¯ Prepare a directory
cluster?
¯ Work out some kind of empanelment for BDS providers

¯ Provide (voucher) support to MSMEs for paying BDS fee

Improving BDS ¯ Train BDS in their respective areas. ToT/Capacity


quality and Building
efficiency.
¯ Provide financial linkage and loan syndication to the BDS

¯ Take steps to improve functioning of BDS

The key points of the PACA validation workshop has been integrated in our Action Plan
and their suggestions will be taken care of while implementation.

11. PRESSURE POINTS AND SCOPE OF INTERVENTION

The Kolkata leather cluster contributes to the country’s export value realization
therefore; it is important for the cluster to maintain and improve its competitive
advantage and work on constraints to achieve quantum growth.

Interventions in various sub-sectors and value-chains have been envisaged keeping


the likely resources available and the time frame of the project. All the sub-sectors and
value chains i.e. tanning, leather goods, footwear and industrial gloves have been
critically analysed and the pressure-points have been identified. Keeping in mind the
key constraints, solutions have been drafted to ensure maximum impact of the
intervention. It is crucial to identify the pressure-points and apply quick-win strategies
along with the long term strategies for maximum benefit. The scope of intervention has
been presented in the following section keeping in mind the constraints.

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Procurement

Tanneries: There is a need to improve the quality of raw hides and skin at the grass
root level. The quality of finished leather depends upon the quality of raw hides and
skin. Due to extreme weather conditions many animals die and nearly 60 per cent of
such animals are buried, therefore their skin is not utilized. Due to rough handling of
dead animals there is devaluation of hides and the ultimate finished product and such
loss is to the tune of nearly Rs 1,000 crore per annum. The backward linkage for
tanneries in terms of sourcing raw hides and skins needs to be improved. Attempt
could be made for sourcing high quality raw hides and wet blue from African countries
like Nigeria, Zambia, RSA, Latin American countries like Brazil, Argentina and some
neighbouring countries like Pakistan and Bangladesh.

It is proposed that intervention should be done to evaluate cost-benefit for importing


raw hides or wet blue by liasoning with the overseas hide suppliers and organizing
buyer-seller meets. Value-added imported wet blue could help in producing innovative
and better quality finished leather. There is also a possibility of tanneries realising cost
advantage by such an arrangement. In this context the tannery owners welcomed the
proposal of conducting a feasibility study for setting up a custom bonded warehouse in
Kolkata. Subject to the feasibility study report, an SPV could be formed for setting up
the warehouse. All these will require involvement of quality BDS / introduction of new
BDS to speed up the process of implementation.

Footwear and leather goods: Most medium and large manufacturers of footwear and
leather goods source finished leather directly from the tanneries. Some of them have
integrated backwards and have setup their own tanneries. To source directly from
tanneries one has to put a minimum order of 1000 sq ft which is beyond the capacity of
many micro and small entrepreneurs. Sourcing of good quality finished leather is thus a
major handicap for such units. They have to depend on the few existing traders who do
not stock good quality leather.

It is proposed that a new BDS should be introduced, in association with a BMO, who
could facilitate joint procurement for the micro/household units operating at Janbazar/
Rajabazar/ Nungi cluster. The immediate short run benefit would be solving the
problems of procurement for the micro units. In the long run, this BDS could transform
themselves into a trading hub for finished leather; thus meeting the requirements of not
only micro units but also small and medium units as well. At times, even for the large
units it is cumbersome to source directly from the tanneries.

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Finance

There are relatively weak linkages between MSMEs and financial institutions. The
small and medium units of all the sub-sectors need softer loans to finance their capital
expenditure and expansion plans. Presently, the units avail loans at approx 12 per cent
interest per annum which limits their capability to grow. The micro units do not maintain
proper books of account and other documents. Also, they transact mainly in cash and
thus most of the transactions go unaccounted for.

Leather footwear has seasonal demand which increases during festivals. If the units
get working finance it will help them in manufacturing goods and stocking them to meet
the demand during the peak season. The traders who source raw hides and skins for
tanneries mostly transact in cash and avoid bank transactions. This leads to poor book-
keeping and most of the transactions are not accounted for in tanneries.

