CHAPTER - IV

Growth and Performance of the Leather Industry in India,

Tamil Nadu and Vellore District

Leather Industry in India

Leather is a durable and flexible material created by the tanning of animal

rawhide and skin, often cattle hide. It can be produced through manufacturing

processes ranging from cottage industry to heavy industry. Leather is used for

various purposes including clothing (e.g. shoes, hats, jackets, skirts, trousers and

belts), book binding and leather wallpaper and as a furniture covering. It is a

produced in a wide variety of types and styles and is decorated by a wide range of

techniques. India is the second largest producer of footwear and leather products in

the world after China. The domestic leather and footwear industry is known to be

major foreign exchange earner amongst all sectors in the country.

Rising disposable incomes, abundance of raw material, influx of new and

improved designs to customers, rising retail opportunities and export market have

been the main demand drivers of the growth of the Indian leather industry. As per

the Index of Industrial Production (IIP) data available, production of leather and

leather products grew by 4.7 per cent per annum over the five year period ended

March 2011. While India’s total leather & leather product exports have observed a

healthy rise, its share in total global trade is still low. India accounts for a meagre

three per cent of the global trade of leather and leather exports. About 80% of the

industry is concentrated in the MSMEs Segment. Though the Indian Leather

95
Industry has achieved significant growth, particularly in the last two decades, the

share of Indian Leather sector in the global imports of leather and leather products is

only 3%. The leather industry definitely has the potential to double its export

performance in the coming years. The leather which is highly unorganised in the

value-added space lacks awareness on international standards and faces capacity

constraints to cater to high volume export markets like USA. Thus, the domestic

leather industry has not managed to garner a sizeable market share in the global

fashion market compared to European and other Asian countries.

The government of India has approved Rs.600-crore mega leather cluster

development scheme for the 12th Five Year Plan (2012-2017), to make the Indian

industry globally competitive. “The concept of mega leather clusters seeks to

address the constraint of large infrastructure with integrated production chains in the

country,” the Department of Industrial Policy and Promotion notified. Considering

the limitations of space in the existing clusters, it is anticipated that clusters would

be set up in Andhra Pradesh, Bihar, Jammu and Kashmir, Himachal Pradesh and

Rajasthan in view of the labour advantage and raw material availability. Each cluster

project will be implemented by a special purpose vehicle (SPV), wherein the

government could provide financial assistance up to 70 per cent of the project cost.

“The SPV will have to bring in the land for the project at its own cost. Preference

would be given to those proposals where states offer land free of cost or on nominal

value.” The clusters can host production units of footwear, footwear components,

leather goods and leather garments.1

1
Report of Working Group on Leather & Leather Products Twelfth Five Year Plan Period (2012-
17) Submitted by: Department of Industrial Policy and Promotion, ministry of Industry,
Government of India, p. 22.

96
 The distribution of the units in this sector in terms of the broad classification

of MSME and others is indicated in table 4.1.

Table: 4.1

Number and Size of Registered Leather Industry in India (in numbers)

Large Medium Small Micro Merchant

Items Total
Units Units Units Units Units
Finished leather 30 49 309 68 151 607
Leather Footwear 38 49 228 49 81 442
Non leather footwear 4 2 34 13 17 70
Footwear Component 29 32 182 28 22 293
Leather Goods 14 13 242 259 210 738
Leather Garments 8 8 132 49 72 229
Leather Gloves 4 3 38 36 24 105
Harness and 3 9 74 69 26 181
Saddlery
Total 130 162 1239 571 603 2705
Source: MOCI/DIPP/Working Group Report/12th Five Year Plan /Leather Industry

Historical Back Ground of the Leather Industry in India

The Indian Leather Industry is serving as a major contributor to the Indian

economy, through its export earnings and employment potential. In the 1950s and

1960s, the industry was exporting mainly raw hides & skins and semi-processed

leathers. The export of leather and leather products during 1954-55 was USD 48.48

million, with value added leather products constituting only 3.88%. The exports

from leather sector increased to USD 66.88 million in 1964-65 and the share of

value added leather products increased to 9.39%. However, during the 1970s the

Government of India laid emphasis on export of value added leather products and

97
constituted the Seetharamiah Committee which laid the framework for export of

value added products from the industry. As a result, the export of value added

leather products and footwear began to increase slowly to 20.51% in 1979-80.

The 1980s saw the transition phase of the industry from being a supplier of

raw materials to an exporter of high quality leather products and footwear. Exports

from leather sector reach a value of USD 1218.47 million in 1989-90, with value

added leather products constituting a significant share of about 65%. In 1990s

witnessed implementation of long term programmes like the National Leather

Development. Programme (NLDP) to further consolidate and enhance the growth

and development of the Indian leather sector. Also, the economic liberation

programme implemented by the Government provided the required fillip for the

industry.

