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Shakshi Garg Arushi Bansal Manisha Devi Kshamta Sharma

India is a traditional leather exporting country. Status changed from a country exporting finished Leather to finished products. India is a 8th Largest earner of foreign exchange for the country.

Government of India shall make concerted efforts to promote exports in these sectors by specific sectoral strategies that shall be notified from time to time. Exports during 2005-06 were close to 3 Billion. Employs 2.5 million people mostly women has huge social impact. There are more than 2300 member exporters in the Country, situated in clusters in Chennai, Kanpur, Kolkata, Agra, Noida and Mumbai. 90% of raw materials for the tanneries are from within the country and only 10% are imported.

The export of Leather and Leather Products for the period April-March 2007-08 touched US$3477.52 million against the performance of US$3059.43 million in the corresponding period of last year, registering a positive growth of 13.67% in Dollar Terms Nearly 75% of Indias Export of Footwear is to the European Countries and the USA MNC Brands sourced from India are Acme, Clarks, ColeHann, Deichmann, Ecco, Elefanten, Florsheim, Gabor, Hasley, Hush Puppies, Double H, Justin etc.

The Footwear Sector is now de-licensed and dereserved, paving the way for expansion of capacities on modern lines with state-of-the-art machinery. To further assist this process, the Government has permitted 100% Foreign Direct Investment through the automatic route for the Footwear Sector. The Indian Footwear Industry provides employment opportunities to a total of 1.1 million people

The Footwear Sector is now de-licensed and dereserved, paving the way for expansion of capacities on modern lines with state-of-the-art machinery. To further assist this process, the Government has permitted 100% Foreign Direct Investment through the automatic route for the Footwear Sector. The Indian Footwear Industry provides employment opportunities to a total of 1.1 million people

(a) Duty free import entitlement of specified items is 3% of FOB value of exports of leather garments during preceding financial year. (b) Duty free entitlement for import of trimmings, embellishments and footwear components for footwear (leather as well as synthetic), gloves, travel bags and handbags is 3 % of FOB value of exports of previous financial year. Such entitlement shall also cover packing material, such as printed and nonprinted shoeboxes, small cartons made of wood, tin or plastic materials for packing footwear. (c) Machinery and equipment for Effluent Treatment

(d)Re-export of unsuitable imported materials such 12 as raw hides & skins and wet blue leathers is permitted. (e) Countervailing Duty (CVD) is exempted on lining and interlining material. (f) CVD is exempted on raw, tanned and dressed fur skins falling under Chapter 43 of Indian Trade Classification (Harmonised System) Classification for Export & Import Items [ITC (HS)]. (g) Re-export of unsold hides, skins and semi finished leather shall be allowed from Public Bonded warehouse at 50% of the applicable export duty.

Hides, Skins and semi finished leather may be imported in the Public Bonded warehouse for the purpose of Domestic Tariff Area (DTA) sale and the unsold items thereof can be reexported from such bonded warehouses at 50% of the applicable export duty. However, this facility shall not be allowed for import under Private Bonded warehouse. Leather Sector (excluding finished leather) is eligible for Status Holders Incentive Scrip

Duty Credit Scrip benefit under Focus Product Scheme (FPS) notified under Chapter 3 of the Foreign Trade Policy has been enhanced from 2% to 4% for leather products and footwear Leather sector shall be allowed re-export of unsold imported raw hides and skins and semi-finished leather from Public bonded warehouses, without payment of any export duty. This will facilitate the logistics for establishment of such warehouses and easy access to raw material for the leather sector. Finished Leather export shall be entitled for Duty Credit Scrip @ 2% under Focus Product Scheme (FPS). Agra has been notified as a Town of Export Excellence for Leather Products Zero duty EPCG scheme, introduced in August 2009 and valid for only two years upto 31.3.2011, has been extended by one more year till 31.3.2012. The Leather Sector is one of the sectors eligible for availing this scheme. The Status Holders Incentive Scrip Scheme (SHIS) was announced in the Foreign Trade Policy 2009-14 Exporters shall now have the flexibility to get a high value EPCG authorisation by filing their EPCG application on Annual basis, without the need to file the application for individual capital goods from time to time. It will reduce transaction time and cost.

India has the world's largest source of leather-its livestock population. With the present availability of 33.2 million raw hides and 69.9 million raw skins per annum, India is well placed to satisfy a significant part of the world's requirement of leather footwear and leather goods. The share of finished leather in the total exports has gone up from about 19 per cent during 1974-75 to about 57 per cent during 1979-80. An appropriate policy would be evolved and expeditiously implemented to increase on a sustained basis the export of leather footwear and leather goods, along with the generation of increased employment. In this effort, the various State leather Development Corporations and the Bharat Leather Corporation would play a significant role.

The leather industry in India, being a traditional industry, is highly employment oriented. There is need for technological improvement in the methods of tanning and finishing of leather with a view to upgrading the quality and output, and realizing optimum value in the export markets. Pollution has been another major problem of the industry and needs to be controlled by lesser use of water pollutants, toxicants, economic treatment methods, fuller utilization of materials, recycling and better utilization of solid and liquid wastes.

