About 18,000 people working in the leather industry were made redundant in 2014-15 due to lower global demand from Europe and currencies of competing countries depreciating more than the rupee.
The leather industry, which employs about 2.4 million people, had revenues of Rs 81,774 crore in 2014-15, with the domestic industry accounting for Rs 39,251 crore. Leather exports went up to Rs 42,523 crore in 2014-15 from Rs 38,794 crore in the previous financial year, but the industry was employing 18,000 fewer people over the previous year.
Industry sources say the job situation for leather manufacturers catering to the domestic industry is more or less static, job creation in the exports segment is an issue.
In the first half of this financial year, exports have declined due to lower demand from traditional markets, especially Europe. The Indian leather industry is also not able to match the prices of competing nations, where the currency has depreciated by over 25 per cent, which makes their products cheaper by around 10 per cent compared to Indian exports.
“We would have lost $300 million worth of orders during the first six months. Small and medium enterprises (SMEs) have mainly faced the heat,” said M Rafeeque Ahmed, chairman, Council for Leather Exports (CLE) and president, All India Skin and Hide Tanners and Merchants Association.
Ahmed believes another 10,000 to 15,000 people would have lost their jobs in 2015-16 so far, and if things continue this way, more jobs will be gone.
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Industry representatives also say that it is difficult for a leather exporter to start catering to the domestic market as there are differences between the two businesses in terms of quality, product design and pricing.
In 2013-14, the leather industry was able to add 39,000 jobs.
Industry representatives say that while the government said it was committed to creating jobs, the Centre was not taking enough steps to protect existing jobs. A large leather exporter said on condition of anonymity, “The Centre or the ministry is not doing anything proactively for the industry to address the problem.” He noted that the industry had been asking for interest subvention of around three per cent for a long time, which would bring down the cost of the end-product by six to seven per cent.
A little help from state governments in the form of subsidies would help the industry a lot, said industry sources. “Our machinery is expensive and interest rates are high. With salary levels being so high, we are too dependent on bank finance,” said S Srinivasan, an SME exporter of shoes near Chennai.
Srinivasan added that India’s leather exporters scored where others did not — quality and reliability of delivery. Earlier, it used to be competitive price. “It is not that we don’t have enquiries, but we are not able to convert them into orders as I am not able to match the price of my counterpart in Brazil, Turkey or Bangladesh,” he added. Srinivasan reduced his workforce to six now from 18 a year ago. Ahmed added, “Fluctuations in the Chinese market are adding to our anxiety and the next few months will be crucial.”
The problem does not stop here. Besides the currency factor and unfriendly policies, the industry is also facing pollution-related issues in Tamil Nadu, and the Maharashtra government’s decision to ban bull slaughter will also impact the availability of raw materials.
On the raw material front, imports of semi-processed hides from countries in Africa would cost around Rs 250 per sq ft as against Rs 100 to 120 locally.
Industry representatives have said that the domestic industry is facing competition from cheap imports and synthetics. In the last six months, the domestic market also reported a five per cent drop due to price and competition.
While Tamil Nadu accounts for 40 per cent of the country’s leather production, Maharashtra is at 15 per cent, much of it in small and medium units. Kolkata, Kanpur, Jalandhar, Bengaluru, Delhi and Hyderabad are the other important places involved in leather manufacturing and exports. These clusters account for around 90 per cent of the country’s leather products.