There is little awareness about Government schemes amongst the entrepreneurs.


Some units who are willing to avail working capital finance are unable to do so because
of improper maintenance of books of accounts. Most banks have core focus on MSME
financing but due to lack of proper financial discipline on the part of MSMEs, they are
unable to avail such facility. MSMEs are curious about financing facilities and are
willing to explore possibilities of equity financing and venture capital financing. In Delhi,
some joint venture units have been set up by top international brands in association
with the manufacturers; and entrepreneurs in Kolkata cluster are also keen on
exploring such options. Also, MSMEs find the interest rates relatively high compared to
the low operational margin and need options that can reduce their interest expenditure.

SME Ratings are relatively a lesser known financial product for SMEs. This would
prove to be an important instrument in reducing the interest burden to some extent.
SMERA and ICRA have specialised products for SMEs and could reduce the interest
burden from 25 to 50 basis points. These ratings also provide better bargaining power
from buyers in terms of credit terms. Awareness workshops on SME rating schemes
would enable entrepreneurs to avail more and more rating services.

After discussions with various financial institutions and MSMEs it was found that there
is a need to strengthen the existing linkage between the cluster and the formal financial
institutions and banks. It is proposed to organize a seminar-cum-workshop to create
awareness and promote financial products of different Fls and banks. Training of
MSMEs to improve their book-keeping practices is mandatory. Introduction and training
of BDSPs in the area of DPR making and loan syndication with the help of banks and
FIs can improve the situation. The BDSPs will be able to provide up-to-date information
about all Government schemes. DPRs of a few select units could be supported from
the project fund on a demonstration basis and successful loan syndication and project

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financing could lead to multiplier effect. This will in effect ensure sustainability of the
BDS market.

It is also proposed to explore possibility of venture capital and joint venture, in


collaboration with national and international BDSPs. A second generation exodus is
expected in the tannery sector where overseas tanneries will look for options of setting
up units in other countries. Introduction of international venture capital consultants in
this area could help in tapping this opportunity. The BDS could also help in setting up
joint ventures with international brands. This will give a facelift to the cluster. Linkages
will also be developed among national venture capital companies like SIDBI Ventures
Ltd, ICICI Ventures Ltd, etc. to explore venture capital financing. In association with
these organizations, a workshop could be organised where the MSMEs will be
informed about the benefits of VC financing and subsequently these BDSPs could
serve as linkage between the MSMEs and venture capitalists.

To an extend credit ratings can reduce the interest burden of the entrepreneurs.
Companies like SMERA and ICRA have started credit rating services for MSMEs.
These ratings help to reduce the interest burden and gives MSMEs better bargaining
power in terms of credit with foreign buyers.

Marketing

Leather goods units in the cluster are mostly export oriented. More than 85% of leather
goods are being exported. These exports are mainly targeted to European countries
like Italy, Spain, Germany and UK. The cluster’s contribution to strong leather markets
like USA, Japan and Australia is relatively poor. These countries have huge potential in
terms of volume and growth. Moreover, the vast domestic market is yet being tapped. It
can provide a solution to the evaporating overseas orders in the present recessionary
condition. The footwear market mostly caters to the domestic market. Lack of proper
market information hampers their growth. In addition, the domestic market for leather
products and footwear is dominated by non-leather products because it is relatively
cheaper. There is a need to create awareness among the consumer on the benefits of
using original leather.

It is proposed to establish strong linkages with marketing BDS in major importing


countries and ‘sunrise countries’ (where demand potential is enormous but untapped).
It is also proposed to introduce BDS to conduct feasibility study and facilitate setting up
a marketing office-cum-showroom in these countries. There is Government support
under MDA and MAI schemes for export facilitation and trade fair participation.
Facilitation could be done for joint participation in fairs, organising BSM in sunrise but
not CLE focus countries.

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For domestic market development it is proposed to introduce BDS for liasoning with the
premium retail outlets like Shoppers’ Stop, Pantaloons, Spencers, FabIndia and others
to develop a private label dedicated to Kolkata leather. The products would be sourced
from select quality vendors from the cluster and would be displayed at designated
counter in these stores. Efforts should be made so that more numbers of micro/small
units could utilise this benefit.