The growth path of the leather industry continued in the first decade of the

21st century. During this period, several landmark measures were initiated with the

Government. This period witnessed the recognition of the leather sector as a “Focus

Sector” in the Foreign Trade Policy 2004-09 and 2009-14, implementation of the

Indian Leather Development Programme (ILDP) in the X Plan XI and the de-

reservation of the leather sector. The long term planning have also led to the

establishment of world class institutions like the Central Leather Research Institute,

Footwear Design and Development Institute, MSME – Development Institutes and

Central Footwear Training Institutes at various centres, which render yeoman

service in the area of skill development. Thus, the success of the leather industry can

be attributed to various long term and short term plans implanted by the Government

98
of India and the landmark schemes implemented for the industry as part of these

plans.2

Indian Leather Industry in the Unorganized and Organized Sectors

The Indian leather industry comprises of both unorganized and organized

sectors. The organised manufacturing sector broadly consists of tanning and dressing

of leather manufacture of luggage, handbags saddler, harness and footwear.

Currently unorganized sector plays a dominant role in the entire production. The

small scale, cottage and artisan sectors account for over 75 per cent of the total

production and majority of them belong to unorganized sector. Though footwear is

produced by both large and small scale sector, the small scale sector has almost 90

per cent share in the total production of footwear in India.3

Production Structure of the Leather in India

Important aspects of the industrial structure can be categorized into product

segments and Structural components. In the following sections analysed these two

aspects separately. In order to have a clear picture of the industry it is focused on

four major items produced by the Indian leather industry. These four items constitute

the various product segments of the Indian leather industry.

(a) Leather footwear (b) Leather footwear components

(c) Leather garments (d) Leather goods

2
Ibid, p. 52.
3
Report of Working Group on Leather & Leather Products Twelfth Five Year Plan Period (2012-
17) Submitted By: Department of Industrial Policy and Promotion, ministry of Industry,
Government of India, p. 52.

99
(A) Leather Footwear

Among the above mentioned product segments, the footwear segment is the

pride of Indian leather industry. It ranks second in the world, next to China. India is

the world’s second largest producer of footwear with estimated production of more

than 700 million pairs per annum. Footwear accounts for 18 per cent share of total

exports of leather products worth U.S. $300 million per annum. Various types of

shoes produced and exported by India are dress shoes, casuals, moccasins, sports

shoes, huaraches, sandals, ballerinas, and booties. Most of the Indian manufacturers

of modern footwear are already supplying to major brands in Europe and USA. In

the last five years, the leather footwear and footwear component production

increased by 60%. Interestingly, despite producing more of gents’ footwear. India is

major producer of ladies footwear in the world. Though, the Leather Industry,

(especially the Footwear industry) has made a strong contribution to the Indian

economy. Being a labour intensive industry, its contribution to employment is

significant which consists of a large chunk of illiterate Workers. About 60% of

employment is represented by unskilled workers indulged in table work operation in

the assembly line. Minority community and lower caste people have their sole

source of livelihood from collecting carcasses, skinning dead animals and tanning

leather which also consist a large proportion of employment provided by leather

industry.

(B) Leather Footwear Components

Leather footwear components another important segment of the Indian

leather industry. The product range in this segment includes shoe Uppers, Sandal

100
Uppers, Moccasin Lasted Uppers, Unit soles, Insole and Sock Linings etc. which are

mainly exported to UK, Germany, Italy, USA, France, Portugal, Switzerland, Spain,

Netherlands and Austria. The important production centres for this segment are

Agra, Ambur, Bangalore, Chennai, Delhi, Jallandhar, Kanpur and Mumbai.

(C) Leather Garments

The Leather Garment segment occupies a significant place in the Indian

leather industry. The product classification of leather garments comprises of jackets,

long coats, waist coats, shirts, pant/sort, children garments, motorbike jackets,

aprons and industrial leather garment. Indian leather garments sector entered the

world market in the mid-eighties. Germany is a major export market for leather

garments. India, China and Turkey are the major suppliers of leather garments to the

German market and accounts for about 78% of the market share.

(D) Leather Goods

The leather goods segment of Indian leather industry range from designer

collections to personal leather accessories, comprising of a wide range of products.

And its share is nearly 21 per cent in Indian leather industry. This product segment

includes the products like bags, handbags, hand gloves, industrial gloves, wallets,

ruck sacks, folios, brief cases, travel ware, belts, sports goods, upholstery saddler

goods etc. The production of these items mainly takes place in large number of units

located in Chennai, Kanpur and Calcutta. Significant feature of this is that it

employees skilled labour and they are equipped with modern and sophisticated

101
machinery. This segment meets the requirements of bulk buyers and consumers in

Europe, USA and Australia. The major market for Indian leather goods segment is

Germany, with an off take of about 25 per cent of the leather goods produced in

India followed by USA, UK, France and Italy. This leather goods segments has

maintained an average growth rate of 11 per cent during the last five years. 4

Globalization and Prospects of Indian Leather Industry

Currently India has a share of 3 per cent (i.e. US $ 2 billion) of global trade

of leather and leather products. India has a large and growing middle class of about

250 million people with good purchasing power. Global players in the leather

business, big or small are today focusing increasingly on India’s domestic market.

