CHAPTER2

OVERVIEW OF LEATHER
INDUSTRY IN INDIA

36 
 
 CONTENTS

2.1. Origin of Leather

2.2. Evolution and Growth of Leather Industry in India

2.2.1. Indian leather trade over the years

2.2.2. Life of Indian Leather Industry in a nutshell

2.3. Structure of Leather Industry

2.3.1. The industrial structure on the basis of activities

2.3.1.1. Trading of raw hides and skins

2.3.1.2. Leather making

2.3.1.3. Production and Trading of leather products

2.3.2. Product wise classification of leather industry

2.3.3. Organic classification of leather industry

2.4. Components of Leather Industry

2.4.1. Livestock

2.4.2. Slaughter Houses

2.4.3. Raw Hides and Skins

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 2.4.4. Tanneries

2.4.5. Production and Trading of Leather Products

2.5. Indian leather industry - Investment & Sales

2.6. Current status of leather industry

2.6.1. Production, Export and Employment

2.6.2. Total factor productivity growth

38 
 
 CHAPTER 2

OVERVIEW OF LEATHER INDUSTRY IN INDIA

2.1. Origin of Leather

Skin was a valuable material even from the time of God. There is

a particular reference of the skin of elephant used as cloth by Lord Shiva

in the Hindu epic Mahabharata. Again, Lord Shiva, the Greatest

Destroyer in the Hindu Triad was used to sit on a tiger’s skin for his deep

meditation and penance1. The Bible also says “Unto Adam also and to

his wife did the Lord God make coats of skins and clothed them”

The primitive man including Adam and Eves used the skins of the

animals for covering his body and it can be said that the use of skins

began so early in the history of a human race. The deer skin was used as

seat by the Brahmanas of ancient India. According to Webster’s

Encyclopedic Unabridged Dictionary of the English language, the

meaning of the term skin is the external covering or intugement of an

animal separated from the body usually with its hair or feathers,

especially when soft and flexible2 . Thus, Great Gods and very ancient

and primitive man used the raw skin of animals for their day to day

multipurpose activities. Many passages in the ancient literature of the

Hindu Epics show that even in those early days, the use of skin had been

39 
 
discovered and a high value was set on them. It is evident from such

writings that clothing was one of the earliest and principal items to

which skins were used. However, it is also impossible to fix any date as

to the commencement of the use of the skin in the universe

Leather is made from raw skin of animals. The meaning of the

term leather as given in the Webster’s Encyclopedic Unabridged

Dictionary of the English language is “the skin of animals prepared for

use by tanning or similar process designed to preserve it against decay

and to make it pliable of supple when dry”2 . The origin of the art of

leather making from the skin cannot in anyway be calculated and the art

may rightly be said to have sprung into existence from the misty depths

of antiquity3 . However, when the history of mankind is traced back a

number of references are such articles as quivers of leather, drums,

leatherarmour, whips and even of leather bags. In the time of Rig-Veda

written about 3000 B.C., leather mashaks for water were well known and

Indra was praised as piercing the rain confining skins or mashaks of

clouds. Bottles of the same materials also were evidently in common use

during those days. Straps and bands were manufactured with leather and

hides and sails were also made of the same materials. In 2000 B.C.,

Agastia in his poison neutralizing mantra says, “I deposit the poison in

the solar orb like leather bottle in the house of vendor of spirits 4 .

40 
 
According to the Law books of Sankhya and Likhita in 2000 B.C., that

water is declared pure which is kept in old leather bottles. Leather bags

were universally used for raising water from wells. Atri in 2000 B.C. is

likewise of the same opinion and adds that flowing water and that which

is raised by machinery are not defiled”. The use of such words as

charmanta, charmapath, varatra, chasabandha etc. in old Sanskrit works

indicate that straps, bands and strings of leather were in common use and

sails were also made of leather or hide. In the Laws of Manu in 800 B.C.

mashaks for water are alluded to under the name of driti and its peculiar

form with the four feet left intact is pointed out5. Directions are also

given for the purification of leather articles. Leather shoes are mentioned

in the code of Manu as a suitable gift for Guru. In another place in the

same work the taking off leather sandles with hands is classified amongst

prohibited acts. Other smritis ordained that oleaginous articles preserved

in leather bottles do not become impure by the contact of cow hide6 .

Leather gauntlets, quivers and jewellery cases found in Egyptian

graves dates back to 300 B.C. They give some indication of the great age

of the craft. The articles, which may be regarded as early leather goods,

were manufactured by same craftsman who produced sandals and other

footwear. Marcopolo states in 1290 A.D. that “the curing of hides and

the manufacture of leather were two of the most important of Gujarat

41 
 
industries. Every year a number ships went to Arabia laden with the

skins of goats, oxen, unicorns and other animals. The leather was used

for sandals and was cleverly worked into red and blue sleeping mats

exquisitely inlaid with figures, birds and beasts and skillfully

embroidered with gold and silver wire7 .”

Production of leather goods remained a part of the shoe maker’s

work right up to medieval times when it was taken over by the book

binding trade which was then growing in importance. Uttar Pradesh in

India occupied a predominant position in the making of finely crafted

‘joothis’ and leather wear for Mughuls and the elitist society of the

Mughul Court. In the South leather formed one of the items of trade

between the South Indian states and the Greek and the Roman kingdoms

of Europe.Leather is a versatile, durable and prestigious material, with a

wide range of desirable attributes - such as flexibility, strength,

mouldability, breathability, friction resistance and with the possibility of

being prepared in a way to be resistant to heat and water. Leather will

retain its appearance and its functional properties if it is correctly

handled and maintained. The correct method of care and handling will

depend on the type of leather. Leather is generally more acceptable to the

public than fur and many people buy it to wear as coats and shoes or for

use as handbags, wallets and belts 8. We’ve been told in the past that

42 
 
leather is healthier for our feet because it’s breathable and therefore cuts

down on potential foot fungus or other problems.

2.2. Evolution and Growth of Leather Industry in India

Leather has had a universal appeal from time immemorial. The

manufacture of leather is one of the oldest technological professions.

Even before the beginning of recorded time, man has worked with hides

and skins to make the earliest form of clothing. The leather making of

primitive man was a race between his efforts and the destructive forces

of nature. The tanner quickly became a specialist and tanning skills were

passed from father to son and on these basis family fortunes and

eventually, industrial empires were built9 .

The concept of tanning and use of leather was prevalent from time

immemorial. Between 5000 and 3000 B.C. the Sumerians of Southern

Mesopotamia used leather to make women’s dresses and other items.

Ancient Assyrians used leather to make wineskins which could be

inflated to make floating devices for rafts. The Phoenicians made water

pipes from leather. The Romans used leather for a wide variety of

purposes and they became masters in the tanning process.

43 
 
 During the middle ages, leather tanners gathered together and

formed guilds, because the tanning process is so odoriferous that no one

wanted them around. The ‘Cordovan’ leather, which is primarily used in

shoe making, comes from horse hide, was first produced by the Moors

when they ruled in Spain during the 8th century A.D.

The history of leather manufacture in India can be traced back to

ancient times as is evident from references to it in Vedic literature and

reports from Marco Polo. The leather making activities were mainly in

the hands of the village chamars and were sufficient to meet the local

needs. International export started only during the 1880s.

The history gives an account of the origin of tanning process. The

tannin is a chemical that occurs in a wide variety of plants and trees,

most notably, the oak. It is widely believed that man happened upon the

sealing qualities of tannin by the most precise of scientific methods. In

other words, it was discovered purely by accident.

Early hide users were trying to dry the hides by smoking them.

The tannins in the bark and leaves and leaves that were used to fuel the

fire of the smoking process were released into the hides, thus helping to

make said hides a pliable material.

44 
 
 The primitive method of preparing hides was first they soaked it

then pounded. The skin was then placed over a plank and carefully

scraped. After the fat and meat were removed, the hide was coated with

urine or wood ash to aid in hair removal. Dung from carnivores, such as

dogs’ was spread over the hide for bating. After bating, finishing was

done. For finishing hide was washed and hung over a pole that rested

over clay lined pit. The pit was filled with a mixture of water and

crushed oak bark. The alternative method involved was using a brain

soup to coat the hide with. The brain soup is prepared from the brain of

the animal that provided the hide10 .