It is also proposed to introduce BDS in the area of franchisee development. The BDSP
would help the manufacturer in locating prospective franchisees across the country and
even abroad. This mode of market development is less capital intensive compared to
other modes and also has quick returns in terms of brand value and market
penetration.

It is also proposed to facilitate a market survey on consumer buying patterns, market


potential and growth prospects in select Tier 1 and Tier 2 cities. This survey would
benefit the manufacturers who want to develop the domestic market purposefully. To
create awareness on use of original leather it is proposed to do a campaign involving
BDS providers in association with some retailers. The campaign will educate the
consumer on differentiating between leather and non-leather.

Product Diversification

The global economic downturn has put the sector in deep trouble. Overseas orders are
reducing and competition is increasingly leaving the manufacturers with low profit
syndrome. This has forced some manufacturers to focus on high volume, low margin
and low value addition items like industrial gloves. Due to inability to comprehend the
cost-benefit of related but value added diversification, the manufacturers are forced to
make basic products.

In this context, it is proposed to organize a workshop on manufacturing leather


garments, leather toys and special purpose (high-end) leather gloves. This
diversification will broaden the product base of the cluster and reduces the dampening
effect of recession. This workshop could be followed by exposure visits to different
clusters.

Environment & Energy

Environment and energy are pressing issues especially for the tanneries. There is
awareness among the tannery-owners on the environmental hazards involved but their
willingness to comply with environmental-friendly practices is more reactive in nature.
They comply with the same only when it becomes mandatory for them. There is a need
to make them understand the inherent benefits to preserve the environment. It was

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also reported that the existing CETPs are not run to its capacity and there is a problem
of solid waste disposal.

Tanneries are a relatively high energy consuming sector. Energy costs contribute to
approx 5 per cent of the total cost. This increases the cost of production of goods and
there is scope for reduction of costs by using energy efficient mechanism.

It is proposed to organize a workshop on better environment practices so that the units


can understand the benefits. Also proposed is involvement of BDS to explore the
possibility of reducing consumption of chemicals in the tanning process. Some of these
practices would be implemented (by involving right BDS) in select units for
demonstration and multiplier effect. Preparing a status report on the performance of
CETP and the possibility of improving their performance will be attempted. Energy
audits would be conducted in some select units and possibility of carbon credit benefits
would be explored. To reduce air pollution in the Calcutta Leather Complex facilitation
of plantation of trees is also proposed.

Skilled Manpower

There is an acute shortage of skilled manpower in the cluster. Workers prefer to work
on piece-rate system which is contractual in nature. Workers are paid less when
working as an employee for a company as compared to the pay they get while working
on contractual basis. This leads to transformation of skilled workers into contractual
workers and thus there is low availability of skilled manpower to work on a permanent
basis. Since the units are exploring options like integrating line coordination system of
manufacturing, there is need for skilled manpower who can work on permanent basis.
Also, the quality of products is hampered because of contractual nature of work.
Workers are paid on per piece basis so the quality is often neglected as they are
concerned in manufacturing more pieces rather than producing quality products.

Most of the workers come from the surrounding districts of West Bengal and States like
Bihar and they do not have any specialised training background. They mostly rely on
on-the-job learning. It is a time consuming process carrying a burden on the
productivity front. Moreover, majority of them work on a contractual basis and the
attrition rate is very high. Most units are unable to change the process parameters
because of non-availability of skilled workers. The requirements of different sub-sectors
vary in nature and therefore the training programmes also need to be tailor-made to
suit the increasing demand of all the sub-sectors.

Government of India is working actively to train people in the BPL and other categories
and ensure smooth supply of skilled workers to the industry. It is proposed to leverage
on the existing programmes of the Ministry of Rural Development and DIPP in this

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area. Introduction of private and public BDSPs for skill development could be useful
here. In future, these BDSPs would be self-sustainable and be able to supply trained
manpower to the industry. The most important aspect of the programme would be
assurance from the units in terms of job-placement and internship support. Moreover,
this activity will help BDSPs to customise their services to cater to the requirements of
the leather industry. For instance, WEBCON never provided any training services in the
leather sector and with the facilitation of this project it could cater to the skill
development requirement of the leather cluster.