The livestock is the raw material for the leather industry. Cattle, buffaloes, goat and

sheep are the four livestock species which provide the basic raw materials for the

leather industry.

India ranks first among major livestock holding countries in the world.

In fact, India has the capacity to full fill 10% of the global leather requirement.

The annual availability of 218 million good quality pieces of hides and skins is the

main strength of the industry. Along with rich endowment of raw materials, the

industry has access to abundant supply of cheap labour. Over the years through

government support the industry has been able to develop its Research and

Development facilities considerably. Though there is much to be done in order to

4
URL:http://labourbureau.nic.in/Leather%20Report%20Final.pdf, Accessed on 22 June 2014.

102
meet the challenges of globalization, the industry has established a sound base for

the same.

The post liberalization era has opened up a plethora of opportunities for the

Indian leather industry. Along with China and Vietnam, India stands to gain a bigger

share of global market. Since global players are looking at new sourcing options for

their trade in leather products. Leading brands from the US and Europe, are planning

to source leather and leather products from India. 5 Global players who participated

at the India International Leather Fair, 2005, emphasized on India as sourcing

destination for their trade in leather products. The domestic producers have also

realized the opportunities ahead. In fact, almost every player in the organized sector

is on an expansion spree, and many are doubling capacities.

Currently India has a share of nearly 2. 3 per cent (i.e. 2 billion) in the global

trade of leather and leather products of nearly US $ 88 billion. Moreover, India has

significant cost advantages in terms of labour and raw materials in comparison to the

other developed countries which are evident from the interest shown by the global

players as mentioned above. Taking the current market share in global trade and the

cost advantages into account it may be said that Indian leather industry has a

significant potential for higher share in global trade. In addition to the global market,

Indian leather industry is yet to capture the existing untapped potential in the

domestic market.6

5
The Hindu Business Line, February 04, 2005.
6
www.leatherindia.com

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 The Global import of Leather increased from US$ 21364.73 million in 2008

to US$ 21673.03 million in 2012. India accounts for a share of 5.05% in the global

leather imports. A Statement showing global import of finished leather viz-a-vis

India’s export and share during 2008 to 2012 is given in the table 4.2.

Table: 4.2

India’s Export and Share During 2008 to 2012 (Value in Million US$)

Export 2008 2009 2010 2011 2012

World Export 21364.73 14904.97 19792.65 23264.41 21673.03

India's Export 673.37 627.95 841.13 1024.69 1093.73

Share of India 3.15% 4.21% 4.25% 4.40% 5.05%

Source: Director General of Commercial Intelligence and Statistics 2013(DGCI&S)

The major markets for Indian Finished Leather are Hong Kong 37.84%, Italy

13.50%, China 9.06%, Korea Rep 3.90%, Indonesia 2.30%, Spain 2.56% and

Germany 2.53%. After reaching an all-time high exports of $5 billion in 2012-13,

exports in the first nine months of the current fiscal witnessed a 20 per cent growth,

he said, adding as per current trends, the industry will be to achieve $6-billion

shipments by the end of Fiscal Year 2013-14.7

The leather industry is spread in different segments, namely, tanning and

finishing, footwear and footwear components, leather garments, leather goods

including saddler and harness, etc. The estimated production capacity in different

segments is showed in the table 4.4.

7
Report of the Council of leather Exports -2014.

104
 Table: 4.3

India’s Export Trend in Leather and Leather Products for the Last Five Years
(Value in Million $)

Product Segment 2008-09 2009-10 2010-11 2011-12 2011-13

Finished Leather 673.37 673.37 841.13 1024.69 1090.22
Footwear 1534.32 1507.59 1758.67 2079.14 2055.93
Leather Garments 426.17 428.62 425.04 572.45 563.48
Leather Goods 873.44 757.02 855.78 1089.71 1178.96
Saddler &Harness 92.15 83.39 87.92 107.54 108.32
Total 3599.46 3404.57 3968.54 4873.53 4996.91
% Growth 1.44% -5.41% 16.57% 22.80% 2.53%
Source: Director General of Commercial Intelligence and Statistics 2013(DGCI&S)

Production Capacity of Indian Leather Industry

Table: 4.4

Production Capacity of Indian Leather Industry

Products Production Capacity

Leather hides 65 million pieces
Skins 170 million pieces
Footwear & Footwear Components 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 & Harness 12.50 million pieces
Source: Indian Leather & Tanning Industry Profile (2013)-Italian trade Commission

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Distinguishing Features of Indian Leather industry

Own raw material source – 21% of world cattle & buffalo and 11% of

world goat & sheep population are housed in India.

Billion sq feet of leather produced annually

2nd largest producer of Footwear and Leather Garments

3rd largest producer of saddler and harness items.

Generating employment for more than 2.5 Million people, mostly from

the weaker sections with more than 70% women predominance.