There were various emissions being generated in the leather

tanning and finishing industry.VOC emissions may occur during

finishing processes. Ammonia emissions may occur during some of the

wet processing steps. Emissions of sulphide may occur during

liming/unhairing and subsequent processes. Also alkaline sulfides in

tannery waste water can be converted to hydrogen sulfide if the PH is less

than 8.0, resulting in release of this gas. Chromium emissions may occur

from chromate reduction, handling of basic chromic sulfate powder and

from the buffing process.

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The twentieth century marked a new period in the trade history of the

Indian leather industry. During 1900-1914, the export scene was

dominated by Calcutta and Madras with the former exporting raw goods

and the latter tanned ones. In 1912-13, the total export of hides/skins

amounted to Rs. 8 crores as against Rs. 4 crores from Madras. This was

because 17 of the 22 organised tanneries were in Madras and the rest

remained scattered in Bengal, Bihar, Orissa and Bombay. The outbreak

of World War II gave an impetus to the development of leather and

leather goods industry in India. While in 1913-14 only 25 large units,

employing 2,753 workers, were established, by 1941, the number of

units had increased to 114 and the workers to 26, 056. Before 1947,

though the British had shown considerable interest in leather

manufacturing in India and had even established some chrome tanning

units in Bengal, India mainly exported raw hides and skins.

After independence, planned efforts were made by the government

of India to promote and develop export trade by the adoption of the

Export Policy Resolution in 1970 and implementing the

recommendations of the Seetharamiah Committee11 .This led to

standardization of material and the development of the tanning industry.

46 
 
The first and second migrations in the global tanning and finishing

industry have had a definite impact on the Indian leather industry. The

last two decades have marked the emergence of the leather products

industry as one of the top five foreign exchange contributors to our

country. The industry had undergone total metamorphosis, emerging as

one of the significant competitors in the global market for leather and

leather products. The image of the country as a supplier of raw hides and

skins and tanned leather has been left far behind and our products, such

as leather footwear, leather apparels and hand bags, have found wide

acceptance even in quality conscious markets such as Germany, USA,

Japan and France. This has been possible largely due to the far sighted

policies of the Government of India and the initiatives from the industry.

The setting up of the Seetharamiah, Kaul and Pandey Commettees

proved to be watersheds in the history of the Indian leather industry.

Conscious efforts were made to promote exports of value added leather

products. The Seetharamiah Committee recommended a radical

transformation of the existing structure of the industry by suggesting a

ban on the export of raw hides and skins, with a gradual reduction in the

export of wet-blue leather. The Kaul Committees’s recommendations

helped in strengthening the industry’s production base, by providing a

major thrust towards importing of capital goods. The Pandey

47 
 
Committee’s recommendations at accelerating the pace of change by

mobilizing resources and creating facilities for manufacture and export

of value added leather products12.

In the context of recent developments in the leather industry, both

at the national and international levels, and recognizing the need to

provide impetus to this sector for export promotion and growth, the

government of India constituted the Murthy Committee, which went into

the growth prospects of the Indian leather industry and submitted a

number of recommendations aimed at capturing at least 10 per cent of

the global market share by India. Salient recommendations of the

committee include measures to encourage greater consumption of non-

leather material in the domestic market, in order to conserveand divert

leather for export production, promotion of strategic alliances with

developed and developing countries through joint ventures with the

Indian industry for material management, product selling, chemicals,

machinery13 etc.

According to the CLRI survey on capacity utilization, there are

2091 tanneries in the country out of which 1803units are in the small

scale sector and 288 are DGTD units. Tamil Nadu with 934 units, West

48 
 
Bengal with 538 units and Uttar Pradesh with 378 units, account for 89

percent of the tanneries in the country.

A survey of the growth of the Indian leather industry over the past

four decades has revealed that, of the 1803 units under SSI sector that

were surveyed, only 234 (13%) were set up before 1950; 126(7%)

between 1951-60; 325 (18%) between 1961-72; 451 (25%) between

1973-1980 and 667 (37%) between 1981-88. In other words, 62% of the

existing units were set up after 1973.

Out of 288 units surveyed in the DGTD sector, 29% came into

existence during 1961-72 and 39% during 1973-80. Only 9% were set up

after 198014 .

It is very difficult to estimate the growth rate of the product sector

since the size of the actual production units in the small and cottage are

not known. The organized sector accounts for only a small percentage of

the total production as shown in the subsequent chapters, though the

trend in the next two decades may show a major shift in the leather

product towards organized units with modernized production

capabilities.

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 2.2.1 Indian leather trade over the years

The growth of Indian leather industry is of recent origin. Though

leather processing and crafting have been practiced for many decades in

the country, for a variety of reasons, such as the general aversion of

majority of the population for the trade in hides and skins, low demand

for leather products such as footwear (military or the uniformed forces

were the major users of leather shoes, belts etc.), a substantial quantity of

hides and skins produced in the country was exported as raw material,

with little or no processing at all. The population engaged in the recovery

and processing of hides and skins belonged predominantly to either the

scheduled castes or Muslim Community. Accordingly, on the

enunciation of the first industrial policy of the Government of India,

after the independence, it was decided to protect this sector from the

invasion of organized industry, so that the current employment in the

industry, consisting of people belonging to the vulnerable sections of

society, could be protected. The industry thus, came to be reserved for

the small scale sector. The industry remained virtually confined to the

cottage sector due to the excise duty regulations which required an

industrial unit using more than 2 HP electric power, or employing more

than 50 persons, to comply with the excise regulations. At the beginning

of the 1970s, the bulk of the hides and skins produced was exported as

50 
 
raw material and whatever production of leather and leather products

took place in the country was predominantly carried out in cottage level

units.

The industry attracted attention in the early 1970s when there was

foreign exchange crisis caused by the oil price hike. Among the few

industries identified as having export potential, leather was one. A

government committee, after studying the then current status of the

industry, recommended in 1973, that the export of raw hides and skins

and pickled hides and skins be banned; that of semi-processed leather

regulated and that of finished leather, encouraged. Import of technology,

capital goods, chemicals and other inputs needed for making finished

leather was allowed. Import duties were reduced. This resulted in the

first flush of modernization of the industry, when a number of tanning

and finishing facilities came up in the country with a good deal of

support from foreign buyers of leather. Along with the tanning and

finishing facilities, some footwear units also came up, but such units

could not be in large numbers in the modern sector, as the licence was

issued only if the licensee undertook to export 95% of his production.

The situation at the end of 1970s was thus a growing modern tanning and

finishing sector, exporting a good deal of finished leather and a vast

network of cottage units for converting leather into footwear and

51 
 
products 15 . Another committee in 1979 and a third committee in 1985,

recommended further liberalization in import policy for import of capital

goods, components, consumables etc. needed for converting leather into

various leather products. Simultaneous ly, a set of incentives were also

announced, encouraging export of value added products and

discouraging export of leather. The export obligation on the licensees

was reduced to 75%. The phase from 1984 to 1992 witnessed what may

be described as the boom period for leather exports from India. The

domestic market for leather and leather products reveals some

characteristics. First, the domestic market is mainly for footwear, for

sandals and chappals and very limited for shoes. It is extremely sensitive

to price, the bulk of the requirements of the market is met by the output

from cottage sector. It is not very alive to design and aesthetics. A little

hike in price could drive people to cheaper substitutes. As the footwear

produced in a modern factory cannot be sold in the domestic market for

prices less than Rs.500 per pair currently, the market for such footwear is

not very large. The youth, of late, seem to show preference for sports

shoes and athletic shoes, but the number that can afford such shoes at

prices above RS. 500 per pair is not large. There is mention about a large

middle class in the country, of the size of 150 million, with purchasing

power similar to that found in advanced countries, but it must be stated

52 
 
that in the footwear market the purchasing power of this so called

wealthy middle class has not yet been exhibited. There is virtually no

market for leather garments, basically because of the climatic conditions

in most parts of the country. That such garments would be beyond the

reach of most Indians is the other equally potent reason. Likewise, in

respect of leather goods such as handbags, wallets and travel goods too,

the domestic demand is small mainly on account of price consideration.