Design Development

Most leather goods manufacturers make designs as per the sample sent by the foreign
buyers. Use of indigenous design is very rare. The manufacturers get designs from the
local design studio like FREYA, when they are participating in international fairs. There
is an urgent need to improve the capacity of design BDS in the area of high-end
designs and trend-forecasting.

Design development in the footwear sector is equally weak. There is hardly any BDS in
the area of pattern and grading. Most manufacturers send their products to Delhi or
Chennai for pattern and grading. There is a need to ensure capacity building /
introduction of new BDS and improve their out reach and service efficiency.

Design development being important for leather products, especially goods and
footwear manufacturers, it is proposed to organise a training of trainers (ToT)
programme for the existing designers. The programme would involve training by
international designers, exchange programme and cluster visit, national and
international. It is also intended to improve the capacity of the BDSPs by providing
support for online and offline trend-forecasting software (like MUDPIE, MPD etc.)
subscriptions that would enable design development at par with the international
fashion trends.

For footwear designing it is proposed to streamline the design development course in


collaboration with CFTC. It is also envisaged to introduce and train BDSPs in the area
of pattern and grading.

Technology

Use of advanced production method and technology has become imperative in today’s
competitive business environment. Lack of awareness and heavy expenditure involved
in upgradation, prohibits some units to opt for technology expansion.

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It is proposed to organize an interactive meet between the machine manufacturers or


suppliers and MSMEs. This would be an exhibition-cum-demonstration event where
entrepreneurs would be able to identify technology that could suit them for improving
productivity. Demonstration of CAD / CAM enabled systems could also be planned. It is
intended to facilitate introduction of ‘line manufacturing’ system in some select units.

Information Technology

Information technology has become inevitable in today’s world. MSMEs use computer
for their day to day work. They use it for accounting practices, internet and basic office
works. The micro level units even do not have access to such basic IT services.
Operations management and inventory control are two critical pressure points for all
sub-sectors in the cluster. ERP systems is a solution for this problem but has a very
low awareness in the cluster.

It is proposed to facilitate training of entrepreneurs at the micro level, by involving right


BDS, on basic use of computer. Use of MS Office, Internet and Email would smoothen
their daily work. For the larger units, demonstration of ERP / MIS systems could be
done and assistance in implementation in some select units could be attempted. It is
also proposed to introduce BDS in the area of ‘remotely hosted ERP systems’ that
would reduce cost burden of installing costly equipments required for ERP systems.

Quality & Social Compliance

Quality certification and social compliance have increasingly become matters of


compulsion rather than matters of choice. Most foreign buyers are stringent regarding
quality certification, and compliance to standards like REACH, ISO, CE, SA 8000
becomes mandatory. Though the awareness level is good among SMEs, it is low
among the micro and low-end small units. Even the quality testing services are
scarcely available in the cluster. Apart from some basic tests, for other quality tests the
samples need to be sent to Chennai (CLRI) or even Hong Kong (SGS).

It is proposed to organize an awareness programme where information will be


disseminated on the non-tariff barriers, quality certification and social compliances. To
improve the capacity of existing BDS in the area of TQM practices, training
programmes have been proposed. Provision has also been mode for introduction of
BDS in the area of testing in close proximity to the tanneries.

Common Facility Centre

The micro level footwear manufacturing units at Janbazar are financially weak and
cannot afford expensive machines like pasting, skiving and sole-cutting. A common

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facility centre that would house all these basic machines can smoothen the production
process.

Attempts could be made to facilitate preparation of DPR for setting up of CFC where-in
the Government schemes supporting CFC could be used. Involvement of right BDS is
of paramount importance here. This would unleash a new life among the highly skilled
job workers who could aspire to become independent entrepreneurs.

Management Development

There is a need to equip the units with the present day management practices, human
resource management, inventory control etc.

It is proposed to organize a seminar-cum-training programme for managers and


entrepreneurs (of export oriented units) where they can be trained to adopt better
management practices like six sigma, HR measure and inventory control like Just-In-
Time etc. Post training, some of these practices could be implemented in the cluster
units by facilitation of BDS which could facilitate multiplier effect.

