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41186744 study-of-indian-leather-industry-2003-version

  2. 2. INDIAN LEATHER INDUSTRY ACKNWOLEDGEMENT“FOR EVERY OPPORTUNITY MAY GOD BETHANKED” I am very thankful to our teacher Dr. Shamsher forhis great assistance to make the successfulaccomplishment of the project. Through his ableguidance and knowledge-based interactions, we havelearnt a lot.I am also thankful to my friends and colleagues for theirsupport and endurance while preparing this project.I would like to thank all the people who have directly orindirectly helped me in completing this project, as andwhen I required. 2
  3. 3. INDIAN LEATHER INDUSTRY AHSAN JAVED PREFACEThe project Indian Leather Industry has beencarried out with a view point of understanding therole of Leather Industry in the Indian Trade andIndian economy.As per the objective of the project, I have tried toexplain, analyze and interpret the role of Leathersector in Indian as well as in international trade. 3
  4. 4. INDIAN LEATHER INDUSTRY TABLE OF CONTENTSCHAPTE TOPIC PAGE R NO.  Acknowledgement 02  Preface 03  Executive Summary 08  Objectives Of The Study 101. INTRODUCTION TO LEATHER INDUSTRY:  An Overview 11  History Of Leather 12  World Scenario 14  Environmental Aspects for Leather 17 Products2. THE INDIAN LEATHER INDUSTRY:  Indian Scenario 18  Composition Of Indian Leather Exports 20  Strengths Of Indian Leather Sector 21 Export Potential:  India’s Export Of Leather And Leather 22 Products For Five Years 4
  5. 5. INDIAN LEATHER INDUSTRY  Import Scenario 25  Major Importing Countries Of Indian 26 Leather And Leather Products  Analysis Of India’s Export Potential 29  Strategies For Indian Leather Sector 32  Major Issues Affecting The Sector 35 Export Performance:  Major Highlights 37  Country-Wise Analysis 39  Trend In Major Importing Countries Of 41 Leather Products  Port-Wise Export Performance 42 44 SWOT Analysis of the Indian Leather Industry3. GOVERNMENT ROLE IN INDIAN LEATHER INDUSTRY:  Prospects For Indian Leather Exports 45  INDAIN Leather Development Program 47 (Implementation During 11th Fine Years Plan)  Supplement To Foreign Trade Policy 51 2004-2009 Announced On 26th February, 2009  Relief Measures Announced By 54 Government Of India To Exporters  Government Support – Policies 57  Leather Industry Tariffs 584. LEATHER INDUSTRY-TRADE ORGANIZATIONS: 5
  6. 6. INDIAN LEATHER INDUSTRY  Major Production Centres 60  Leather Institutes 62  Council For Leather Exports 64  Main Markets 66  International Leather Organizations 675. PROMOTION AND MARKETING OF INDIAN LEATHER INDUSTRY:  Entry Into The Market: Basic 71 Consideration  Recent Marketing Efforts To Promote 74 The Indian Leather Industry  International Leather Fairs In India - 75 2008-09  Connecting Indian Leather To The 77 World - Cle At International Fairs/BSMs  List Of Road Shows Organized / To Be 78 Organized In Overseas Countries  Role Of Exim Bank In Promoting Indian 79 Leather Sector6. EXPORT PROCEDURES AND DOCUMENTATION RELATING TO INDIAN LEATHER INDUSTRY:  Export Documents 80  Documents Related To Goods 83  Certificates Related To Shipment 85  Documentation 86  Dutiable Shipping Bills 88  Documents Related To Payment 89 6
  7. 7. INDIAN LEATHER INDUSTRY  100% E.O.U 96  Export Procedure 98  List Of Documents Required To Be 103 Submitted By The Exporter To The Various Authorities, Organization And Agents7. FINANCING:  Pre- Shipment Finance 106  Post –Shipment Finance 109  Procedure 110 8. FUTURE PROSPECTS OF INDIAN LEATHER INDUSTRY:  Leather Industry Targets $7 Billion 111 Exports By 2011  Integrated Leather Development 112  Leather Sector Impact-Interim Budget 113 2009-10  Conclusion 115  Weaknesses of Indian leather indusrty 116  Remedial measures 121  Impacts of current recession on Indian 123 leather industry 7
  8. 8. INDIAN LEATHER INDUSTRY  Leather industry glossary 126  Leather products 144  Leather Exporters in India 155  Indian Leather Manufacturers 158EXECUTIVE SUMMARYThe basic objective of undertaking this project was tostudy the role of Leather Industry in Indian economy, toexamine the export potential of leather products, toanalyze the various Documents for findings out theadequacy and precision of export facilities by financialinstitutions and the role of Indian Government in Indianleather sector.I collected the data using various primary and secondarysources. (The sources of data collection have beenmentioned at required chapters in my report). 8
  9. 9. INDIAN LEATHER INDUSTRYThe Leather Industry is a significant segment of theforeign trade in India. India ranks eighth among theleather producing countries in the world. The industry islabor intensive.The Indian leather industry is provided with institutionalinfrastructure support through premier institutions likeCouncil for Leather Exports, Central Leather ResearchInstitute (Chennai), Footwear Design & DevelopmentInstitute (Noida), National Institute of Fashion Technology(New Delhi), etc in the areas of technologicaldevelopment, design and product development andhuman resource development. The various phases of export are offer and receipt ofconfirmed orders, production and clearance of theproducts for exports, shipment, negotiation of documentand realization of export proceeds and obtaining variousexport incentives. 9
  10. 10. INDIAN LEATHER INDUSTRYOBJECTIVES OF THE STUDY 1. To study the role of Leather Industry in Indian economy. 2. To examine the export potential of leather products. 10
  11. 11. INDIAN LEATHER INDUSTRY 3. To analyze the various Documents for findings out the adequacy and precision of export facilities by financial institutions. 4. To explain the role of Indian Government in Indian Leather Sector. 5. To suggest any improvements necessary in the existing Leather Industry.CHAPTER ONEINTRODUCTION TO LEATHERINDUSTRYTHE LEATHER INDUSTRY – AN OVERVIEW: 11