Bulk of the domestic demand for such products is met by non-leather

substitutes. The main factors that do have an impact on the demand

pattern for footwear and leather goods are population, disposable

personal income levels, climatic conditions, price levels, general

economic condition, availability of attractive and competitive substitutes,

religious considerations-in that order16 .

2.2.2 Life of Indian Leather Industry in a nutshell

The Indian Leather Industry is serving as a major contributor to

the Indian economy, through its export earnings and employment

generation 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

53 
 
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 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%.

The 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 sector17. Also, the economic liberation programmes 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

54 
 
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 and XI Plan 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 are rendering 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 implemented by the Government

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

of these plans.

The exports of leather and leather products have increased from

USD 2495.37 million in 2004-05 to USD 3400.98 million in 2009-10,

with value added leather products/footwear constituting a share of about

80%. The industry is providing employment to about 2.5 million people,

mostly belonging to the economically weaker sections of the society.

About 80% of the industry is concentrated in the MSME Segment18 .

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 Though the Indian Leather 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

2.94%. The leather industry definitely has the potential to double its

export performance in the coming years.

The Department of Commerce, Ministry of Commerce and

Industry has fixed a target of USD 8.5 billion for the Indian Leather

Sector, to be achieved by 2013-14. The industry has to achieve an annual

growth of about 26% (as against the present level of about 10.5%) in

order to achieve this target.

2.3. Structure of Leather Industry

The structure of the industry, as it exists now, presents an

interesting spectacle. In tanning and finishing, the country has the

capacity for processing 192 million hides and skins per year. A

substantial capacity lies in the modern tanneries, the production in

cottage and back-yard tanneries registering a steep decline over the

years. This is due to the fact that the modern tanneries are able to pay a

better price for the raw material in the process, a good quantity of hides

and skins, which were earlier not collected, do get collected. These

tanneries were set up with a good deal of technological support from

56 
 
foreign buyers and are constantly being modernized, enhancing their

capability to produce better quality leathers. The tanning and finishing

industry has assumed the characteristics of an organized industry.

Footwear, however, presents a different picture. Out of total production

of 465 million pairs in 1992, including shoe uppers, except for about 40

million pairs of shoe uppers produced in modern factories, over 80 per

cent of foot wear produced in the country came from cottage and small

scale units. The production of sports leather shoe is negligible. Those

units using non leather materials for footwear have just started coming

up and the current capacity is estimated at about 50 million pairs per

annum. Leather garments are produced in both, in what may resemble an

oversized tailor shop and large modern factories. Leather goods such

ashandbags and gloves are made in small and cottage units and so are

saddles and bridles. A significant chunk of the output of the industry still

emanates from the small scale and cottage sector.

The distinguishing features of leather industry in India are summarized

as under:

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

of world goat and sheep population are housed in India.

• 2 billion sq feet of leather produced annually

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 • 2nd largest producer of Footwear and Leather Garments

• 3rd largest producer of saddlery and harness items.

• Generating employment for 2.5 Million people, mostly from the

weaker sections with 30% 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.

The structure of leather industry in India is analysed from three angles.

The structure of leather industry is classified according to three bases

which are describedbelow:

2.3.1. The industrial structure on the basis of activities.

The following activities comprise thrust areas of leather industry.

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 2.3.1.1. Trading of raw hides and skins

Trading involves collection and disposal of raw hides and skins.

Trading has a vital role to play in the total structure of leather industry

because it is a strong link between the primary production and the

ultimate tanning activities. Trading of raw hides and skins involves

collection, curing, storing, grading, packing and transmitting ultimately

for tanning purpose19. Trading also consists of financial credit to the

dealers concerned. The trading activity has strong forward and backward

linkage in the total network of raw material management.

Trading of raw hides and skins is carried out by raw material

dealers. While the small scale dealers operate in semi-urban, urban

centers, each having limited area of operation, the big dealers operate

mainly in the urban centers with a network of their own collection

system. The small dealers cater to the needs of tanners or at time supply

the big dealers. The organization set up of the raw material marketing

looks like a pyramid with large number of collectors/small scale dealers

spreading at the base and gradually narrowing down by the time it

reaches the terminal markets 20.

The strength of leather industry lies with its vast bovine

population. Hides and skins constitute the basic raw material for the

59 
 
leather industry. The pelts of big and full grown animals like cows,

buffaloes, horses etc. are called hides and that of small animals, like

sheep, goats and deer etc. are the skins. The difference between hides

and skins mark in size, thickness and weight, the former being larger,

thicker and heavier than latter.

2.3.1.2. Leather making

Leather making constitutes the most important activity of leather

industry in India. It is the activity which converts the raw hides and skins

into finished leather which is used for the production of the final leather

products

The process of leather making involves the following steps in

sequential order:

Liming

Liming is the process of hair loosening. Lime is used for the

purpose and sodium sulphide, sodium sulphidrate, dimethylamineet care

also used for the liming process. Lime is the most widely used for the

purpose. The liming procedure also aims at the removal of inter

fibriallary proteins and natural facts.

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Deliming

Deliming is the process of removing the alkaline chemicals

present in relatively large amount on the limed skins and hides which are

called pelts. A number of chemicals such as acids, acid salts and

amonium salts are used for this process. The extent to which deliming

should be carried out depends upon the type of leather to be produced.

Fully delimed pelts produce softer leather, while for firmer and harder

types, complete deliming is not desired.

Bating

The delimed hides and skins contain non leather making constituents

such as degraded proteins, color pigments, grease and lime soap etc.

bating is the process of making the grain surface of hides and skins

clean, smooth and fine and to give the finished leather its soft pliable and

stretchy feel. It is the process of removing non leather making

constituents such as degraded proteins, color pigments, grease lime soap

etc. contained in the delimed hides and skins. The bating agent used in

the bating process includes enzymes such as trypsin, pepsin, lipase,

amylase etc. and also synthetic bate such as oropon. Bating may be done

either in paddle or drum.

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Pickling

Pickling is the process of treating the delimed and bated pelts in acid-salt

pickle liquor. In the process they absorb acid which is partly used to

neutralize the free alkalinity and to combine chemically with collagen.

The result of pickling process is that the pelts in an acid environment are

ready to accept chrome tanning agents. Pickling also helps to preserve

the pelts either for tanning at a later stage or for export and the skin can

be easily sorted for production of different types of leather.

Tanning

Tanning is the process of conversion of putrescible animal skins or

hides into a stable and non putrefiable commercial product leather. The

two main tanning agents are vegetable tanning and chrome salts. In the

former process raw hides and skins are treated in water containing

tanning extracts from plant leaves, bark, froit and roots. Chrome tanning,

on the other hand, involves a process in which pickled hides and skins

are first acidified with sulphuric acid and common salt to allow the

tanning agent to penetrate. Later, the pelts are treated with solutions of

basic chromium salts. Tanning, thus, converts the pelts into semi-

finished leather through the wet blue and crust stages in the case of

chrome tanning and through East India in vegetable tanning. Tanning is

one process in which India possesses considerable traditional expertise.

62 
 
Presently, leather making in India ranges from backyard tanning units

relying on elementary equipment to sophisticated leather complexes with

the most modern machinery.

Neutralization

It is the process of de-acidification of chrome leather using

neutralizing agents such as sodium bi-carbonate, sodium or

calciumformate or syntans. The purpose of neutralization is to reduce the

excessive positive charge of acid present in leather to a as low a degree

as possible so that in the subsequent processes the semi-finished leather

is not disturbed in any manner.

Retanning

Retanning process is carried out in order to make up for variations

in thickness and to level out surface defects of leather by employing

appropriate retanning agent s such as vegetable extracts and synthans

and resin tanning agents. Retanning is done only on chrome-tanned

leather.

Dying

Dying is the process of giving suitable shades of different colours

to the leather. The different types of dye stuff employed in leather dying

include anioric dyes, pre-metallised dyes. Chrome-mordent dyes and

63 
 
reactive dyes. There are various methods to carry out dying. Dying is

important since it enhances the value of finished leather in the national

and international market.

Fat liquoring

The main purpose of fat liquoring is to coat the fibers and fibrils

of leather with thin layers of oil there by imparting a certain degree of

softness as well as water proofness. Some of essential physical

characteristics of leather like tensile strength, aberration resistance etc.

are increased perceptibly by fat liquoring.