The industry has a great export potential. The exports of leather and leather goods in 1984-85 were of the order of Rs. 584 crores. The share of semi-finished leather in total exports has come down from 82 per cent to 12 per cent in 1983-84, with a corresponding increase in the exports of finished leather and leather goods. It should be possible to achieve the target of Rs. 1000 crores by 1989-90 with the use of sophisticated modern machinery and increase in productivity. During the Seventh Plan, the value of exports rose from a level ofRs.584 crores to Rs.2030 crores The leather industry is reserved for the small scale sector, which along with the cottage sector accounts for over 75 per cent of the total leather goods production.

One of the problems in the leather sector has been inadequate supply of raw materials i.e. raw hides and skins. A major objective of the Ninth Plan would be modernization of leather processing industry as well as artisan sector in footwear and leather goods segments. This would include (a) costreduction through higher productivity, (b) putting in place cleaner production systems, and (c) focusing on global market leadership in selected vital sectors through improvement of quality and consistency of products. The Inter-Ministerial Group constituted to evolve a comprehensive strategy for the development of the leather sector has assessed that India has the potential to expand exports from the level of US $ 2.7 billion in 200506 to US $ 7 billion in 2011 12.

The

indigenous raw material base of the industry is deficient. As of now about 90% (1.8 billion sq ft) of leather is produced in the country from indigenous hides and skins. 4 billion sq ft needed to meet out the future targets. Another challenge is the problem faced by the existing tanning units has the imposition of rigorous environmental requirement (Zero Liquid Discharge) by the State Pollution Control Board under the directions of the High Court.

There is acute shortage of skilled and semi-skilled workforce It is estimated that if the full potential is to be realized 0.5 million workers would need to be trained Manufacturers are unable to meet the large volume orders from the US, which accounts for a large share of world imports It is needed to scale up the production and diversify the product mix The competitiveness of Indian exporters of leather products suffers on account of bad roads, delays in Inland Container Depots This is mainly due to the fact that the channels in the ports lack the depth necessary to allow large ships to come to these ports

In order to address the above challenges the following significant interventions are proposed For augmenting the raw material base, rearing of animals would be encouraged as per the scheme for modernization of slaughter launched under PPP In order to stimulate fresh investment in leather products, it is proposed that at least 10 leather complexes would be established on the pattern of the SITP scheme of the Ministry of Textiles in the 10th five year plan

A large Human Resource Development Mission will be launched for onsite training of workers and artisans in the unorganized sector and also for entrepreneurship development. The Footwear Design and Development Institute (FDDI), will be provided with additional machinery, equipment, workshops, and laboratory facilities for running courses on design and technology with increased intake and a new branch of the FDDI will be set up In the 11th Five year Plan an allocation of Rs 1300 crore has been made for the ILDP.

105.81 45.9

766.93 784.95

finished leather
leather footwear footwear components leather garments leather goods saddlery and harness 343.99 non leather footwear

1163.82 266.11

CONCUSIONS AND RECOMMENDATIONS

Key conclusions for Indian leather and footwear sector:

Low market share, declining over a period a time Indias share of global exports was only about 2.2% for the period 2001 2005 Indias share declined from 8% in 1980s to current levels. In comparison, Chinas share increased from 0.41% in 1981 to around 35% in 2005
Low share of value-added products Indias footwear exports formed less than half (41%) of its total exports. On the contrary, finished leather which has significantly lower value addition compared to footwear constituted 29% of Indias exports. In comparison, China exported 68.2% as footwear and 2.8% as finished leather.

Export portfolio not aligned to key segments India exported about 71% as value added products namely leather footwear, leather apparel and leather goods. Footwear constituted 62% of world imports. However, Indias footwear exports as mentioned earlier formed less than half (41%) of its total exports. However, finished leather constituted 29% of Indias exports while the share of finished leather in the global imports is only 18%. In comparison, China exported as high as 97.2% as value added products. Geographic portfolio not aligned to key markets One of the largest markets for footwear USA (which accounted for 28.1% of global imports) is not among the top three destinations for Indian footwear exports. Similarly, USA forms 33.9% of global imports of leather apparel but only 16.9% of Indias portfolio. One segment where India is aligned to key customer markets is finished leather which is in the upstream side of the value chain. In comparison, the USA which is the largest importer of leather products is the top destination for China. In summary, China has a aligned itself significantly better to the global leather trade compared to India.

RECOMMENDATIONS:

Improving cost competitiveness through value chain efficiencies: Implementing best practices at a firm level and at the sect oral level through cluster based approach, setting up crossindustry clusters and support them through governmental interventions on infrastructure like port clearances and power. Promoting footwear component clusters near leather clusters: Promotion of footwear component industries near the leather and footwear clusters or incentives for building scale for the component industries would boost the leather sector. Focus on Training: Increasing the capacity of training institutes The existing capacities of the training institutes would not be sufficient to meet the employment generation projections for 2011.

Increasing the tanning capacity : Indias current capacity of tanneries is around 2 bn square feet whereas to achieve the export target of 7 bn $ in 2011, around 4 bn square feet of finished leather is required. Attracting Foreign Direct Investment: The leather and footwear sector had seen only Rs.200 Crores of FDI (Which is only 0.15% of Indias total FDI from 1991 to 2005). FDI brings in scale, efficiency in operations and latest management practices for the industry to benefit.