  12. 12. INDIAN LEATHER INDUSTRYThe leather industry occupies a place of prominence in the Indianeconomy in view of its massive potential for employment, growthand exports. There has been an increasing emphasis on itsplanned development, aimed at optimum utilization of availableraw materials for maximizing the returns, particularly fromexports.Indian leather industry today has attained well meritedrecognition in international markets besides occupying aprominent place among the top seven foreign exchange earnersof the country.There came the long awaited dusk to the complacence of theIndian manufacturers,(the village leather industry in particular)When the long slammed doors of global markets were opened tothe leather industry. As already project by various economicwizards, the leather manufacturers met challenge with a renewedvigor and started capturing markets like Germany, U.S, Italy, U.K.,and France. The very fact that a major market like U.S. has beenchosen to build up positive image for the Indian leather productsand to promote joint ventures adds one more feather in the capof leather industry in presenting a strategy so remarkable.“Leather Fashion”- A Hot Tip:When one talk of leather products coupled with their bulk exports,naturally the buzzword “fashion” comes in question. In order tosurvive in market already filled with competitors, it isindispensable for an exporter to be at par with the latest fashiondevelopment in the country in which he is exporting the goods.When the fashion speaks for itself, it can play a stimulating roleas spearhead of an entire industrial sector .A search for light,purity, clear lines has been acclaimed at the basis for fashion inthe leather products. Elegance is the back with the timeless,thorough bred city –dwellers-inspirations that will characterizethis look. City fashion has new focal points in this new trendtowards elegance. Talking about the contemporary fashion, one 12
  13. 13. INDIAN LEATHER INDUSTRYcannot ignore the timeless crocodile and python prints in elegantcameo tones have a slightly old fashioned look that is now veryfashionable. The traditional grained leather, caviar, sharkskin,lizard, clusters and fabrics prints are Omni present, with two-toneeffect and high shine. Thus with the coming back of such age oldand traditional taste in leather products, one cannot clearlydefined that this is the era of renaissance in the Indian.The leather industry has undergone a dramatic transformationfrom a mere exporter of raw materials in the sixties to that ofvalue added finished products in the nineties. Policy initiativestaken by the Government of India since 1973 have beeninstrumental to such a transformation. In the wake ofglobalization of Indian economy supported with liberalizedeconomic and trade policies since 1991, the industry is poised forfurther growth to achieve greater share in the global trade.HISTORY OF LEATHERThe primitive man, even more than 7000 years ago, made andused leather goods. He dried fresh skins in the sun, softenedthem by pounding in animal fats and brains, and preserved themby salting and smoking. Of course, the products were crude,made for protection than as fashion.The Egyptians and Hebrews developed around 400 BC, theprocess of vegetable tanning that involved simple drying andcuring techniquesUnder the Arabs during the middle Ages, the art of leathermaking became quite sophisticated. Morocco and cordovanleathers were in great demand.The ancient puppet theatre in the southern India used primarilyleather dolls. The tradition continues even today.Following the industrial revolution in Europe, power drivenmachines were introduced to perform operations such assplitting, fleshing, and dehairing. The chemical tannage wereintroduced towards the end of 19th century 13
  14. 14. INDIAN LEATHER INDUSTRYCOMMON LEATHERS:  cattle, including calf and ox  sheep and lamb  goat and kid  equine animals, including horse, mule, and zebra  buffalo  pig and hog 14
  15. 15. INDIAN LEATHER INDUSTRYWORLD SCENARIO:WORLD LIVESTOCK POPULATION:Hides and skins are the basic raw materials for the leatherindustry, which originate from the source of livestock. There wasan upsurge in the number of bovine animals and goats and kidsduring 2007-2008, while population of heap and lambs was on adecline. Developing countries accounted for around 78% of thetotal population of bovine animals and 93% of world population ofgoats and kids.World bovine animal’s population stood at 1,529 million heads in2008. India had the largest number of bovine animals (283 millionheads) with a share of 19% followed by Brazil (13%), China (9%)and USA (6%). World sheep and lambs population stood at 1,079million heads in 2008. With a total population of 170 millionheads, China had a share of 16% in the world sheep and lambspopulation. India (6%) lagged behind at third position, with apopulation of 62 million heads. World goats and kids populationstood at 807 million heads in 2008. China has the highestpopulation of goats and kids, which stood at 195 million heads in2008. Although in 1990, India had the highest population of goatsand kids (21% of the total), it was overtaken by China in 1995 andthe gap between the two countries has been widening.WORLD RAW HIDES AND SKINS PRODUCTION:World production of raw hides and skins was nearly 7 millionmetric tonnes, of which production of bovine hides and skinsalone accounted for 90% in 2008. Developing countries are themajor producers of raw hides and skins.China played a significant role in turning developing countries asthe major source of global imports of raw hides and skins.WORLD LEATHER EXPORTS: 15
  16. 16. INDIAN LEATHER INDUSTRYWorld leather exports grew moderately, by a CAGR of 7.3%, fromUS$ 46 billion in 2000 to US$ 61 billion in 2004. World leatherexports can be categorized in to raw hides and skins (40%),leather articles (49%) and fur skins (11%).China, Hong Kong, Italy, USA and France are major exporters ofleather in the world. World leather articles exports increased by aCAGR of 8.06%, from US$ 22 billion in 2000to US$ 30 billion in2004. China constitutes 34% of the total leather articles exports.Hong Kong (17%), Italy (11%) and France (9%) are other majorexporters. India’s exports of leather articles have stabilizedaround US$ 1,033 million in 2008. 16
  17. 17. INDIAN LEATHER INDUSTRYWORLD LEATHER IMPORTS:World leather imports can be classified in to raw hides and skins,leather articles and fur skins, with a share of 38%, 55% and 7% ofthe total world leather imports, respectively. Leather articles arepredominantly imported by USA, Spain, UK and Belgium; whereasChina, Mexico, Turkey and Romania are mainly into imports ofraw hides and skins. Hong Kong, USA and Italy are chiefimporters of fur skins. World imports of leather articles areestimated to have grown marginally from US$ 27 billion in 2000to nearly US$ 34 billion in 2008. USA, the largest importer of thisproduct, is predominantly captured by China.China’s share in USA’s import of leather articles has increasedgradually, from 54% in 2000 to 70% in 2008. 17