Drying

Drying is an operation which removes water from leather. Drying

performs an important function in the making of good leather. Drying is

mainly done by toggle drying past drying vaccum drying. Drying sets the

stage for the preparation of finished leather.

Finishing

It is the final stage of the entire process of leather making.

Finishing is the process of providing the leather surface with a protective

coat to prevent penetration of excessive moisture and dirt and also

safeguard it from damages caused by rubbing and scuffing. This

protective coating while upgrading its quality and improving its aesthetic

64 
 
appeal also imparts the desired colour and level appearance to the

leather. There are various finishing agents with divergent properties

applied in several coats. There are also different types of finishes

designated according to the composition of finishing agents, or the

application technique employed for the finishing effect obtained. The

leather after the finishing process becomes a major and important raw

material for the manufacturing of various products such as leather goods,

shoes, garments etc.

2.3.1.3.Production and Trading of leather products

Leather industry in India also comprises of the activities of

productionand trading of various leather products. Production activity

deals with the conversion of finished leather into consumable leather

products, while, trading activity is concerned with the buying and selling

of final leather products.

2.3.2. Product wise classification of leather industry

The leather industry in India can be classified into the following

segment:

Footwear and footwear components

Footwear construction is the most dominant end-use for leather in

the global scenario, although many new end-uses for leather have

65 
 
emerged. Leather footwear constitutes the most important segment of the

leather industry in India. It accounts for about 60% of the total

production of this sector. Footwear represents leather products such as

shoes, decorated shoes, shoe uppers, handmade footwear, home slippers

and chapels, sandals. Footwear production in India is spread over

cottage, small scale and the DGTD sectors. The footwear industry is

characterized by the lack of significant economies of scale.

Leather Garments

Leather garments are a relatively new item of production and have

achieved an unusually high turnover level in a short time span. Almost

the entire production base is in the small-scale sector and has been

created recently to cater to an increasing demand in the foreign market.

There is an almost total absence of domestic demand on account of the

unsuitability of leather garments to the tropical climate as well as low

income levels of the population.

Leather goods

The term leather goods consists of hand bags, patch work

shopping bags, wallets, purses, harness and saddler, travel bags, tie,

jewellery, table mats, gloves, pen holders, sports goods etc. There is a

66 
 
considerable domestic market for leather goods, though, exports

predominate.

2.3.3. Organic classification of leather industry

The organic structure of leather industry in India is divided into

organized and unorganized sector. Production in the organized sector is

divided into large, medium and small scale sectors. Organized sector

refers to the factory mode of production using modern technology and

incorporating a relatively high degree of mechanization. Large and

medium sized units in the organized sector are known as DGTD units,

since they have to be registered with the Directorate General of

Technical Development. With command over technology, resource,

management, finances and marketing expertise, the organized sector is

growing rapidly and now accounts for major share in the production and

export of finished leather and leather products.

The main characteristics of the unorganized sector of leather

industry in India are small scale operation, simple and labour intensive

technology, unregulated and competitive markets, low barriers to entry

and family ownership of enterprises. Most of the unorganized or cottage

or traditional leather units are rural based and are known as Khadi and

Village Industries Centre units, since the Khadi and Village Industries

67 
 
Commission is responsible for the development of the village leather

industry21.

2.4. Components of Leather Industry

2.4.1. Livestock

The first Livestock Census was conducted during 1919-1920 and

since then it is being conducted quinquennially by all States/UTs in

India. The 18th Livestock Census was conducted in 2007as the date of

reference. The Census is conducted as a 100% Centrally Sponsored

Scheme. Livestock Census is the onlysource, which gives detailed

information on all species of livestock and poultry, animal driven

agricultural implements and machinery, and fishery statistics.

In the 18th Livestock Census (2007), for the very first time digital

data up to the household level has been processed at the central level

through National Informatics Centre. Breed-wise data has also been

collected for the first time.

T1.LIVESTOCK (in million Nos.)

India’s Global
World India
share% Rank
Cattle 1367 189 14.0 I

Buffalo 171 95 56.0 I

68 
 
 Goat 770 127 16.0 II

Sheep 1022 51 5.0 IV

Source: Livestock Census, 2007 – National Informatics Centre

India holds sizeable livestock both in terms of numbers and in

percentage share of globallivestock especially in buffalo, cattle and in

goats.

The livestock sub sector has emerged as one of the key

components of agricultural growth in developing countries in recent

years. The Indian livestock system is the endeavor of small holders and it

is a centuries old tradition. As a result of gradual transition from

subsistence to market system, the economic dimensions of livestock

keeping have assumed increasing significance in household behaviour.

Over 70 percentages of the rural households in India depend on livestock

farming for supplementary income. The sector is highly gender sensitive

and over 90 per cent of activities related to care and management of

livestock are carried out by family’s women folk. An analysis of the

figures from 1990 to 2000 reveals that over the period a continuous

declining trend was noticed in sheep population alone. Over 1992, the

worlds’ cattle population increased by 5.36 per cent during 2000. During

the same period buffalo population increased by 11.86 per cent, goat

69 
 
population by 24 per cent and pig by 5.01 per cent and sheep population

declined by 6.66 percent22.

As per the provisional figures of 2003 livestock census India has

187.38 million cattle which is about 15 per cent of the world cattle

population. Out of the 187.38 million cattle, 22.63 million were

crossbred, which is 12.07 per cent of the total cattle population. Between

1997 and 2003, crossbred population increased by 12.6 per cent. The

states of Tamilnadu, Maharashtra, Kerala, Uttar Pradesh, Karnataka and

Punjab account for about 60 per cent of the crossbred cattle population.

The country has 96.62 million buffalo population, which is about 56 per

cent of the world buffalo population. Between 1997 and 2003, the

buffalo population increased by 7.5 per cent. In spite of India’s position

as highest producer of milk, productivity per animal is very poor. It is

only 987 Kgs / lactation as compared to the world average of 2038

Kgs/lactation. This is mainly due to poor level of nutrition as well as low

genetic potential for milk production and health care.

The trend in livestock population of India and Kerala has been

examined on the basis of quinquennial livestock Census data. All types

of livestock have been showing a declining trend in Kerala after 1996,

while in India (1992 on wards) cattle population alone is declining. This

70 
 
may be due to the preference of people for high yielding cross bred

varieties. To add to the remarkable status India has in the world cattle

and buffalo population there are 181.88 million small ruminants in the

country in 2003 consisting of 61.78 million sheep and 120.10 million

goats. In terms of population, India ranks second in world in goats and

third in sheep. More than 70 per cent of them are reared by

small/marginal farmers and landless labourers. Contribution of sub

sector to the economy is estimated at Rs.2400 Crores per annum. The pig

population increased from 13.29 million in 1997 to 14.14 million in

2002-03 with an annual growth rate of 1.25 per cent and during 1951-

2003 periods it increased from 4.40 million to 14.14 million registering a

growth of 219 percent.

In Kerala, nearly 94 per cent of the livestock population is

concentrated in rural areas, 80 per cent of the livestock farmers are

marginal farmers and agricultural labourers. Women constitute 60 per

cent of the workforce in this sector. Most of the cattle holdings are one

cow farms. Nearly 65 per cent of the meat required is met from animals

of neighboring States. The majority of livestock owning farmers are

either small and marginal or even landless. In view of its suitability for

combining with crop sub sector and sustainability as a household

71 
 
enterprise with the active involvement of women, it is emerging as a

very popular supplementary avocation in the small farms.

The last two Census periods witnessed a drastic decline in the

livestock and poultry population in the state. It is assumed that the

factors attributed to the decline are scarcity of cheap and quality fodder,

rapid increase in the price of feed and feed ingredients, inflow of cheap

and low quality livestock products from neighbouring states,

indiscriminate slaughter of animals, under exploitation of production

potential of animals, non availability of good germplasm and threat from

contagious diseases like FMD etc.As per 2010 figures, Kerala’s share in

all India cattle population is 2.13 per cent. Buffalo population accounts

only for 1.07 per cent, goats 1.51 per cent and pigs 0.84 percent.