Capacity building of BMOs

Business membership organizations or associations play a lead role in the growth of


any industry. Some of the BMOs in the cluster like ILPA are very proactive and are well
organized; but some BMOs lack professionalism.

It is proposed to set up a professional secretariat in the cluster BMOs. In clusters


pockets like Janbazar where there is no BMO, it is proposed to establish a BMO. As
part of capacity building of the BMOs, they would be taken for exposure visits to
benchmark clusters. Possibilities of conducting training programmes for BMO staff will
also be explored. Slowly these BMOs could be pursued to provide BDS to the cluster
MSMEs. It can serve a own-stop-shop for all BDS related information / problems

Workers’ Welfare

The workers in the cluster work in not-so-well condition with no safety measures. To
take care of Health and Safety of the workers it is proposed to introduce BDSP to
spread awareness about safety and health measures to majority of the workers who
work on contract basis. Use of employee benefit schemes like ESI, LIC, mediclaim and
other measures to improve workplace environment would also be facilitated.

Consortia approach

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In order to mitigate higher cost of the high end strategic initiatives where return is not
imminent a Responsible Quality Circle (RQC) will be formed to take joint benefits for
quality certification, brand building and overseas marketing. It is proposed to facilitate
the process of formation of consortia by introducing private BDS. Joint trade fair
participation in fairs outside CLE’s list of fairs could also be attempted.

BDS Linkage

BDS outreach in the cluster is not well envisaged because of low awareness among
MSMEs and inability to calculate cost-benefit analysis. There is no platform where
information related to the cluster and BDS is available at one point.

To improve BDS outreach, increase awareness and facilitate BDS usage by MSMEs, it
is proposed to organize BDS – MSME linkage workshops every year during the course
of the project. It is also proposed to set up a business information centre that would
become the focal point of all information related to the cluster and BDS. A directory
containing an exhaustive list of strategic and generic BDS like designers, technical
consultants, machine/chemical suppliers, raw material suppliers, language translators,
importers/exporters, wholesalers, retailers, manufacturers and others could also be
developed.

Voucher support

The BDS market is still in its nascent stage and there could be initial hiccups among
the MSMEs to pay fully for the services provided to them. It is therefore, proposed to
keep a provision to partially or fully support the initial strategic transactions between
MSMEs and BDS through voucher support.

Project information dissemination

Newsletter: It is proposed that a quarterly newsletter is made that would disseminate


information related to the project and all upcoming events.

Project Website: Launch of project website is also proposed that would provide all
information about the project. This would become an online resource centre for the
cluster. It would also facilitate B2B operations and search/ IT based-market promoting
awareness for its registered members.

Case studies: During the course of the project it is proposed to make case studies on
‘best practices’ that could lead to multiplier effect.

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Annexure
Annexure – I
Profile of Leather Cluster at Kolkata

Type of Employment
Sub-Sector No
Unit

Tannery Units 190 Small Scale 7600

850
Tannery Units 34 Micro

Leather goods manufacturing


(export oriented) 236 Small Scale 23600

Fabricator of leather goods and units


catering indigenousness market. 450 Micro 3600

4650
Gloves manufacturer cum exporter 31 Small Scale

Fabricator of Gloves
200 Micro 6000

Footwear manufacturer (large BATA)


1 Large Scale 3000

Footwear manufacturer
25 Small Scale 1000

Fabricator & household units


manufacturing
2000 Micro 10000
(both close & open footwear)

Merchant exporter

Leather goods
96 Micro 1920

Gloves
11 Micro 220

3274 62440

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Annexure – II
Activity Constraints Matrix

Core Intra-Cluster Short & long term constraints that may be addressed by
Value – Chain appropriate orientation of BDS services and markets.
Activity

Ü Lack of consistency in quality as well as supply of raw hides.


Ü Weak initiative for environment compliance.
Ü Poor initiative to upgradation of technology and quality
assurance.
Leather Tanning Ü Efforts have not been made for cost reduction in operation of
ETP & energy saving in tannery.
Ü Limited access to the institutional credit.
Ü Infrastructure is not fully developed.