  18. 18. INDIAN LEATHER INDUSTRYENVIRONMENTAL ASPECTS FOR LEATHER PRODUCTS:Manufacturers who produce environmentally sound products willenjoy a competitive advantage in all business relations. The pitchhas to be to successfully emphasis the environmental soundnessof the product in the information to the buyers since majorattention is being paid to the increasing role of the environmentalregulations. Therefore, the manufacturers have to view theirproducts and production processes not just by looking attraditional aspects like price, quality, customer demands, etc. butalso at the environment. Environmentally sound production,consequently, opens new market opportunities.The regulations concerning the ban on the use of Azo Dyes andPCP need to be specially taken care of. Use of both these inputshas been banned due to their carcinogenic nature. Likewise, forcompliance with the German packing regulations, Indiansuppliers have to stick to the basic principle that packagingmaterial be reusable and recyclable. Consumers may have atendency to choose products, which are easily recognizable assuch and are labeled according to legal stipulations. Thehallmark for these environment-friendly products is normallyreferred to as ‘ECO-LABEL’. This indicates that the product ismanufactured in consonance with the environmental regulations. 18
  19. 19. INDIAN LEATHER INDUSTRYCHAPTER TWOTHE INDIAN LEATHER INDUSTRYINDIAN SCENARIO:With about 15% of the world livestock population, Indiaaccounted for only 8% of the leather production in 2008.TheIndian leather industry consists of 42,000 small-scale industry(SSI) units, which account for 75% of the total production.Nearly, 2.5 million people earn their livelihood from this sector. Asurvey by Central Leather Research Institute (CLRI) estimatedthat about 1,600 tanneries were present in India in 2000. Theconcentration of tanning industries is mainly in Tamil Nadu, with ashare of 52%. Other states where tanning industry isconcentrated include West Bengal and Uttar Pradesh. Small scale 19
  20. 20. INDIAN LEATHER INDUSTRYsector accounts for large processing capacity ranging from 70-87% for different leather products.INDUSTRY AT A GLANCE:  The Indian leather Industry occupies a place of prominence in the Indian economy in view of its substantial export earnings, employment generation and growth.  There has been increasing emphasis on its planned development, aimed at optimum utilization of available raw material for maximizing the returns particularly from exports.  The export of leather and leather products increased manifold over the past decades. The export increased from Rs. 290 mn in 1956-57 and from Rs. 30760 mn in 1991-92 to Rs. 140007.33 mn in 2007-08.  Today the industry ranks 8th in the export trade in terms of foreign exchange earnings of the country.  The composition of export of leather and leather products from India has undergone a structural change during the last three decades, from merely an exporter of raw material in the sixties to that of value added products in the nineties. The value added finished products presently constitute around 80% of the total export from the Industry, which was mere 7% in 1956-57.  India accounts for a share of 2.62% in the global leather trade during 2006. With the exclusion of non-leather footwear, this is slightly higher at 3.41%.  India is the largest livestock holding country -21% large animals and 11% small animals.  A source for 10% global leather requirement  Annual production value US$ 5 billion  Annual export value US$ 3.47 billion 20
  21. 21. INDIAN LEATHER INDUSTRY  Export growth CAGR 11.91% (5 years)  About 2.50 million workforce (30% women)  Promising technology inflow and Foreign Direct Investment  Top priority to occupational safety and work environment  Meticulous concern for consumer safety  Compliance to environmental standards  Enormous potential for future growth (domestic as well as export) .COMPOSITION OF INDIAN LEATHEREXPORTS:Composition of Indian leather exports has undergone a radicalchange, from being a mere exporter of raw hides and skins, to astatus of an exporter of value added leather products. From 1991-92, India has been exporting only finished leather because ofexport restriction on semi finished leather. Total leather andleather manufactures exports stood at Rs.10, 286 crores in 2004-05. Leather footwear is the largest component of leather exports,with a share of 26%.ESTIMATED PRODUCTION CAPACITIES: ITEM CAPACITYHides 65 million piecesSkins 170 million pieces 21
  22. 22. INDIAN LEATHER INDUSTRYLeather Footwear 909 million pairsLeather shoe uppers 100 million pairsNon-leather footwear 1056 million pairsLeather Garments 16 million piecesLeather Goods 63 million piecesIndustrial Gloves 52 million pairsSaddlers & Harness 12.50 million pieces Source: CLRI STRENGTHS OF INDIAN LEATHERSECTOR:  Own raw material source – 2 billion sq ft of leather produced annually  Some varieties of goat / calf / sheep skins command premium position  Strong and eco-sustainable tanning base  Modernized manufacturing units  Trained / skilled manpower at competitive wage levels 22
  23. 23. INDIAN LEATHER INDUSTRY  World-class institutional support for Human Resources Development and R & D activities  Presence of support industries like leather chemicals and finishing auxiliaries  Presence in major markets – Long Europe experience  Preferred sourcing by several international brands – Pierre Cardin, Versace, NEXT, Hugo Boss, Tommy Hilfiger, Florsheim, Clarks, K shoes, DKNY, Liz Claiborne, Guess etc.  Strategic location in the Asian landmass EMERGING STRENGTHS  Design development initiatives by institutions and individuals.  Continuous modernization and technology up gradation.  Economic size of manufacturing units.  Constant human resource development programme to enhance productivity.  Increasing use of quality components.  Shorter prototype development time.  Delivery compliance.  Growing domestic market for footwear and leather articles.EXPORT POTENTIAL:INDIA’S EXPORT OF LEATHER AND LEATHERPRODUCTS FOR FIVE YEARS: 23
  24. 24. INDIAN LEATHER INDUSTRY India’s Export was growing at a CAGR of 11.91% in the last 5 years. Global leather import trade was growing at a CAGR of 8.77% during last 5 years. YEARS 2003-04 2004-05 2005-06 2006-07 2007-08CATEGORY (VALUE IN MILLION US$)Finished Leather 555.71 607.73 636.27 724.00 766.93Footwear 767.73 910.77 1045.24 1236.91 1475.83LeatherGarments 301.08 329.44 333.30 309.91 343.99Leather Goods 539.21 585.72 660.17 706.28 784.95Saddlery &Harness 52.71 61.71 77.52 82.33 105.81Total 2216.45 2495.37 2752.50 3059.43 3477.52% Growth 18.20% 12.58% 10.30% 11.15% 13.67% Source: DGCI&S 24