2.4.2. Slaughter Houses

There are 47,002 slaughter houses in the country, which are

recognized or authorized by local bodies. In addition a considerable

number of animals are slaughtered in unauthorized places. A rough

estimate indicates up to 50 percent of animals slaughtered in any urban

centre are from unauthorized slaughter. Over the years, the facilities and

hygienic conditions in most of the slaughter houses have deteriorated.

Compared to 1951, livestock population increased by about62 percent

72 
 
and human population increased by 134 percent but the number of

authorized slaughter houses have not increased to meet the demand for

meat production23 . The increased demand for meat is met either through

over crowding operations in the existing slaughter houses operating at

much higher capacity than feasible in the facilities or through

unauthorized slaughter at many places. In both these situations not only

meat hygiene is a casualty, increased pollution and adverse public

reactions are observed. The existing slaughter house capacity in the

country isunable to meet the growing public demand for clean and

hygienic meat. This can be achieved byimproving existing slaughter

houses to accommodate higher capacities and creating new slaughter

houses with modern facilities.

Several head of cattle are reportedly being transported from

Karnataka to slaughterhouses inAndhra Pradesh, Maharashtra and

Kerala. It is estimated that more than three million cattle headare being

transported out of the State annually. It is said that Karnataka has

emerged as a majorsource of cattle for slaughter houses as they are

available at cheaper rates. The demand for beef in Kerala is said to be

one of the reasons for the transportation of a large number of cattle to

slaughter houses there. While the domestic consumption in that State is

said to be around two lakhstonnes, the slaughter houses also cater to the

73 
 
international market.Though Kerala has a high count of cattle, some

experts say these cannot be sent to slaughter houses as they are

expensive hybrid cattle.

T2. District Wise Number of Slaughter houses in Kerala

Slaughter house
Sl No. District
registered Unregistered

1 Kasargod 25 35

2 Kannur 57 197

3 Wynad 88 83

4 Kozhikode 223 141

5 Malappuram 139 496

6 Palakkad 109 297

7 Trissure 152 349

8 Ernakulam 46 624

9 Idukki 84 184

10 Kottayam 112 323

11 Alappuzha 136 156

12 Pattanathitta 73 102

74 
 
 13 Kollam 122 193

14 Trivandrum 124 234

Total 1490 3414

Source : Department of Animal Husbandary, Kerala State

2.4.3. Raw Hides and Skins

The basic raw material for the leather industry is hides and skins.

These Raw materialsare recovered as byproduct from meat industry. In

the case of bovine hides, fallen category i.e. animals died due to natural

causes like old age, diseases also account for sizeable share. The major

specie of livestock that supply hides and skins are cattle, buffalo, goat

and sheep. These animals are reared for different purposes such as cattle

mainly for draught purposes, buffalo for milk and goat and sheep for

meat purposes 24 .

75 
 
 T3.PRODUCTION OF HIDES AND SKINS
(in million pieces)

World India India’s share

Cattle Hides 274 23 8.0

Buffalo hides 36 28 78.0

Goat skins 347 82 24.0

Sheep skins 460 30 7.0

Source : Report of All India Survey – Ministry of Commerce, Government of India 2007.

The above data clearly show that India commands sizeable global

share in buffalo hides and goat skins. In terms of area, India produces 2

billion sq.ft. of leather which roughly accounts for about 10% of global

production.

About 60% of hides and 90% of the skins are obtained from

slaughter. It is well known that in India, cattle and buffaloes are reared

for milk and draught, and they end up being slaughtered when they

become unproductive. On the other hand, goats and sheep are basically

reared for meat.

76 
 
 T4.Availability of Hides and Skins in India (2010)

Slaughtered Net Availability

Category Fallen (%)
(%) (in million pieces)

Cattle Hides 25 50-60 40-50

Buffalo Hides 21 60-70 30-40

Goat Skins 101 90 10

Sheep Skins 34 90 10

Source : Report of All India Survey – Ministry of Commerce, Government of India 2007

Recovery of fallen hides in India is confronted with a number of socio-

economic issues. This is resulting in significant non-recovery of hides.

T5.Recovery of Hides and Skins in India (2010)

(in million pcs)

Category Recovery Non-Recovery Total

Cattle Hides 25.0 5.3 30.3

Buffalo Hides 21.1 2.1 23.2

Goat Skins 100.8 5.4 106.2

Sheep Skins 34.3 3.4 37.7

Source : Report of All India Survey – Ministry of Commerce, Government of India 2007

77 
 
 In other words, they are being wasted due to non-availability of

traditional flayers as well as the local practice of burying the dead

animals in certain parts of the country. However, in the case of skins, the

wastage is confined to lambs/kids due to uneconomical reasons.

The system of collecting hidesand skins in India is quite unlike

practices followed in the industrialized countries of the world. A Report

of the Council for LeatherResearch in India (CLRI) (which was based on

the ‘All India Surveyof Hides and Skins’ conducted in1987) stated that,

annually, about 9 million hides and an equal number of skins were lost

due to no recoveryfrom carcasses in far flung villages. Fortunately, of

late, this figure has dropped sharply. Awell-established network of

butchers, animal breeders, small and bigtraders, agents, weekly

marketsand major markets exists across the country.

Tamil Nadu accounts for more than 60 per cent of the tanning

done in the country, with tanners from the state sourcing the bulkof their

raw material from other states. They have agents in different parts of the

country and the major markets for hides and skins are Vijayanagaram

(Andhra Pradesh),Guwahati (Assam), Darbhanga(Bihar), Jabalpore

(Chattisgarh), Ahmedabad, Junegadh, Rajkot and Bahraich (Gujarat),

Srinagar and Jammu (Jammu and Kashmir), Trivandrum, Thrissur,

78 
 
Cochin and Calicut, Ernakulam (Kerala), Bhopal, Indore and Gwalior

(Madhya Pradesh), Mumbai and Sholapur (Maharashtra), Jaipur

(Rajasthan), Trichy, Pollachi, Erode and Chennai (Tamil Nadu), Kanpur

and Hapur (Uttar Pradesh), Kolkata (WestBengal) and Delhi.

Large traders in major markets have their agents in small

feedertowns and villages. They receive hides and skins from villages

either through their sub-agents or directly from butchers. Often villagers

transport the hides and skins directly to weekly markets from where

agents of large traders procure them. A system of advance payment to

butchers also prevails. Generally, it takes 7 to 21 days for hides to reach

the tannery after the animal has been skinned.

The Leather industry is bestowed with an affluence of raw

materials as India is endowed with 21% of world cattle & buffalo and

11% of world goat & sheep population. This also means that we should

put in place effective mechanism for back end operations. During

interactions with the CLRI, some of the concerns noted are Inadequate

animal husbandry measures which has a direct bearing on the animal

health, Inadequate collection of raw hides and skins & also decentralized

system of collection, Delayed preservation and eventual deterioration of

quality of raw hides and skins, inefficient and not-so-eco friendly

79 
 
preservation system etc. Roughly about 20% of the raw hides and skins

are left uncollected, which is a national loss. Apart from inadequate

ecollection of raw materials, poor animal rearing practices and

unorganized system of raw hide collection leads to deterioration of

quality of raw hides and skins. These aret he areas which need to be

looked after by the CLRI for the development of leather industry. The

industry would urge the CLRI to discuss these concerns and suggest

possible solutions to the relevant Ministry in the Government of India for

drawing up of action plan in this macro level subject.

2.4.4. Tanneries

Tanneries are spread all over the country. According to a CLRI

report, there are 2091 tanneries functioning across the country. This

number does not include the unregistered cottage-scale tanneries. Of late,

tanning activities in the states of Maharashtra (particularly Mumbai),

Karnataka (mainly Bengaluru) and Rajasthan have reduced considerably

due to economic and environmental reasons.

As the manufacture of semi-processed leather or chrome tanning

was reserved for the small-scale sector until recently, there is a

preponderance of small-tanneries across the country.

80 
 
 Limited resources, small scale of operations, lack of technical

expertise and a hand-to-mouth situation prevent a majority of small-scale

tanneries from opting for modernisation or improved process

technologies.

Raw material quality is a prime concern of tanners the world over.

The tanning industry and the downstream industries which it supplies -

footwear, furniture, automotive, clothing, leather goods, saddlery - are

entirely dependent for their raw material on supplies of cattle hides and

sheep skins, plus a small number of goat and other skins. While supplies

and quality of hides and skins are vital to the tanning industry, they are

just by-products for the meat, dairy or wool industries.