Ü For export oriented units foreign market is not expanding. Lack of


collective effort for exploring new market and market
development.
Ü Shortage of skilled operators. Remuneration in the industry is not
Leather Goods attractive.
Manufacturing Ü Scope for improving management practices, productivity and
quality of end product.
Ü VAT refund is delayed.
Ü Limited access to finance.

Ü Leading brand like BATA, Khadim & Sree Leather dominate the
market.
Ü Leather is gradually replaced by cheaper material like PVC.
Foot Wear Ü Shortage of skill operator.
Ü Components are brought from Delhi / Agra.
Ü Support services like testing, pattern design are not available at
Kolkata.

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Annexure III

Top 10 Chapters Enjoying Comparative Advantage in India’s Merchandise Exports with their ranks

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Chapter/ Ran Ran Ran Ran Ran Ran Ran Ran Ran Ran
RCA RCA RCA RCA RCA RCA RCA RCA RCA RCA
Description k k k k k k k k k k

13. Lac,
15.8 20.1 22.0 17.2 14.5 12.3 10.5 11.6 11.6
Gum and 6
1
3
1 22.7 1
5
1
7
1
9
2
5
2
7
2
7
2
5
1
Resin
9.Tea & 13.1 10.1 10.4
2 3 4 9.41 6 8.95 6 7.82 7 6.92 7 6.02 7 5.45 8 4.56 10
Coffee 5 2 5
12.5 12.2 10.1 10.7 10.3
52.Cotton 1
3
7
2
2
5
6
5
2
3 8.51 6 7.78 6 6.7 6 4.98 9 6.35 6

10.4 10.8 11.5 10.3


57.Carpets 6
4 8.73 5
6
3
3
3
1
4 9.9 3 8.88 4 8.58 4 7.87 5 9.29 3

63.Made-up
Textile 7.55 5 8.52 7 7.95 7 8.28 7 9.28 5 8.64 5 7.8 5 7.17 5 6.84 6 6.82 5
Articles
53.Textile
7.53 6 8.93 4 6.5 - 5.3 10 6.71 9 4.93 9 4.79 10 4.46 10 4.82 10 4.57 9
fibres
71. Precious 10.8
7.49 7 7.89 8 9.02 6 4 8.87 7 9.11 4 8.99 3 8.62 3 9.15 3 7.76 4
Stones 5

23.Residues
7.32 8 6.2 9 3.67 - 3.08 - 3.23 - 3.2 18 1.68 - 3.3 - 2.66 - 3.63 -
and Waste
14.Vegetabl
e Products 7.01 9 5.94 - 7.26 8 6.7 8 7.15 8 5.71 8 4.76 - 4.42 - 5.57 7 4.66 8
Diagnostic Study Report of Kolkata Leather Cluster

50. Silk 5.88 10 8.56 6 11.22 2 14.42 2 15.38 2 15.04 1 15.29 1 16.6 1 13.59 1 11.61 2

26.Ores,
Slag and 5.79 - 3.67 - 3.15 - 2.52 1 2.67 - 3.04 - 4.29 9 5.04 9 8.49 4 6.29 7
Ash
42. Articles 13
5.1 - 6.05 10 6.71 10 5.66 9 5.73 10 4.82 - 3.86 3.9 - 3.46 - 3.25 -
of Leather
* Source: India’s RCA in merchandise trade by L.G.Burange, Sheetal J.Chadda, Mumbai University
Diagnostic Study Report of Kolkata Leather Cluster