  25. 25. INDIAN LEATHER INDUSTRYThe leather industry, one of the major foreign exchange earnersof the country recorded significant growth since the beginning ofthe decade. Today the share of the value added finished productsin the total exports from leather sector are 80% as against 20% in1970s.Export Scenario for the last 5 Years 25
  26. 26. INDIAN LEATHER INDUSTRY% Share of Leather Products in ExportPerformance (2007-08):IMPORT SCENARIO: 26
  27. 27. INDIAN LEATHER INDUSTRY INDIA’S IMPORT OF RAW HIDES & SKINS AND LEATHER FOR FIVE YEARS: YEARSCATEGORY 2003-04 2004-05 2005-06 2006-07 2007-08 (VALUE IN MILLION US$)Raw Hides & Skins 49.80 50.21 58.21 69.58 84.12Leather 171.01 212.70 233.11 288.85 336.56TOTAL 220.81 262.91 291.32 358.44 420.68 MAJOR IMPORTING COUNTRIES OF INDIAN LEATHER AND LEATHER PRODUCTS 27
  28. 28. INDIAN LEATHER INDUSTRYTHE COUNTRY-WISE PERFORMANCE FOR FIVEYEARS:(Value in Million US$) CAGR 2003- 2004- 2005- 2006- 2007- GROWT COUNTRY 04 05 06 07 08 H%GERMANY 329.82 350.79 363.24 410.08 488.72 10.33%.ITALY 285.02 258.23 317.04 413.35 479.04 13.86%.UK 250.65 313.69 345.54 359.84 414.32 13.38%.USA 251.58 290.42 318.36 317.59 306.69 5.07%.HONG KONG 226.97 247.68 252.15 279.72 267.93 4.23%.SPAIN 161.23 176.70 200.18 185.78 212.07 7.09%.FRANCE 109.82 140.00 143.72 174.04 196.17 15.60%.NETHERLANDS 57.75 65.68 82.95 100.82 133.37 23.27%.UAE 37.39 48.03 52.34 62.55 74.53 18.82%.PORTUGAL 34.07 38.38 42.20 49.92 56.06 13.25%.BELGIUM 24.24 35.10 40.20 43.01 54.53 22.46%.CHINA 22.87 34.51 38.71 42.52 51.90 22.73%.AUSTRALIA 32.03 36.41 43.22 39.38 49.74 11.63%.DENMARK 24.66 30.84 40.46 42.30 49.08 18.77%.SWEDEN 19.61 23.49 25.82 29.01 38.81 18.60%.CANADA 25.59 29.70 34.80 32.17 35.90 8.83%.KOREA REP. 25.47 30.98 34.45 36.28 28.80 3.11%.SOUTHAFRICA 20.64 21.71 24.38 35.23 27.49 7.42%.SWITZERLAND 16.64 18.35 21.54 21.92 25.47 11.22%.AUSTRIA 19.12 21.23 23.38 21.79 25.43 7.39%.GREECE 21.11 19.53 21.94 24.22 23.38 2.58%. 28
  29. 29. INDIAN LEATHER INDUSTRYSAUDIARABIA 10.61 12.08 14.63 15.77 15.53 9.99%.JAPAN 10.37 10.57 12.37 12.26 15.41 10.40%.RUSSIA 11.33 8.05 11.49 17.18 14.95 7.17%.INDONESIA 8.42 10.22 12.66 12.17 14.90 15.33%.FINLAND 4.23 6.62 7.72 9.87 14.33 35.66%.IRELAND 4.08 5.77 4.56 5.46 8.07 18.59%.NEWZEALAND 4.22 3.28 5.64 6.05 5.60 7.32%.OTHERS 166.91 207.33 216.81 259.15 349.30 20.27%.TOTAL 2216.45 2495.37 2752.50 3059.43 3477.52 11.91%.Source: DGCI & S 29
  30. 30. INDIAN LEATHER INDUSTRYCountry-wise Export Performance(2007-08): 30
  31. 31. INDIAN LEATHER INDUSTRYANALYSIS OF INDIA’S EXPORT POTENTIAL:India’s major export markets for leather handbags are USA,Germany, UK and Spain. In UK and Spain, Italy is the topexporting country of leather handbags. However, China hasovertaken Italy and emerged as major exporter in markets likeUSA, Canada, Hong Kong and Russia. India has lot of potential inthese markets, as it has unique advantage of economies of scaleand capability of producing niche products.Footwear is a critical segment for the Indian leather industry asthis is expected to be the engine of growth for the Indian leathersector. Currently, the trend in export of Indian footwear has beenencouraging; however the trend for footwear components exportshas been declining. India’s exports offootwear components have dropped from US$ 238 million in2000-01 toUS$ 164 million in 2004-05. Top importers of leather footwearuppers in the world are China, United Kingdom and Canada.World leather garments exports have increased over the years.USA, Germany and Japan were the largest importers of leathergarments in the world in 2004. India was placedamong the top three exporting countries of leather garments inthese markets. Further, India is the largest sourcing partner ofleather garments to Spain and Italy, which are the major marketsfor Indian leather garments. India’s other major export marketsare Germany, USA and France. But, India must be cautious ofChina, as its unit price of leather garments is cheaper than that ofIndia. 31
  32. 32. INDIAN LEATHER INDUSTRYINDIAN LEATHER FOOTWEAR INDUSTRYIndia is the worlds second largest producer of footwear; itsproduction estimated over 700 million pairs per annum. At aboutUS $ 300 million per year, footwear accounts for 18 percent shareof total exports of leather exports.Various types of shoes produced and exported from India includedress shoes, casuals, moccasins, sports shoes, horacchis, sandals,ballerinas, and booties. Major production centres are Chennai(Madras), Delhi, Agra, Kanpur, Mumbai (Bombay), Calcutta andJalandhar.Most of the modern footwear manufacturers in India are alreadysupplying to well establish brands in Europe and USA. The largedomestic market and the opportunity to cater to world marketsmake India an attractive destination for technology andinvestments. Equally relevant is it for the footwear componentsindustry, at this juncture, it is posed for real growth anddiversification.INDIAN LEATHER GOODS INDUSTRYItems produced by this sector include, in addition to bags,handbags, hand gloves and industrial gloves, wallets, ruck sacks,folios, brief cases, travel ware, belts, sports goods, upholstery andsaddlery goods.A surfeit of modern units in Chennai, Kanpur and Calcuttaemploying skilled human resources and equipped with modernand sophisticated machinery account for a diversified range ofsuperlative small leather goods including bags, purses, wallets,industrial gloves etc. made of quality leathers of cows, sheep,goats and buffaloes. The products meet the requirement of bulkbuyers and consumers in Europe, USA and Australia. 32