For the tanner, the raw hides and skins represent 50-60% of the

cost of producing a piece of leather.In order for many companies in the

leather industry to be competitive, they specialize in producing particular

types of leather - for example high quality and high performance

leathers. However the potential benefits can only be fully realized when

the hides and skins available to the industry reach a consistent quality,

allowing tanners to buy with confidence that the material will be suitable

for the manufacture of leather to meet their target markets.The quality of

leather that the tanner can produce is determined primarily by the quality

81 
 
of the raw hides that he buys. But the quality of the hides can not be fully

assessed until after the hair or wool has been removed, and after the

completion of the tanning process when the hide has been turned into

leather. The value of the hide depends on the end use to which the

leather goes. This eventually has to be reflected in what the tanner pays

for his raw material.The quality of the hide or skin is to a large extent

related to the amount of damage to the grain (or “outside”) surface25 . The

damage may be due to skin parasites that affect the live animal, related

scratch, husbandry practices on the farm or in transport of the live animal

(scratches, bruising, or dirt contamination); it may be due to damage

during slaughter or removal of the hide; or it may because by

inappropriate handling or inadequate preservation techniques. Most

types of damage can be reduced or avoided altogether by better

management of the animal or the hide.

The International Hide and Allied Trades Improvement Society is

the international organization that specializes in the improvement of

hides and skin quality. As part of a project funded by the European

Commission, a network was developed of researchers into improvement

in the quality of hides and skins under the FAIR project. Areas identified

for further research and development are a need for further investigation

82 
 
into the operating methods of delivering c lean animals to the abattoir

without damaging the hide or skin.

Optimum methods of minimizing parasite damage to hides and

skins, practical and economic methods of identifying hides and skins

through the chain from farmer to tanner where quality canbe fully

assessed, and development and evaluation of quality improvement

systems, in order to provide some incentive to farmers and/or abattoirs to

reflect much more directly the quality and value of the hide in the price.

Although leather is often thought of as biodegradable and

therefore eco-friendly, the tanning process is often quite toxic. Leather is

treated in a number of ways to prevent it breaking down as it would is

left as skin, and extremely harsh and very toxic chemicals are used

during the treatment. These include cyanide and arsenic, and several

other chemicals that are very poisonous if brought in contact with people

or make their way into the water supply. Some are carcinogenic. The

waste products like hair, slurry, lime and salt all need to go somewhere,

and there have been problems safely disposing of it. In the US there was

a study on increased child leukaemia near a site where tannery waste had

been dumped, which concluded there was a “significantly elevated

incidence of childhood leukaemia” amongst those living nearby. Many

83 
 
tanneries have now moved to developing countries where wage costs are

cheaper and environmental regulations are less stringent.

There has been a major change in the complexion of tanning

industry during the last few decades. The organized tanning sector has

gained s ignificance in the industrial process and grown in Tamil Nadu,

West Bengal and Uttar Pradesh. With the power of technology and

resources, the organized sector is able to mobilize the raw hides from the

entire country. However the industry is established in a few pockets in

the states of Tamil Nadu and West Bengal due to the presence of tanning

operations from the British period and proximity to the port. The process

of transformation has been faster since 1973 and tanning industry has

grown in clusters of Tamil Nadu, West Bengal, Uttar Pradesh and

Punjab26 .

84 
 
 T6.State-wise Distribution of Tanne ries in the Country

State No. of Tanneries Percentage

Tamil Nadu 934 44.60

West Bengal 538 25.70

Punjab 79 3.80

Uttar Pradesh 378 18.00

Andhra Pradesh 24 1.15

Maharashtra 33 1.60

Karnataka 16 0.80

Bihar 17 0.80

Haryana 18 0.80

Other States 54 2.75

Total 2091 100.00

Source: Central Pollution Control Board (CPCB) 2010

85 
 
 Out of the total number of tanneries in India, about 45% are in

Tamil Nadu alone. Tamil Nadu, West Bengal and Uttar Pradesh account

for 88.50% of the total tanneries in the country. The states of Tamil

Nadu, Uttar Pradesh and Maharashtra contribute to 85% of the total

production each with a share of 37.44%, 21.74% and 14.96%

respectively.

Most tanneries in India use old and inefficient technologies and

production methods. Even in large tanneries the general level of

technology is low. The use of inefficient technology is largely

responsible for the wasteful use of water and chemicals, high load of

effluent pollutants and low productivity of the tanning industry. A study

of India’s tanning industry, carried out on behalf of India’s Ministry of

Science and Technology, brings out these facts clearly. According to this

study:

1. The raw hides and skins are salt preserved in India. This causes a

serious problem of excess of salt in tannery effluent.

2. The yield of leather from wet salted stock is lower in India than

international norms. This is partly due to higher level of process

waste.

86 
 
 3. The chemical consumption in Indian tanneries is about 25 to 30%

higher than international norms. This is due to the use of

inefficient equipment and processes and the absence of recycling.

4. The specific water consumption in Indian tanneries is more than

double that of tanneries in developed countries.The tanning units

in India consume an average of 40 ltr/sqft of finished leather.

Compared to this, the tanneries in developed countries consume

about 12-15 litres/sq ft.

5. A majority of the tanneries in India are very old and their layout is

not efficient. This leads to bottlenecks for process and material

handling, multidirectional material flow and excessive material

handling. Most of these tanneries also have very unhygienic

working conditions, inadequate ventilation and lighting.

2.4.5. Production and Trading of Leather Products

The leather and leather products industry is one of India’s oldest

manufacturing industries. The industry employs about 2.5 million people

with a large number of them belonging to poor and marginalized sections

of society. The highest number of peopleis employed in the most basic

activity of this sector which is flaying, curing and carcass recovery

87 
 
followed by Chappal and sandals making. The leather industry also

provides employment to a large number of women. More than 80%

workers employed in the leather goods and garments and shoes uppers

segments are women. Women are also employed in small jobs done on

scrap leather. Moreove, nearly 70% of the leather sector is comprised of

small-scale firms, although there also exists a significant number of

medium and large-sized firms in all segments of the industry. The

footwear and saddlery and harness segments have the highest shares of

the household, tiny and cottage sector. In the tanneries segment, the

presence of the medium and large-scale sector is the strongest with a

share of 55%. The presence of small- scale units is the highest at 95% in

garments, followed by leather goods, saddlery and harness.The major

production centres of leather and leather products are located mainly in

the eight states of India namely Tamil Nadu (Chennai, Ambur, Ranipet,

Vaniyambadi, Trichy and Dindigul), West Bengal (Kolkata), Uttar

Pradesh (Kanpur and Agra), Punjab (Jalandhar), Delhi, Andhra Pradesh

(Hyderabad), Karnataka (Bangalore) and Maharashtra (Mumbai). Tamil

Nadu, by the number of production centres located, is the biggest leather

exporter of the country.

88 
 
 Leather is one of the world’s mostly traded commodities. On

average, global leather trade is estimated to be around $60 billion for a

year, and is predicted by the industry analysts to grow further. Global

leather industry is estimated to be around $85 billion USD. Developed

countries such as US are the major consumers of leather items, while

developing countries constitute a major share of manufacturing leather

products.

China and Italy are the leading manufacturers and exporters of

leather products in the world, with India occupying the third position. In

India, leather industry is in a predominant position with substantial

export revenue generation, and thereby providing economical growth.

The most premium leather products in the world are being made in India,

and are much sought after in the global market.

Indian leather industry is one among the top 8 industries for export

revenue generation in India, holding 10% of the global raw material, and

2% of the global trade. India enjoys competitive benefits such as

availability of abundant raw material, cheap and skilled labor, supporting

institutions for industrial developments, and supportive domestic market.

A recent survey states that, India has the largest livestock in the world.

The country possesses the largest population of buffaloes, goat, and

89 
 
sheep. India also has the world’s largest technically trained manpower in

leather craft, which enables it to surpass its competitors in the global

market.