Nearly 60-65% of the production is in the small / micro sector

Promising technology inflow and Foreign Direct Investment

World-class institutional support for Design and Product Development,

Human Resources Development and R&D activities

Presence of support industries like leather chemicals and finishing

auxiliaries

Presence in major markets-Long European experience and strategic

location in Asian landmass.

Analysing the ‘Talent Pain’ points for the industry, it is made the following

lack of points are existing in the leather industry in India.

Shortage of talent with right competencies

Having to invest resources in new hiring & training

106
 Lack of industry standards to align – competencies, curriculum

Lack of industry driven accreditation, certification

Competition for talent within industry

Competition for talent with other industry segments

Lack of research on labour market and best practices

Non-availability of industry in the shaping of policies to boost

productivity, thereby improving company competitiveness and individual

employability

Lack of trainers8

The Labour Scenario in Indian Leather Industry

The Leather Industry is Labour intensive and is concentrated in the small and

cottage industry sectors. While leather shoes and uppers are concentrated in large

scale units, the sandals and chapels are produced in the household and cottage

sector. The leather industry employs about 2.5 million people. The industry is also

one with strong links with the social structure through caste and community. Thus, a

large number of people engaged in the industry (entrepreneurs as well as workers)

are even today from traditional leather working castes (belonging to the lower castes

in the caste hierarchy) and the Muslim community.

Due to the age of the industry and it links with the social structure, the

organizational structure that has emerged is a very complex one that contains within

8
Indian Leather & Tanning Industry Profile (2010)-Italian trade Commission, p. 3.

107
it elements of continuity with traditional structures as well as those that represent a

break with them. The processes in the footwear making include last making, pattern

cutting, clicking, sewing Assembling and finishing. There is no gender selectively in

child labour. Adults earn wages that are only marginally higher than what the

children earn. Irrespective of the experience, skill and family size and requirements

the wage payment system remains insensitive and relatively inelastic. Children

contribute 20 to 40 per cent of the family income.

The labour in the leather industry is defined by the caste location. While

market forces predominantly govern all other aspects of the industry, the labour is

drawn exclusively from the most down trodden section. As heads of 60 percent of

the households are engaged in leather work, the leather sector study establishes the

incidence of child labour in leather flaying as an intergenerational phenomenon.

Women are also employed in large numbers in Indian leather industry and are

making important contribution to the national economy as well as to exports.

Women are involved in large numbers, especially in footwear production in

Athani (Karnataka), Rajasthan, Agra (U P) and Chennai, Ambur, Ranipet and

Vaniyambadi (Tamil Nadu). Their entry into productive work has helped

considerably in improving their household situation. With the ‘take off’ of the

footwear industry, especially in the last 20 years and the rapid Management Insight

rise of exports, women’s employment has increased. The leather industry has been

108
designated as a hazardous industry under the Factory Act 1948, and has a mandatory

requirement of formal approvals for expansion.

It has been observed that formal units expand and set up illegal units, where

the bulk of women workers, especially dalit women are found. Women are not

documented as ‘workers’ on any official records. Therefore, they are not legally

entitled to any compensations or benefits. These women are recruited through

contractors and are engaged in all stages of the tanning process. Their tasks are time

consuming, backbreaking and the most hazardous.9

Employment Requirements in Indian Leather Industry

The leather industry is an employment intensive sector, providing jobs nearly

about 2.5 million people, mostly from the weaker and minority sections of the

society in which women employment is predominantly more than other industries.

Nearly semi-skilled and skilled manpower contributed about 50% share in its

workforce. Many estimates are available in workforce in leather industry.

As can be seen from the table 4.5 the majority of the people employed in the

finished leather segments are in the 10th or 12th class and below category they are

employed in Operators, assistants, helpers and other unskilled works. CA/MBA

graduates are employed only 1-2 % they are working in Management, Marketing,

Accounts and Planning.

9
Bose, Indranil (2011), ‘Job security and its impact on unionization of work force: A survey on
selected Leather organizations of Kolkata’, ACRM journal of Business and Management
research, September, Bengaluru, Pp. 45-50.

109
 Table: 4.5

Distribution of Employment by Education Level in Manufacture of

Leather Products in India

Percentage of
Educational Level Role in the Industry
People
CA/MBA 1-2% Management, Marketing, Accounts,
Planning
Other Graduates 3-5% Assistants in various departments, rising
up to Department Head level overtime
with experience
Engineers 1-2% Marketing, Merchandising, Product
Development and Engineering,
Designing & Sampling, Production
Planning
Diploma 2-3% Production supervisors, Maintenance
Equivalent Certification supervisor, Store manager
Other Vocational 1-2% Line in-charge, Machine Maintenance
Courses
Class12th (or)10th and 85-90% Operators, assistants, helpers and other
Below unskilled works
Source: Human Resources and Skill Requirements in the Leather and Leather
Goods Sector (2022), A report by the National Skill Development
Corporation, New Delhi, p. 25.