  33. 33. INDIAN LEATHER INDUSTRYThe major market for Indian leather goods is Germany, with an offtake of about 25 per cent of the leather goods produced in Indiafollowed by USA, UK, France and Italy. With products ranging fromdesigner collections to personal leather accessories, this sectorhas a share of 20.53 per cent in the leather industry, whilemaintaining an average growth rate of 11 per cent recorded inthe last five years.INDIAN SADDLERY INDUSTRYIndia is one of the largest producers of saddlery and harnessgoods in the world. The saddlery industry was established in the19th century primarily to cater to the needs of military and police.From then on initiatives were taken to develop, the industry andtoday there are over 150 units in the organised sector, out ofwhich approximately 105 are 100% export oriented units.Kanpur, in the state of Uttar Pradesh, is a major production centrefor saddlery goods in India accounting for more than 95% of thetotal exports of saddlery items from India. Kanpur, because of itsspecialization in tanning and finishing of buffalo hides is the onlycentre in the country where harness leather, which is major inputfor saddlery industry, is manufactured.The export of saddlery and harness items has showed an annualgrowth rate of about 40% reaching DM 64 million during 1998-99.The major importers of Indian saddlery are Germany, USA, UK,France, Scandinavia, Netherlands, Japan, Australia and NewZealand.INDIAN LEATHER GARMENTS INDUSTRYThe Leather Garment Industry occupies a place of prominence inthe Indian leather sector. The product classification of leathergarments comprise of jackets, long coats, waist coats, shirts, 33
  34. 34. INDIAN LEATHER INDUSTRYpant/short, children garments, motorbike jackets, aprons andindustrial leather garments.Indian leather garments, which entered the world market only inthe mid-eighties with exports of Rs. 15 crores in 1997-98, accountfor about Rs. 1530 crore in 1997-98. The major exportdestination of leather garments from India is Germany. In 1997,German imports of leather garments aggregated DM 1786 millionof which DM 304 million worth of imports went from India. India,China and Turkey were the major suppliers of leather garmentsfor the German market, as they accounted for about 78% of themarket share.Among the three major exporting nations of leather garments,India maintains a similar level of market share of about 20%, inboth German and EU markets.Other markets for India include Italy, U.K., U.S.A. France, Spainand Netherlands. Recently, successful attempt had been madefor exports to Denmark, Switzerland and Canada.STRATEGIES FOR INDIAN LEATHERSECTORThe Indian leather industry is targeting over US$ 5 billion exportsby 2010 and is expected to add about additional 1 million directand indirect jobs during this period. At present, the industryemploys 2.5 million people directly and indirectly.SHIFTING OF MANUFACTURING BASE:Major world tanning firms are in the process of shifting theirmanufacturing base to developing countries due to high wagelevels and strict environmental norms in developed countries.Factors such as availability of leather, production know-how, 34
  35. 35. INDIAN LEATHER INDUSTRYprocessing of shoes work in India’s favour. India could effectivelyuse these advantages to augment its share in global productionand exports.GOVERNMENT SUPPORT:Technology up gradation and Modernization of the entire leatherValue chain should be given priority. Recently, the Governmenthas approved Rs. 290 crores for modernization and technology upgradation programme.STRONG PRODUCTION BASE:The industry should lay emphasis on design and technology,quality and innovation and economies of scale. Skill developmentfor the manpower engaged in the sector is vital for enhancing theexport potential of this sector.INVESTMENT BY LARGE CORPORATES:Indian leather industry is dominated by household and small scalesectors. Corporate presence would enhance the capability ofproducing quality leather products. The large capacity would alsobring down the unit cost and increase the competitiveness ininternational markets.NEW MARKETS:Diversification of export markets is another important strategy forIndian leather industry. Consolidation in new markets such asCroatia, Slovakia and Serbia would sustain the export growthmomentum for the Indian leather industry. Imports of leatherarticles by these countries have increased in the range of 20-30% in a period of five years. 35
  36. 36. INDIAN LEATHER INDUSTRYNEW TRENDS:The industry needs to keep itself abreast with latest fashiontrends in the sector. It is observed that Italian buyers payattention not only to the quality of the leather products but alsoto the accessories used in the garments. It is imperative thatadequate care is taken about the packing material.DIVERSE MARKETING TECHNIQUES:India needs to adopt aggressive marketing techniques in order toendure global competition. The industry could undertake businessdelegation to secure overseas investments and technologypartnerships, besides building brand image. Developing countrieslike India should have two pronged marketing strategy ofsimultaneously targeting both low price and high quality markets,rather than the traditional strategy of being a low price-lowquality supplier.ENABLING INFRASTRUCTURE:The development of the Calcutta Leather Complex is a positivesign as all amenities are available at one place. Such exclusiveleather complexes could be developed in other major productioncentres. Improvements in efficiency of ports, internal transport,customs procedures and supply chain management arenecessary for augmenting the productivity and exports in thissector.FAIRS AND EXHIBITIONS:It is imperative that Indian exporters participate in fairs andexhibitions organized in the international market. It could serveas a good platform to showcase our products. Lack of information 36
  37. 37. INDIAN LEATHER INDUSTRYabout Indian leather manufacturers also acts as a hurdle forinternational buyers.TRAINING FACILITIES:Training programmes should enable the industry to foresee andadapt to changing trends and technology. It is imperative that thestaff is skilled and well qualified to train the students. Further,programmes need to be conducted to make Indian exportersaware of different standards and requirements in the globalmarket to ensure that Indian exports do not get rejected due toenvironmental norms.MAJOR ISSUES AFFECTING THE SECTORThe issues that are hindering the export growth of the Indianleather industry are as follows:ENVIRONMENTAL ISSUES: 37
  38. 38. INDIAN LEATHER INDUSTRYThe leather industry is traditionally considered as a pollutingindustry in the tanning and finishing stages of the productionchain. Global standards set by importing countries affect theentry and increase the cost of market access to products ofdeveloping countries. Usage of many chemicals has been bannedby various countries. The product specifications for leather areconstantly under review, leading to greater stringency.IMPACT OF PETA:Campaigns by NGOs, such as People for Ethical Treatment ofAnimals (PETA), related to cruelty against animals have led toboycott of Indian leather products by many foreign companies.WTO RELATED MATTERS:With the advent of WTO, the average and bound tariffs formanufactured products have fallen in the developed countries.However, the average and bound tariffs for leather productsremain relatively high. Many developed countries areimplementing Technical Barriers to Trade (TBT) as Non-TariffBarriers to restrict leather exports from developing countries likeIndia.COST ESCALATION:Leather exporters have to meet domestic as well internationalenvironmental norms. Testing and certification requirements addto the However, it is observed that small supplier firms may notbe able to comply with stringent environmental standards. Highcosts of compliance impose real economic costs on firms.CHINESE COMPETITION: 38