India is the biggest livestock producer in the world, with the

capacity of 1.8 billion square feet of leather production annually. 13% of

the global footwear production comprising of 16 billion pairs are made

in India. India is the world’s second largest footwear manufacturer,

making 2065 million pairs of various footwear categories. It exports 115

million pairs, thus having 95% of its production to meet its own

domestic demand. Leather shoes and uppers are made in the large scale

units, while chappals and sandals are made in the cottage sector. US,

Germany, Italy, and UK are the major markets for Indian footwear.

Many established brands in EU, and US are being exported by Indian

manufacturers.

Apart from footwear, other items such as garments, hand bags,

bags, gloves, wallets, briefcases, upholstery, saddler items, belts, and

folios are also made in India, and are being exported; worldwide. The

products made, meet the standards and requirements of bulk buyers from

Australia, EU, and US.

90 
 
 Indian leather items offer good market potential for entrepreneurs

to foray into the German, EU and other worldwide markets. India is an

attractive destination for technology and investments relevant for the

footwear sector and is posed for growth and diversification.

India hosts innumerable number of small and medium traders

operating in a totally unorganized fashion of these only 30-35 traders are

registered. Due to non-standardisation of material and labourcost, the

price of the manufactured leather goods varies substantially. This

coupled with tax evasion by non-registered traders further widens the

price disparity.Some of the traders are in an advantageous position as

they have their own manufacturing units which gives them cost benefit.

A meagre number of traders (3) are in the business of direct export, a

few others export through export houses/agents. The unorganized nature

of the market leaves a lot of scope for manipulation by a few ‘biggies’ in

the business.

2.5. Indian leather industry- Investment & Sales

The details about the investment in leather industry and the sales

are given below:

91 
 
 T7.Investment details of Indian leather industry
Average

No. of Investment per unit Total Cost(in

Sector
Units *(in Rs. Crores) Rs. Crores)

Tanning

SSI 1077 2.25 2423.25

Large / medium 80 5.00 400.00

Sub – Total (I) 2823.25

Foot Wear

SSI 550 0.80 440.00

Large / medium 50 3.78 189.00

Sub – Total (II) 629.00

Leather goods

SSI 390 0.50 195.00

Large / medium 10 1.68 16.80

Sub – Total (III) 211.80

Leather Garments

SSI 390 1.00 390.00

Large / medium 10 4.00 40.00

Sub – Total (IV) 430.00

92 
 
 Total
4094.05
(I+II+III+IV)

Unorganised sector (@30% of total amount) 1228.21

Total Amount 5322.26

Source : Facts for you Volume I, 2009.

The ratio of investment: sales value is 1: 2.25, which is very low

when compared to other industries. This is mainly due to low capacity

utilization of the units.The capacity utilisation of units in respect of hides

converting raw into unfinished leathers is estimated at 49%, raw to

finished 60% and unfinished to finished 70%.

In the case of skin based tanneries, the respective percentages are

64, 67 and 70. The main reasons reported for under utilisation of

capacity are raw material shortage, high price of raw materials, and lack

of modernisation, financial constraints, power constraints and stringent

environmental regulations.

2.6 Curre nt statusof leather industry

The leather industry in India is geographically well diversified,

though Tamil Nadu, Uttar Pradesh and West Bengal account for bulk of

the output. The major production centres for leather and leather products

93 
 
are located at Chennai, Ambur, Ranipet, Vaniyambadi, Trichi, Dindigul

in Tamil Nadu, Calcutta in West Bengal, Kanpur, Agra and Noida in

Uttar Pradesh, Jalandhar in Punjab, Bahadurgarh and Manesar in

Haryana, Bangalore in Karnataka, Delhi and Hyderabad in Andhra

Pradesh. The sector is dominated by micro and small units with bigger

units accounting for just around 5 per cent of the total manufacturing

units. The distribution of the units in this sector in terms of the broad

classification of MSME and others is indicated below:

T8.Structure of Leather Industry (in numbers)

Large Medium Small Micro Merchant
Total
Units Units Units Units Units

Finished 30 49 309 68 151 607

leather

Leather 38 46 228 49 81 442

Footwear

Non
Leather 4 2 34 13 17 70
Footwear
Footwear 29 32 182 28 22 293
Component
Leather 14 13 242 259 210 738
Goods

Leather 8 8 132 49 72 269

Garments8

94 
 
 Leather 4 3 38 36 24 105
Gloves
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.

NOTE: Multiple units of a single company are counted as one. But

if they produce different products, they figure in each of the production

categories. The leather industry is spread in different segments, namely,

tanning and finishing, footwear and footwear components, leather

garments, leather goods including saddlery and harness, etc. The

estimated production capacity in different segments is as under:

95 
 
 T9. Estimated Production Capacity

Product 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: MOCI/DIPP/Working Group Report/12th Five Year Plan /Leather Industry.

2.6.1. Production, Export and Employment

Production data for leather sector, as for the other industries, are

available in the National Accounts statistics (NAS). NAS provides data

for both the organized factory sector (defined in terms of employment

and covering all units employing 10 or more workers) and the

96 
 
unorganized sector (defined as units employing less than 10 workers). As

per the NAS, total output of the leather sector increased from Rs 27,233

crore in 2004‐05 to Rs 47,940 crore in 2009‐10 at an average annual rate

of 11.8 per cent. The growth in the organized sector at 16.9 per cent was

significantly higher than the unorganized sector, which recorded a

growth of 6.9 per cent during this period. The share of the organized

sector, therefore, witnessed a sharp improvement. Exports had a slower

growth compared to total output resulting in some moderation in the

share of exports.

97 
 
 T10: Production and Export of Leather and Leather

Products

Exports
Share of
Total Exports
theOrganize d
Organized Unorganize d as% to
Se ctor
production

2004‐2005 12401 14972 27373 45.3 10881 39.7

2005‐2006 15406 15530 30936 49.8 11943 38.6

2006‐2007 17482 17263 34745 50.3 13650 39.3

2007‐2008 24392 19861 44253 55.1 14101 31.9

2008‐2009 24828 19228 44056 56.4 16355 37.1

2009‐2010 27017 20923 47940 56.4 15946 33.3

Source: National Account Statistics, 2011

The Gross Domestic Product, in terms of expenditure, provides

the data for the expenditure incurred by households on purchase of a

variety of products. Footwear is one of items covered under the NAS

consumption basket. The expenditure on footwear increased from Rs

4,270 crore in 1989‐90 to Rs 42,509 crore in 2009‐10 at an average

annual trend rate of 10.6 per cent. The elasticity of demand for footwear

98 
 
is less than 1 indicating that growth in consumption has remained lower

than GDP growth4 . The share of footwear in total Private Final

Consumption Expenditure (PFCE), however, continued to fluctuate and

averaged 1.18 per cent (the share had peaked to 1.7 per cent in 1990‐91).

Since the PFCE does not include the consumption expenditure of the

public sector (and this may not be insignificant given the purchases by

the defence) and since the expenditure pertains only to footwear, the

PFCE in itself is an underestimation of leather goods production for

domestic use. The PFCE data with some mark up to cover the

nonfootwear sector and public procurement could be used to build up the

market size of the leather industry. Industry estimated unorganized to be

bigger in size than the organized sector and should be accounting for

nearly 60 per cent of output.The growth of total private final

consumption expenditure during 1990‐2010 was 11.8 per cent. The

elasticity of footwear consumption with respect to total private final

consumption was 0.90.

Production estimates built on the NAS consumption data have

assumed that leather footwear would account for nearly 80 per cent of

total footwear consumption and share of leather.

99 
 
 T11: Domestic production and exports of leather products

Sha
re ExportsS
PF ofF Share
Marchen Producti Expo hare GlobalIm ExportsFrom
CE W inexpo
ding on rts inproduct ports India
FW in rts
ion
PF
CE

Per
(Rs in crore) Per cent US $
cent

159
2000 26257 6891 1.21 26.2 54512 1590 2.92
77

175
2001 30046 8883 1.24 29.6 59170 1944 3.29
49

174
2002 30279 9110 1.14 30.1 62470 1910 3.06
65

154
2003 27697 8945 0.95 32.3 63545 1848 2.91
71

168
2004 30305 9939 0.95 32.8 68570 2163 3.15
01

193
2005 34338 10881 1.00 31.7 97461 2495 2.56
52

240
2006 41089 11943 1.11 29.1 109127 2752 2.52
45

272
2007 46681 13650 1.10 29.2 118824 3059 2.57
50

100 
 
 378
2008 59968 14101 1.33 23.5 131513 3549 2.70
40

391
2009 63755 16355 1.20 25.7 139158 3599 2.59
05

425
2010 67472 15946 1.12 23.6 115589 3401 2.94
09

505
2011$ 79551 18338 1.12 23.1 127841 3877 3.03
01

Source: MOCI/DIPP/Working Group Report/12th Five Year Plan /Leather Industry.