Table: 4.6

The Estimated Employment in Different Segments of Leather Industry

Workforce All
Percentage
Industry segment over India) in
of Total
million
Footwear & Footwear components (organised) 0.20 08
Flaying curing, handling & transport, etc. of raw 1.00 40
material-(self-employment)
Footwear & Footwear components (cottage, house 0.90 36
hold, and rural artisans in unorganised sector)
Tanning and finishing(organised) 0.10 04
Leather Garments, Goods, etc(organised) 0.03 12
Total Indian Leather and leather product 2.50 100
Industries
Sources: Human Resources and Skill Requirements in the Leather and Leather
Goods Sector (2022),A report by the National Skill Development
Corporation, New Delhi, p. 15.

110
 The leather industry as a whole employs around 2.5 millions skilled,

unskilled and semi-skilled workers in India. The table 4.6 shows that among the sub-

segments, footwear and footwear components are the largest providing employment

to1.1million people. Out of this, about0.2 million people are employed in organised

sector. Remaining 0.9 million people are engaged in unorganised sectors like rural

artisans, cottage industries and household units etc.

Table: 4.7

Employment Requirement in the Leather Industry between 2008 and 2022

(in millions)

Sectors 2008 2012 2018 2022 Incremental

Footwear and other components 1.1 1.6 2.3 3.1 1.5
Flaying curing, handling & transport, etc. of 0.1 1.3 2.1 2.8 2.7
raw material
Tanning and finishing 0.1 1.4 0.2 0.2 0.0
Leather Garments, Goods, etc(organised) 0.2 0.5 0.6 0.8 0.3
Total 2.5 4.8 5.3 7.9 4.5
Source: Human Resources and Skill Requirements in the Leather and Leather
Goods Sector (2022)- Report by the National Skill Development
Corporation, New Delhi, p. 45.

Employment Requirement in the Leather Industry Between 2008 and 2022

ICRA Management Consulting Services Limited (IMACS) analysis

estimates the requirements of human resources for Indian leather industry. The table

4.7 shows the estimates for different years and incremental figures for future

requirements for the long term forecast till 2022,it is expected that the leather

industry would employ about 7.9 million persons by 2022 from the current level of

about 2.5 million persons, i.e., an incremental employment requirements of about

111
4.5million persons. Footwear industry would be the largest employer account for

over 44 percent of the employment.

Industrial Scenario of Tamil Nadu

Tamil Nadu is already strong in the major industrial sectors of automobiles,

auto components, engineering goods, leather, textiles, Information Technology and

Bio Technology and the New Policy aims to maintain and improve the competitive

edge of the State to make Tamil Nadu the Manufacturing Hub of the country and

one of the Top three destinations for investment in Asia. The Vision 2023 Tamil

Nadu document unveiled by the Honorable Chief Minister of Tamil Nadu on

22.3.2012 charts out a crucial road map for the growth of manufacturing with an

annual growth rate of 14% and a total investment of Rs.15 lakh crore by 2023

covering all the major sectors of the State economy. A major thrust for Infrastructure

Development is proposed.

The State of Tami Nadu has always been in the forefront of economic growth

in the country. The State has made impressive strides over the years to carve out a

niche for itself in the fields of engineering, automobiles, textiles, leather,

Information Technology, electronic hardware and hi-technology industries and the

Gross State Domestic Product (GSDP) stood at Rs.4,51,313 crore at constant prices

in 2012-13. The industrial GSDP of Tamil Nadu grew at an impressive rate of

9.60% from the year 2005-06 to 2012-13 at constant prices. Traditionally, Tamil

Nadu has been in the vanguard of industrialization among the Indian States. The

State has had a strong presence in textiles, engineering, automobile production and

auto components manufacture and recently in Information and Bio Technology

sectors.

112
 Tami Nadu has always been a safe haven for the investors owing to a

favourable business climate, excellent infrastructure for trade and investment,

outstanding law and order maintenance, peaceful industrial relations and healthy

socio-economic reforms. Among the Indian States. Tamil Nadu has many labour

intensive industries like textiles, apparel and leather. These industries have been a

good source of export earning potential. In recent years, they face challenges due to

WTO agreement (removal of quota) and environment regulations. It is essential to

find solutions to overcome these issues.10

Leather Industry in Tamil Nadu

Many international brands and retailers source leather products from south

India. Tamil Nadu has a dominant presence in the leather and leather based

industries. Tamil Nadu in the south is home to a growing export industry for shoes

and other leather goods. In Tamil Nadu however, the industry is based around large

factories- which nonetheless outsource a large amount of work to informal workshop

and home workers. There is a well-established industry in Ambur, while newer

factories are to be found in Chennai, and nearby Free Trade Zones. The leather

industry in South India is a major employer particularly for Muslim. It is estimated

that women make up 80-90% of the workers in the industry. The tanning industry in

India has a total installed capacity of 225 million pieces of hide and skins of which

Tamil Nadu alone contributes to an inspiring 70%. Leather industry occupies a pride

of place in the industrial map of Tamil Nadu.