  39. 39. INDIAN LEATHER INDUSTRYChinese leather industry ranks top on the raw material resources,product yield and import and export trade in the world. China isone of the major competitors to India’s leather sector as it has thecapability to produce largevolume at low price. Chinese leather exports have increased bythree-fold after its entry into WTO. THE INDIAN LEATHER INDUSTRY IS ORGANIZED AS FOLLOWS  Tanning & finishing  Footwear & Footwear Components  Leather Garments  Leather Goods (bags, wallets, belts, gloves, accessories)  Saddlery and harness articles EXPORT PERFORMANCE 39
  40. 40. INDIAN LEATHER INDUSTRYAnalysis of Export Performance of leather and leather productsduringApril-October 2008 vis-à-vis April- October 2007 1.0 INTRODUCTION:As per DGCI& S monthly export data, the export of leather &leather products for the period April-October 2008 touched US$2250.79 million against the performance of US$ 2024.62 millionin the corresponding period of last year, registering a positivegrowth of 11.17% in Dollar Terms. In rupee terms the exporttouched Rs.98058.07 million against the previous year’sperformance of Rs.82370.01 million showing a positive growth of19.05%.A Statement showing the Product-wise Exportperformance during April-October 2008 vis-à-vis April-October 2007 is given below: (Value in Million Rs) CATEGORY APR-OCT APR-OCT 2007 2008 % VARIATIONFinished Leather 19298.36 20384.69 5.63%Leather Footwear 26372.66 31939.30 21.11%Footwear Components 6565.61 7207.17 9.77%Leather Garments 8484.11 11381.91 34.16%Leather Goods 18039.54 23276.98 29.03%Saddlery & Harness 2488.15 2654.77 6.70%Non-Leather Footwear 1121.58 1213.25 8.17%TOTAL 82370.01 98058.07 19.05%Source : DGCI &S 40
  41. 41. INDIAN LEATHER INDUSTRY (Value in Million US$) CATEGORY APR-OCT APR-OCT 2007 2008 % VARIATIONFinished Leather 474.35 467.90 -1.36%Leather Footwear 648.23 733.12 13.10%Footwear Components 161.38 165.43 2.51%Leather Garments 208.54 261.26 25.28%Leather Goods 443.40 534.29 20.50%Saddlery & Harness 61.16 60.94 -0.36%Non-Leather Footwear 27.57 27.85 1.02%TOTAL 2024.62 2250.79 11.17%1.1 MAJOR HIGHLIGHTS:  Export of Footwear (leather, footwear components & non- leather footwear) has increased from US$ 837.18 million during April-October 2007 to US$ 926.40 million in April- October 2008, registering a growth of 10.66%  In Dollar terms, leather footwear has alone grown by 13.10% and footwear components by 2.51% and Non- leather footwear by 1.02%.  In Dollar terms, export of Leather Garments has increased by 25.28% and Leather Goods by 20.50%. Export of Saddlery & Harness and Finished Leather marginally declined by 0.36% and 1.36% respectively. 41
  42. 42. INDIAN LEATHER INDUSTRY2.0 COUNTRY-WISE ANALYSIS • The major markets for Indian leather products are-  Germany (13.63%)  Italy (13.30%)  UK (11.61%)  USA (9.48%)  Hong Kong (7.08%)  France (5.72%)  Spain (5.72%)  Netherlands (4.21%)  U.A.E., (2.58%)  Denmark (1.69%)  Belgium (1.55%)  Australia (1.41%) 42
  43. 43. INDIAN LEATHER INDUSTRYThese 12 countries together accounts for nearly 77.98% ofIndia’s total leather products export. • Overall positive growth is seen in markets like- o Germany 9.51% o USA 11.98% o UK 8.68% o Italy 10.20% o France 21.26% o Spain 11.37% o Netherlands 27.73% o Australia 12.55% o Denmark 39.89% 43
  44. 44. INDIAN LEATHER INDUSTRY• Overall decline is seen in markets like- o Hong Kong 9.29%, o Russia 15.86%, o Greece 14.55%, o South Africa 23.25%. 44
  45. 45. INDIAN LEATHER INDUSTRY3.0 TREND IN MAJOR IMPORTING COUNTRIES OFLEATHER PRODUCTS (In Million US$) Country April-Oct April-Oct % Variation 2007 2008Germany 280.06 306.71 9.51%Italy 271.71 299.42 10.20%UK 240.37 261.23 8.68%USA 190.61 213.44 11.98%France 106.18 128.76 21.26%Spain 115.64 128.79 11.37%Netherlands 74.18 94.75 27.73%U.A.E. 42.29 58.08 37.32%Australia 28.15 31.69 12.55%Hong Kong 175.66 159.35 -9.29% 45
  46. 46. INDIAN LEATHER INDUSTRYSource: DGCI & S4.0 PORT-WISE EXPORT PERFORMANCEAs per the Port-wise compilation for the period April-October2008, export of leather and leather products from all the Regionsare showing positive growth. (Value in MillionUS$) APR- APR- %Region OCT Share in OCT Share in Variation Total Total 2007 Export 2008 ExportSouthern 865.20 42.73% 909.55 40.41% 5.13%Western 382.98 18.92% 433.01 19.24% 13.07%Eastern 276.55 13.66% 332.66 14.78% 20.29%Northern 226.43 11.18% 261.93 11.64% 15.68%Central 46.51 2.30% 72.47 3.22% 55.81%Others 226.96 11.21% 241.18 10.72% 6.27%Total 2024.62 100.00% 2250.79 100.00% 11.17%Note: This is purely based on port-wise compilation and does notreflect the accurate regional performance:Source: DGCI& S 46
  48. 48. INDIAN LEATHER INDUSTRYSWOT ANALYSIS OF THE INDIAN LEATHER INDUSTRY STRENGTHS • High Growth • Ready availability of highly skilled and cheap manpower • Large raw material base THREATS OPPORTUNITI • Policy initiatives taken by the ES Government Major part of the industry • Capability to assimilate new is unorganized• Rising technologies and handle large Limited scope for potential in projects mobilizing funds the domestic Continuous emphasis on product through private market development and placements and• Growing design up gradation. public issues fashion (many consciousnes businesses are s globally family-owned)• Use of Difficulty in obtaining information bank loans technology resulting in high and decision cost of private support borrowing software to Stricter international help WEAKNESSES standards eliminate the • Lack of warehousing support High competition from length of the from the government East European production • International price fluctuation countries and cycle for • Huge labour force resulting in other Asian different high labour charges countries products • Lack of strong presence in the Lack of communication• Use of e- global fashion market facilities and commerce in • Unawareness of international skills 48