Footwear in consumption of total leather goods would be around

66 per cent. Exports areaddedto the domestic consumption of leather so

arrived to get the overall leather goods production5 .

While it was expected that with the ban on exports of

semi‐finished leather in 1990‐91, and a structural shift in favour of the

organized sector, the leather industry would move up in the value

addition ladder. The organized factory sector data, however, reveal that

resource intensity in the organized leather manufacturing has actually

increased. The ratio of value added to output declined from 22.8 per cent

in 1993‐94 to 13.6 per cent in 2007‐086. The valueof inputs consumed in

the production process increased to close to 84 per cent in 2007‐08.

Theshare of value added in output in leather sector was also lower than

the share in the overall organized manufacturing. Four factors, lack

101 
 
indigenous development and acquisition of technology, adoption of the

acquired technology through research, brand building and inadequate

emphasis on human resource (skill) development may have contributed

to this stable (increased) material resource intensity in leather

manufacturing. Resource intensity of leather industry was also observed

by the ICRA study which based on Capitaline data observed that in

footwear sector raw material accounted for 65 per cent of the cost

followed by selling and administrative expenses (14 per cent) and

expenditure on employees (7 per cent).

Leather industry estimates the leather sector to be around US$

175‐200 billion. Production as per NAS is less than half of the industry

estimates. The alternate approach puts leather sector output at US$ 140

billion.A decline in the share of value added to output becomes apparent

from 1999‐2000 onwards. The decline in share of value added was

largely on account of a decline in the share of profits.

Contrary to the general perception, the overall employment in the

leather sector seems to have declined in the last five years. The NSSO

61st and 66th Rounds indicate that overall employment in manufacturing

and leather sector (covering both the organized and unorganized sector)

has declined not only in absolute terms but also relative to total

102 
 
employment. In 2009‐10, the leather sector (manufacturing segment)

employed 2.2 per cent of total persons (usual principal and subsidiary

status basis) engaged in manufacturing. The employment in organized

leather sector, however, witnessed an increase. But the organized sector

employed only about 20 per cent of the persons engaged in the entire

sector.

103 
 
 T12. Employment in Manufacturing and leather sector
(persons in millions)
Share of the
Total Total
Employment Leather Leather
Manufacturing Employment
sector

2004-05 1.4 53.6 457.9 2.6

209-10 1.1 50.5 459.0 2.2

Source: MOCI/DIPP/Working Group Report/12th Five Year Plan /Leather Industry.

Overall share of value added in output for the ASI sector also

witnessed a decline, from 24.9 per cent in 1996‐97to 18.7 per cent in

2008‐09.

Direct employment in leather sector is expected to be over 2

million persons 10. The share of total persons engaged in leather sector

in organized manufacturing, however, increased from 1.3 per cent in

1990‐91 to 2.1 per cent in 2007‐08, though its share in output declined

from over 1 per cent to 0.86 per cent during this period.

Leather industry is amongst the top ten foreign exchange earners

for the country. Indian Leather Sector has registered consistent growth in

exports during the six year period from 2003‐04 to 2008‐09 with exports

increasing from US$ 2.22 billion in 2003‐04 to US$ 3.60 billion in

2008‐09. The Leather sector has shown positive export performance

104 
 
even during 2007‐08 when the Indian Rupee appreciated significantly.

The sector surpassed the set export targets in the five year period from

2003‐04 to 2007‐08. However, during 2009‐10 the exports from Leather

Sector have declined by 5.51 per cent in Dollar Terms due to continued

impact of global financial crisis. Growth in export segment is returning

in 2010‐11 and 2011‐12.

T13. Commodity composition of exports (US $ Million)

% Apr‐ Jan Apr‐ Jan

Product 2005‐ 06 2006 ‐ 07 2007 ‐ 08 2008 ‐ 09 2009-10
Share 2009‐ 10 2010‐ 11

FinishedLe 636.3 724.0 807.2 673.4 625.5 18.4 506.5 669.5

ather

Footwear 1045.2 1236.9 1489.4 1534.3 1507.5 44.3 1018.5 1159.1

LeatherGa
333.3 309.9 345.3 426.2 428.5 12.6 372.2 330.5
rments

Leather
660.2 706.3 800.5 873.4 756.0 22.2 616.7 657.0
Goods

Saddlery&
77.5 82.3 106.2 92.2 83.4 2.5 67.5 69.1
Harness

Total 2752.5 3059.4 3548.5 3599.5 3401.0 100 2581.3 2885.2

% Growth 10.30% 11.15% 15.99% 1.44% -.51% 11.77%

Source: MOCI/DIPP/Working Group Report/12th Five Year Plan /Leather Industry.

2.6.2. Total factor productivity growth

Notwithstanding a declining share in gross value added (or

increased material intensity of the sector) and near stagnant (or even a

moderately declining) employment, the sector achieved a better growth

in total factor productivity. The trend growth of Total Factor

105 
 
Productivity in the organized leather sector increased from 0.78 per cent

per annum during 1980‐81 to 1990‐91 (pre reform period) to 1.18 per

cent during 1992‐92 to 2003‐04 (post reform period). A higher growth in

TFP in post reform period relative to the overall manufacturing indicates

the responsiveness of this sector to factor market reforms undertaken

during the 1990s. The trend total factor productivity growth in the

leather sector during 1980‐81 to 2003‐04 at 1.17 per cent per annum was

significantly higher than the total factor productivity growth of 0.92 per

cent per annum in the total manufacturing sector.

106 
 
 T14. Total factor productivity growth (per cent per annum)

Overall
Period Leather Sector
Manufacturing

1981‐1985 5.85 4.32

1985‐1990 -0.83 1.19

1990‐1995 1.57 0.27

1995‐2000 0.48 0.24

2000‐2004 2.94 2.21

Average annual TFPG 1.79 1.5

Trend TFPG 1.17 0.92

Source: MOCI/DIPP/Working Group Report/12th Five Year Plan /Leather Industry.

The labour productivity comparison for the organized and

unorganized sector in the leathersector relative to overall manufacturing

indicates that, while in the organized manufacturing sector the leather

sector recorded a low productivity growth, in the unorganized sector the

increase in productivity was substantially higher than over the

unorganized manufacturing. While the organized leather sector became

more resource and capital intensive and generated higher total factor

productivity growth, the unorganized sector successfully improved the

productivity of labour. Increase in labour productivity in the unorganized

107 
 
sector, with a significant proportion of self‐employed persons, indicate

that the policy interventions raised the income in leather sector at a rate

higher than in other sectors.

T15.Labour productivity in leather and overall

manufacturing (Rs at 1981‐82 prices)

1989‐90 1994‐95 2000‐2001 1989‐90 1994‐95 2000‐2001

Organized sector Unorganize d sector

Leather 117840 162685 208403 9953 19850 27800

Manufacturing

Overall 168007 208557 336726 12452 14949 22794

Manufacturing

Ratio of leather
sector’slabour 70.1 78.0 61.9 79.9 132.8 122.0
productivity

ROG Leather 6.7 4.2 14.8 5.8

ROG 4.4 8.3 3.7 7.3

Manufacturing

Source: MOCI/DIPP/Working Group Report/12th Five Year Plan /Leather Industry.

Success of policy interventions are corroborated by other results

as well. Development Research Group Study commissioned by the

Reserve Bank of India observed that while policy environment per se did

not emerge as an enabling factor leading to a shift to a higher growth

path for the organized manufacturing sector, the leather sector was one

of the exceptions. The co‐efficient of policy dummy for the leather

108 
 
sector was not only positive but statistically significant. An ICRA study

done for the National Manufacturing Competitiveness Council (NMCC)

has also observed an improvement in manufacturing competitiveness

index forthe leather sector by around 27 per cent in 2007 compared to

the base year of 2004.

109 
 
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