Tamil Nadu enjoys a leading position with 40% share in India’s export.

Government of Tamil Nadu offers a special subsidy to further encourage the leather
10
Tamil Nadu industrial policy notes (2014), Ministry for Industries Government of Tamil Nadu,
p. 5.

113
industry. TALCO-estate govt. organization is setting common effluent treatment

plants in leather industry clusters. A recent study by the National Council of Applied

Economic Research (NCAER) made comparison of the incentive packages of all

Indian States which reveal that Tamil Nadu offers the most attractive package

among industrialized States of India.

The Bed of the Palar River, flowing through the Vellore district of Tamil

Nadu, presents a picturesque sight. The traditional laundry men dry their customers’

clothes, children play cricket and cows graze lazily-all on the riverbed. A few stray

patches of water remain as the only indicators of the fact that a river once used to be

in full flow here. The river is dry with over exploitation, the groundwater is

coloured, saline and contaminated with the leather industry’s effluents and the air is

thick with the stench from the tanning process. This is one of the strongholds of the

leather industry in India. It was here, in the Vellore district of Tamil Nadu.11

The Vellore district has a dominant presence in the Leather and Leather

based industries. Vellore District accounts for more than 37% of the country’s

Export of Leather and Leather related products such as finished leathers, shoe

uppers, shoes, garments, gloves and so on. Leather and Leather products exports

from the year 2012-13 is Rs.5,123.66 Crores from this District alone. The

Government of Tamil Nadu provides all possible capital subsidies and

infrastructural support in the form of setting up Industrial Estate and common

effluent treatment plant. Thus, Vellore District. Share of the Leather market in the

years to come is ensured.12

11
India news leathers e-news, council of leather exports, India-Volume-04, Issue 04, and April,
2012.
12
Council for Leather Exports India (2012-13) Facts and Figure, Pp. 8-9.

114
 Table: 4.8

Export of Leather Products from Tamil Nadu 2012-13 ( Value Rs in crores)

Product Quantity Value Share in value wise(%)

Finished Leather(sq.ft) 333,897,338 3,179.61 35.27
Footwear Components(pairs) 17,873,498 1,002.59 11.12
Leather Footwear(pair) 28,266,684 3,188.48 35.37
Leather Garments(pieces) 1,414,590 685.15 7.60
Leather Gloves (pairs) 2,498,188 106.35 1.18
Leather Goods(Pieces) 23,775,409 825.66 9.16
Non Leather Footwear (pairs) 416,238 25.99 0.29
Sources: www.indianleatherportal.com

Current Status of the Leather Industry in Tamil Nadu

70% of Tanning capacity of India and 6% of Global leather requirement.

Annual production: Rs.15000 crores – 60% of India’s production

Export: Rs.9013.83 crores – 36% of India’s exports (2012).

Employs about 5 lakhs (about 70% are women) are directly and

indirectly. Tamil Nadu enjoys a leading position with 40% share in

India’s export.

The tanning industry in India has total installed capacity of 225 million

pieces of hide and skins of which Tamil Nadu alone contributes to an

inspiring 70%.

Leather industry occupies a pride of place in the industrial map of Tamil

Nadu.13

13
India Brand Equity Foundation (www.ibef.org)

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Evolution of the Leather Industry in Tamil Nadu

The outlines the socio – spatial structure of Tamil Nadu particular in Vellore

in an industrial economy, and its transformation over recent decades. The leather

industry is over 100 years old. Starting in 1973, with a government decision to ban

exports of raw hides, a series of state measures partly pushed and partly incentivized

tannery owners in the region to diversify and upgrade their enterprise into more

value adding activities such as leather processing and leather goods manufacturing

(Tewari 2001). Spurred by technological and marketing support from state

institutions like the Central Leather Research Institute (CLBI) and Footwear Design

Institute, Leather firms moved from exporting raw leather to exporting processed

and finished leather and, more recently leather products such as footwear and

footwear components, bags, gloves, and garments.

This diversification was accompanied by changes in the spatial organization

of production. Accelerating concerns and conflicts from the mid – 1980’s over the

destruction of agricultural lands, crops and water resources due to tannery effluents

culminated in a Supreme Court order in 1995 prohibiting additions in capacity to

existing tanneries or the opening of new tanneries. This, in combination with rising

land costs, resulted in the majority of tanneries moving out of the town to

neighbouring villages. The growing demand for raw material began to be met by

sourcing semi – finished leather from places like Erode district in Tamil Nadu,

Rajasthan, and more recently, through imports from countries like Pakistan and

China.