Annexure IV
List Public BDS Interviewed

Sr. Contact
Name Category Phone
No. Person
Export Mr. Debendra
1 CLE 22835479
Promotion K Acharya
R&D, Testing
2 CLRI Dr. S.K Sarkar 23292381
Lab
Design Training
3 NIFT Mr. D.B Datta 23355726
Institute
Trade
4 ITPO 22822904
Development
EDP, Govt
5 DIC Mr. A. Sen 22486343
assistance
Development
6 MSME DI Mr.D Ghosh 25770595
& Training
Mr. B.
7 GCELT Training
Chattopadhyay
Footwear Mr. Mrinal
8 CFTC 9903346220
Training Chakraborty
Environment Mrs. Anjali
9 NEERI 24421988
Research Srivastava
Mr. T. K
10 WBSIDC Infrastructure 22373895
Ganguli
11 WBIDC Infrastructure Mr. Pradip K Sil 22105361
Mr. A K
12 WEBCON Consultancy 22251229
Mahapatra
Bureau of Indian
13 Standards DDG 23208662
Standards
Intellectual Property
14 Patents Mr. D K Rahut 23671987
Office
Mr. A
15 Customs Dept. Customs 22304336
Mukherjee
16 DGFT DEPB, IEC Mr. S. N Das 22486436

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Export
17 ECGC 22822218
Insurance
WB Pollution Control Pollution
18 Dr. T.K Gupta 23359088
Board Control
Teachers
19 TTTI 23374125
Training
20 CSTRI Training Mr. A Rahi 23671005
Mr. J.K
21 NSIC SME Growth 22435493
Mohanta
22 NPC Productivity Mr. A K Sinha 22876069

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Annexure V
List of Private BDS Interviewed

S Contact
Name Category Phone
No. Person
Mr. Debasish
Harman Leather
1 Cutting dice Chakrabarty 22873435
Machines
Mr. Sudeshna
2 C&E Ltd Chemical & Dyes Chaterjee 22261175

Chemical
3 Stahl India Pvt. Ltd. Mr. N K Ray 22485102
suppliers
V belts & M/c
4 Ganga Traders parts and 9836331769
lubricants
Quality Systems &
5 ISO Consultant Mr. S.K Bagchi 23371741
Inspection Services
Taxation,
6 Saikh & Associates Accounts, Mgmt Mr. G.M Saikh 9831295842
Consultants
Narayan Jain Tax Consultant 22821100
7
Foreign Trade
8 S.S International Mr. Sunil Jain 22897229
Advisor
Mr. Pranay
Leather Auxilliaries Chemical
9 Mallik 23545897
Mktg Co. P. Ltd. suppliers
Mr. Suman
10 SGS Testing services Banerjee 66266165

Machinery
11 Harman Sales P Ltd Mr. Sayed Asif 32435205
suppliers
Mr. Arijit
Dehumidification
12 BRYAir Mukherjee 22814850
solution provider
Calcutta Overseas Chemical Mr. Rajesh
13 22301952
Corporation suppliers Nagori
Export Marketing Mr. Debasish
14 Debasish Guha 22103382
Consultant Guha
ISO,
Search Services P Mr. Sabyasachi
15 Management, 24633811
Ltd Basu
energy consultant
Carbon Credit,
16 First Climate Mr. Arijit Paul 40223456
energy Consultant

Entrepreneurship Development Institute of India


Diagnostic Study Report of Kolkata Leather Cluster

17 Footform Lasting, Grading Ms. Piyu Paul 24472305


Webdesigning , Mr. A C
18 Capsule Concepts 24831552
research Agarwal
Chartered Mr. Amit
19 Amit Agrawal 9331003883
Accountant Agarwal
Mr. Indranil
20 BASF Chemicals 22201354
Bhatacharya
Alchemist HR Ms. Maitreyee
21 HR Services 40226600
Services P Ltd Bagchi
22 Team Lease HR Services Ms. Tamali Roy 40444638
Sagittarians Mr.Kaushik
23 Machinery 22292517
International Ltd Burman
Focus Machines (I) Mr. Soumen
24 Machinery 24431389
P Ltd. Bagchi
Mr. Dipak
25 Dipak Trading Co. Accessories 22373872
Dhanesha
A Banerjee & Financial & Mgmt Mr. Angsuman
26 23500160
Assoc. Consultancy Bandopadhyay
Akshoy Kr. Ghosh & Mr. Gouranga
27 C&F 22435761
Sons Paul
Mrs. Antara 0321
28 FREYA Design
Kumar 8200155
29 Yash Impex Lining Material Mr. Yash 9830360609
30 Laxmi Enterprise Lining Materials Mr. S L Daftry 9831350610
31 RAMCO ERP 22171736
32 Blue Dart DHL Logistics 22881234
Mr. Ashish
33 ICTEAS ERP 40097800
Manpuria
34 Leather Age Magazine Mr. Y K Luthra 24130032
35 Accessories Mr. R Daftry 9804241341
Mr. Anirban
36 Indiamart B2B Website 30580580
Kundu
37 Just Dial B2B Website 30520336
Kshitij Consultancy Mr. Vikash
38 Forex Consultants 24892010
Services Murarka