  50. 50. INDIAN LEATHER INDUSTRYPROSPECTS FOR INDIAN LEATHER EXPORTS:Exports has brightened in the recent year as India has emergednatural and alternate supplier of leather and leather goods to theglobal market. India has one of the highest concentrations ofcattle population and produces close to 10% of global leatherevery year. Within the export basket, finished leather exports stillconstitute a significant 24%. Footwear as is known is the maindriver of growth with more than 41% of the share in the exportmarket.India with its advantage in the availability of raw material andlarge number of people available in the employment sector withits low manufacturing cost provides ample opportunities forentrepreneurs to invest and grow. Government of India policy ofallowing 100% FDI has opened the gate for global leatherentrepreneurs to explore this leather rich country.Special Economic Zones (SEZs) are created in India for producingleather products. These zones are deemed foreign territorieswhere exports and imports are duty free. A foreign investor canown his factory in these zones and could repatriate 100% profit.There are huge concessions in taxes with five year holiday on theprofit tax (income tax) and another five year with lesserpercentage of tax as compared to units outside the SEZ. Plots areavailable in SEZ for investmentsJoint ventures and business collaborations are the knownbusiness models in Indian leather sector. As the consumption inthe domestic market is increasing day by day, India is poised toimport large quantities of leather from abroad. It would bebeneficial for the overseas brand owners to forge businesspartnerships with the existing manufacturers in India with orwithout equity participation and manufacture goods for domesticmarket. Large numbers of living examples of JVs are there foranyone to see. 50
  51. 51. INDIAN LEATHER INDUSTRYGovernment of India is facilitating the development ofinfrastructure by promoting leather product parks. These parksare expected to have a complete link in the supply chain and theyare expected to increase the production of leather goods andproducts in the next five years. 51
  52. 52. INDIAN LEATHER INDUSTRYINDIAN LEATHER DEVELOPMENTPROGRAMME (ILDP)IMPLEMENTATION DURING 11TH FIVE YEAR PLAN(2007-12)Leather Sector is the 10th largest manufacturing sector in Indiaand it plays an important role in Indian economy in view of itssubstantial overall output, export earnings and employmentpotential. The Leather Sector employs 2.5 million people withmajority from weaker sections of the society and about 30%women. The Sector is dominated by small and mediumenterprises. In order to augment raw material base, enhancecapacity, address environmental concerns, human resourcedevelopment, attract investment and global marketing of IndianLeather, the Central Government has approved implementation ofthe Indian Leather Development Programme (ILDP) for the 11thFive Year Plan comprising of the following components :- I. INTEGRATED DEVELOPMENT OF LEATHER SECTOR (IDLS) (Outlay Rs. 253.43 crores): This is a 10th plan scheme and is being continued in the 11th plan. The scope of the scheme is enhance to include new units. The scheme would provide assistance in the form of Investment grant @ 30% to SSI and 20% to Non-SSI upto grant of Rs. 50 lakh. Assistance will be provided @ 20% if the grant amount is above Rs. 50 lakh within the ceiling of Rs. 2 crores. The disbursement above Rs. 25 lakh would be made in four equal installments. 52
  53. 53. INDIAN LEATHER INDUSTRYII. LEATHER TANNING COMPLEX AT NELLORE (Outlay Rs. 29 crores): This project was proposed to be implemented during the 10th Five Year Plan. However, the project could not take off for want of decision from the Government of Andhra Pradesh. This project aims to increase the capacity of the tanning sector. The project is proposed to be implemented during the 11th Plan. Government of Andhra Pradesh has transferred the required land to LIDCAP, an institution expected to implement the project. A provision of Rs. 29 crores is approved during 11th plan as assistance to develop the infrastructure of the tanning park.III. ESTABLISHMENT OF BRANCH OF FDI (NIFDT) AT FURSATGANJ (OUTLAY RS. 7.17 CRORES): The institute would be a branch of the footwear design and development institute, Noida and would be equipped with facilities of the latest technologies to provide training of international standard with latest technology. The assistance from the Department to the project is Rs. 13.53 crores out of which Rs. 6.36 crores has been released during the 10th plan period. The balance of Rs. 7.17 crores has also been released in December 2007 i.e., during the plan period.IV. FOOTWEAR COMPLEX (OUTLAY RS. 3 CRORES): this is an going scheme of the 10th plan and aims to build a footwear complex near Chennai in 153.65 acres and provide infrastructure facilities for housing large footwear manufacturing units. Infrastructure development towards design and testing centre, display centre, warehousing, common power plant etc. would be provided. State Industries Promotion Corporation of Tamil Nadu Ltd. 53
  54. 54. INDIAN LEATHER INDUSTRY (SIPCOT), a State Government undertaking is the implementing agency. The Central Government has released Rs. 11 crores during the 10th plan and the balance of Rs. 3 crores would be released during the 11th Five Year Plan period.V. SADDLER DEVELOPMENT (OUTLAY RS. 10 CRORES): Harness and saddler comprise a wide range of products. The industry had identified up gradation and development of skilled manpower, standardization and development of components accessories and tools, development of iow cost indigenous machinery, and improvement in production techniques and processes as major areas of concern. International Institute of Saddlery Technology and Export Management (Kanpur), a special purpose vehicle constituted under the overall guidance and superintendence of IIT (Kanpur) would continue to provide skilled human resources to meet the of the sector and function as an R & D base for the industry. In order order to achieve the above stated objectives an allocation of Rs. 10 crores has been approved for the XI plan period.VI. SUPPORT TO ARTISAN (OUTLAY RS. 40 CRORES): there are various clusters in Indian making traditional footwear and other leather goods. The aim of component is to promote the clusters at various forums as they are the integral part of rural Indian economy and have potential for generating local employment and export. The artisan clusters (both rural and urban) would be supported for enhancing their designs as per the changing trends and fashion, corpus for revolving funds and obtaining bulk raw material, grant base livelihood support, marketing support 54