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 Labour for the tanneries is primarily drawn from the nearby villages,

although employment absorption in tanning has declined with advancements in

leather processing technologies. Further, leather tanning, although historically a

preserve of dalit labour, is longer, is no longer an attractive employment option for

youth, rural or urban, due to its association with pollution and death. Despite the

higher wages offered to the workers, young dalit workers are rarely found seeking

tannery jobs in this region any longer. The diversification into leather goods

production has been accompanied by a process of ruralisation of the sector with a

large number of shoe factories emerging in the town’s hinterlands.14

Origin of the Leather Industry in Vellore District

The growth of the leather industry in India can be linked to increasing

demand for leather by the colonial state and by European trading interests operating

out of India starting in the 19th Century. Regions within the Madras Presidency in

south India began to specialise in the manufacture of semi-finished leather from the

last decades of the 19th Century. From the outset, this production was oriented

toward export markets. Cow and buffalo calf hides processed using vegetal tannins

were shipped to London on consignment basis for public action. It is noteworthy that

at the time, other parts of India were mainly exporting raw skins and hides. The

region studied here, the middle Palar Valley, continued to specialise in the

production of semi-finished leather until the 1970s when the government decided to

pass out the exportation of this intermediary good in favour of higher value added

manufacturing.

14
Business Standard, Ministry of Science and Technology; Government of Tamil Nadu, p. 56.

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 The tanneries of the palar Valley were established predominantly by Labbai

Muslims who took advantage of the opportunities opening up in leather.

Strengthened in number locally through migration from other parts of the region,

members of this community undertook to organise the formerly village-based

production of leather into more modern manufacturing units. Labbais and other

groups of “Tamil Muslims” have traditionally been involved in commerce and trade

and they could mobilise their networks to realise capital investments. Interestingly,

there appear to be a few organic links between agriculture and industry in this

specific case, in the sense that the industry has not depended on investment from

local agricultural surplus. However, rural areas have supplied labour to the leather

tanneries for many decades and interactions between the two sectors have intensified

in recent years with the increasing demand for labour in leather goods

manufacturing.

The historical absence of Hindu investment in this industry can be explained

by the impurity associated with leather in the brahmanical value system. According

to most historical accounts the main reasons that tanneries located in the Palar

Valley were abundance of water, and perhaps its quality, the proximity to traditional

tanning materials, mainly tannins from the bark of trees collected from nearby

mountainous areas (Mysore plateau, Javadi Hills), and the proximity to Madras (now

called Chennai). Madras was a major colonial seaport, from which leather was

dispatched to distant markets, and the city itself constituted an important leather

market and local labourers may have constituted the initial work force. The groups

of people from other regions, whose traditional occupation was leatherwork, were

also recruited. These families migrated and settled in the Palar Valley. These

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migrations, which concerned both Tamil and Telugu speaking groups, were

staggered over several decades.

Table: 4.9

Classification of Registered Leather Industry and Workers in Vellore District

No. of
Product
No. of units Products Workers
Segments
Employed
I 52(15 tanneries and Finished leather, Shoe uppers, Full 50000
37 shoe units) shoes
II 50 Finished leather (mostly job working) 15210
III 48 Semi-finished Leather (job working) 7758
IV 70 Shoe uppers (job working) 9512
V 35 Dry finishing (Mostly job working) 3692
VI 125 Full shoes for local markets 6290
Total 395 92462
Sources: District Industrial Centre, Vellore-2013.

There is a Significant Increase in the Employment of Male and Female Rate in

the Leather Industry in Vellore District

Hypothesis 1

Alternative Hypothesis: There is a significant increase in the employment of Male

and Female rate in the leather industry of Vellore District for Last Ten Years. To test

this hypothesis data pertaining to employment in leather industries in Vellore

District is considered, ‘t’ test is presented in Statistical Packages for the Social

Sciences(SPSS).

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 Table: 4.10

Growth of Employment in the Leather Industry in Vellore District

Employment in
Years Percentage
numbers
2005 72,568 17
2007 79,153 19
2010 86,716 20
2012 91,475 21
2015 97,268 23
Source: Government of Tamil Nadu, Department of Economics and Statistics,
Chennai from Various years

One-Sample Statistics

Std. Std. Error

N Mean
Deviation Mean
Employment in
5 85436.00 9787.309 4377.018
number

One-Sample Test

Test Value = 0
95% Confidence
Sig. (2- Mean Interval of the
t df
tailed) Difference Difference
Lower Upper
Employment in
19.519 4 .005 85436.00 73283.45 97588.55
number

The calculated value is 19.51 and the table value at t0.005 (0.5%) is 4.604.

Since the calculated value is greater than table value the alternative hypothesis is

accepted and the inference is that there is significant increase in the employment in

the leather industries in Vellore District as increase in the casual employment of

leather industries shown in the table 7.17.

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 Figure: 4.1

Growth of Employment in the Leather Industry

2005
2015 17%
23%
121

2007
19%

2012
21%

2010
20%
The Conceptual Framework of the Leather Industry in Vellore District

Leather clusters of the Palar Valley manifest a number of characteristics of

the industrial district model, including joint action. Each town hosts a tanners

association. For instance, often established decades ago that circulates information

and organizes meetings. Regarding inter-firm co-operation, it is somewhat limited

among the primary tanneries, i.e. those that process leather from a raw to semi-

finished state, because the production process is not easily broken down into distinct

phases, For a given quality of raw material, primary tanneries produce a generic

product, i.e., semi-finished leather, and hence they are usually in stiff competition

with each other. They come together in co-operative ventures through the tanners

associations or common effluent treatment plants, but they tend to be of low

intensity.