Entrepreneurship Development Institute of India


Diagnostic Study Report of Kolkata Leather Cluster

Annexure VI

List of BMOs & Industry Associations Interviewed

S No. Name Contact Person Designation Phone


Mr. K S
1 SIDBI CGM 22904165
Singhwan
Mr. Manish
2 HSBC AM – SME 22485686
Nayak
Mr. Anuttam
3 Bank of Baroda CM – SME 22252490
Goswami
4 SBI Mr. RD Barman Chief Manager 2213 7097
Mr. Devashis
5 SMERA ADM 32410578
Dubey
Ms. Anuradha
6 ICRA 22800008
Roy

Entrepreneurship Development Institute of India


Diagnostic Study Report of Kolkata Leather Cluster

Annexure VII

List of Banks and Financial Institutions Interviewed

S No. Name Contact Person Designation Phone


Mr. K S
1 SIDBI CGM 22904165
Singhwan
2 HSBC Manish Nayak AM – SME 22485686
Mr. Anuttam
3 Bank of Baroda CM - SME 22252490
Goswami
4 SBI RD Barman Chief Manager 2213 7097
SME Credit Devashis Dubey
5 SMERA 32410578
Rating ADM
Ms. Anuradha
6 ICRA SME Ratings 22800008
Roy

Entrepreneurship Development Institute of India


Diagnostic Study Report of Kolkata Leather Cluster

Annexure VIII
List of Entrepreneurs Interviewed

S No. Name Contact Person Phone


1 Network Leather Mr. Anurag Fathepuria 24428041
2 Pinnacle Overseas Mr. Gautam Dalmia 2290 4913/22803369
3 Mani Leather Industries Mr. Narul Islam 9830073701
4 New-Horizons Ltd Mr. Palash Halder 22877679
5 Radiant Leather Pvt Ltd Mr. Sashir Chaubey 9831910861
6 Hena Leather & Co. Mr. Iftakhar Najam 9331023972
7 Superior Trading Md.Jahangir 9831945580
8 Dilshad Ahmed Mr. Shamim Ahmed 9830808125
Ajanta Leather
9 Mr. V.Srinivasan 25732423
Fashions (P) Ltd
Jiwanram Sheoduttrai
10 Mr. Alok Prakash 22498256
Ind.Pvt.Ltd
Industrial Safty
11 Mr. Rounak Kr.Naredi 23430913
Products (P) Ltd
12 Shilpa Kutir Mr. Kallol Sarkar 22410434
Reflexions Narayani
13 Mr. Dipak K Saha 24422855
Impex P Ltd
14 Shibani Enterprise Mr. Indrajit Dalui 24410985
15 Md. Hafizullah Md. Hafizullah 9331873102
16 ASG Leather P Ltd Mr. Alok Kr. Sengupta 23444859
17 GC Enterprise Mr. Ashim Kr Chaterjee 22853509
18 Lumens India Mr. Shyam Sundar Bagaria 23705406
19 Sooky Leather Mr. S.S Sidhu 23234539
20 Standard Footwear Mr. Syed Ahmed 22841890
21 Ritex Mr.Sanjay Sethi 24431670
22 Trade Link Mr.Prabir Sarkar 23299979
23 Hochin Co 9903362170
24 GC Enterprise Tannery Mr.Utpal Mukherjee 64560216
25 Khadim India Ltd Mr.Tapas Sengupta 40140501
26 Woon Son 22362088
27 Munai’s Creation Mr. Tapan Nandi 22292096
28 Overseas Leather Mr. Anup Chaterjee 23706122
Goods Co P Ltd.
29 Rajda Industries & Mr. Paresh Rajda 22261916
Exports P Ltd.

Entrepreneurship Development Institute of India