Increasingly, as tanners have diversified into manufacturing leather goods,

mainly footwear, that yield higher value addition than tanning, they prefer to

concentrate on the finished and manufacturing phases of production, and to contract

out the primary processing to other firms. However, in order to maintain a maximum

amount of control over the processing without actually doing it themselves, they

tend to rely on a limited number of partners. Field surveys conducted in 1997 and

1998 indicated that numerous small primary tanneries worked mainly or exclusively

with one or two large units.

These privileged partnerships are often created among relative, for instance a

son (or son-in-law) runs a tannery to feed his father’s (father-in-law’s) composite

tannery or footwear factory. In other cases, these relationships are among non-

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relatives, but based on trust gained through repeated transactions over time, to both

parties’ satisfaction. Trust-based relations among firms are perceived as less risky,

and so less costly than recourse to the market. The successful functioning of such

treatment plant relies on the co-operation of all members who are required to meet

certain quantitative and qualitative standards. Implicit rules that surround them

constitute a specific form of local governance, which has been defined as the non-

market co-ordination of economic activity. 15

Export of Leather and Leather Products 2013-14 in the Study Areas

The export of leather and leather products in Vellore district in the year

2012-13 was valued at Rs,2,470.57 crore in Ambur where as in Vaniyambadi and

Ranipet were valued at Rs,435 crore and Rs,2,105.38 crore respectively. The export

figure is witnessing that the exporting of leather footwear segment is as high as

67.02% from Ambur, 0.43% from Vaniyambadi and 44.76% from Ranipet out of the

above said Value. The Finished Leather segment valued at 18.25%, 63.92% and

45.02% from Ambur,Vaniyambadi and Ranipet respectively. It shows that the export

of finished leather is higher than the other segment in Vaniyambadi. There is less

percentage of remaining leather products like, Leather Garments, Leather Goods and

Non-Leather Footwear in export due to the less demand driven in foreign countries

with the slowdown in the European markets. An important feature is that the

importance of leather footwear sector the export value of footwear is highest among

the other leather and leather products.

15
Raj, X. and Venkatasubramaniam, G. (1998), “ Mobilization and Organization of Tannery
Workers in the Palar Valley,” unpublished report, French Institute of Pondicherry, Pp. 17-19.

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 Table: 4.11

Export of Leather and Leather Products in the Study Areas-2013-14

(Export Value Rs.in crores)

Ambur Vaniyambadi Ranipet
% share
Description FOB % share in FOB % share in FOB
in(value-
Quantity Value (value-wise Quantity Value (value-wise Quantity Value
wise
Finished Leather
45,159,486 451.00 18.25 27,932,504 278.17 63.92 88,831,859 947.76 45.02
(sq. ft)
Footwear
124

7,639,550 343.54 13.91 136,129 08.47 1.95 2,637,398 152.89 7.26

Components(pairs)
Leather
14,916,521 1655.86 67.02 238,794 18.81 04.32 7,744,427 942.36 44.76
Footwear(pairs)
Leather
824 0 .12 0.00 125,631 75.96 17.46 11,387 6.60 0.31
Garments(pieces)
Leather
22,925 0.33 0.01 1,599,520 53.63 12.32 725,251 54.84 2.60
Goods(pieces)
Non- Leather
195,146 19.73 0.80 1,145 0.15 0.03 119,845 0.93 0.04
Footwear(pieces)
Grand Total 2,470.57 100 435.19 100 2,105.38 100
Sources: Council for Leather Exports India (2014-15)
 Figure : 4.2

Export of Leather and Leather Products in the Study Areas-2013-14

Ambur Vaniyambadi Ranipet

67.02
63.92

45.02 45.02
Percentage
125

18.25 17.46
13.91
12.32
7.26
4.32
1.95 2.6
0 0.31 0.01 0.08 0.03 0.04

Finished Leather(sq. ft) Footwear Leather Footwear(pairs) Leather Garments(pieces) Leather Goods(pieces) Non- Leather
Components(pairs) Footwear(pieces)
Export items
Pollution in Vellore District Due to the Leather Industry

One of the problems that faces is polluted ground water which is not potable.

This happened due to the chemicals released by the leather tanneries directly into the

most-of-the-time-dry Palar River traversing across Ambur before the Common

Effluent Treatment Plants that use Reverse Osmosis Process (ROP) were installed.

However, with strict measures taken by the State Government, most of the

companies have now installed effluent treatment plants to treat the water from harsh

chemicals such as hexavalent chromium, trivalent chromium, etc. However, the city

has been a victim of serious groundwater pollution by heavy metals and is

considered as one among the most toxic places on earth.16

16
http:/www.tntdpc.com/technoblaze/may/casestudy.pdf.

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