  55. 55. INDIAN LEATHER INDUSTRY linkages. The broad objective of this component would be to ensure better and higher returns to the artisans.VII. HUMAN RESOURCE DEVELOPMENT (OUTLAY RS. 60 CRORES): HRD mission would target the non-traditional potential workforce in the rural areas. The project would train and prepare the individuals in the rural areas to be fit to work in medium to large industrial units that are likely to be set up. Up gradation of skills of persons already employed in the sector besides training for trainers/ supervisors would also be undertaken. The scheme would lay stress on skill development and technical development especially in cutting and stitching. The training proposed under the scheme would be output linked where at least 75% of those trained would be placed in the industry.VIII. UP-GRADATION OF FACILITIES OF FDDI AND ESTABLISHMENT OF OTHER SUCH INSTITUTES AND CENTRES (OUTLAY RS. 300.07 CRORES): In leather sector, about 3,800 people are trained every year. Against this supply, the demand of the industry is around 1,00,000 skilled person every year for the next five years. In order to meet the growing demand of more skilled person the up gradation of existing facilities has become essential. Rs 10 crores, would be provided for the up gradation of existing FDDI campus at Noida. Assistance would be provided in the form of one-time grant for the creation of capital assets and permanent infrastructure and no recurring cost would be provided. It is proposed that at least three new FDDI campuses each in Tamil Nadu, West Bengal and Haryana would be established 55
  56. 56. INDIAN LEATHER INDUSTRY at a cost of Rs. 96.69 crores each during the 11th Plan period to meet the growing demand of leather industry.IX. UPGRADATION OF INFRASTRUCTURE FOR ENVIRONMENT PROTECTION IN LEATHER SECTOR (OUTLAY RS. 200 CRORES): Leather industry and tanning activity in particular, all over the world is linked to environmental concerns. An allocation of Rs. 200 crores has been made in 11th five year plan to address these concerns. Projects for meeting environment concerns would be funded with 50% grants from central Government, 15% from State government and remaining 35% from the industry. The entire Operation and maintenance costs would be borne by the industry.X. MISSION MODE (10 CRORES): This programme envisages attracting investments into the sector and includes provision for research, programme support, surveys and concurrent evaluation etc in leather field. Besides, provisions has also been made for cost on account of advisory and consultancy services in respect of various projects under ILDP being implemented in the 11th Five Year Plan. 56
  57. 57. INDIAN LEATHER INDUSTRYSUPPLEMENT TO FOREIGN TRADE POLICY2004-2009 ANNOUNCED ON 26THFEBRUARY, 2009Union Minister for Commerce and Industry Shri Kamal Nathannounced the Supplement to Foreign Trade Policy 2004-09 onFebruary 26, 2009. The major benefits announced in thissupplement are given below:PROMOTIONAL SCHEMES FOR LEATHER, TEXTILESETC.  An amount of Rs. 325 Crores would be provided under Promotional Schemes for Leather, Textile etc. for exports made with effect from 1.4.09. The details of the promotional schemes are expected to be notified in due course.DEPB  Duty credit scrips under Chapter 3 and under DEPB scheme shall now be issued without waiting for realization of export proceeds. The exporters shall be required to submit proof of export proceeds realization within the time limits prescribed by Reserve Bank of India. The issuance of these benefits without BRC would be subject to a Bank Guarantee/LUT in terms of Circular to be issued. This provision shall be applicable for applications made on or after 1.4.2009.ADVANCE AUTHORISATION  Export obligation period against advance authorizations has been extended up to 36 months in view of the present global economic slowdown. 57
  58. 58. INDIAN LEATHER INDUSTRY  Supply of an Intermediate product by the domestic supplier directly from their factory to the Port against Advance Intermediate Authorization, for export by ultimate exporter, has been allowed.  For Advance Licenses issued prior to 1.4.2002, the requirement of MODVAT/CENVAT certificate dispensed with in cases where the Customs Notification itself prescribed for payment of CVD. This will help in closure of a number of pending advance licenses.  In case of Advance Authorization for Annual Requirement where Standard Input-Output Norms are not fixed, the provisions in Customs Notification have been amended in line with Foreign Trade Policy. PREMIER TRADING HOUSES  At present, Govt. recognizes Premier Trading Houses based on an export turnover of Rs.10, 000 crores in the previous three years and the current year taken together. In view of the prevailing global slowdown, the threshold limit for recognition as Premier Trading House has now been reduced to Rs.7500 crores.OTHER FACILITATION MEASURES  Re-imbursement of additional duty of excise levied on fuel under the Finance Acts would also be admissible in respect of EOUs. 58
  59. 59. INDIAN LEATHER INDUSTRY  Re-credit of 4% SAD, in case of payment of duty by incentive scheme scrips such as VKGUY, FPS and FMS, has now been allowed.  As per the existing procedure, applicants have to submit individual invoices certified by the jurisdictional excise authorities for claiming duty drawback claims. Further, for getting refund of Terminal Excise Duty deemed export ER-1 / ER-3 are required as documentary proof evidencing payment of excise duty. A simplified provision has now been introduced and exporters can now submit a Central Excise certified statement in lieu of individual invoices and a Monthly Statement confirming duty payment in lieu of ER-1/ ER-3, for the purpose of Deemed Export Benefits.  Electronic Message Transfer facility for Advance Authorization and EPCG Scheme established for shipments from EDI ports w.e.f. 1.4.2009. Requirement of hard copy of Shipping Bills dispensed with for Export Obligation discharge.In addition to the above, DGFT andDepartment of Revenue provisions havebeen aligned in following matters: 59
  60. 60. INDIAN LEATHER INDUSTRY  Utilization of Duty Credit scrip allowed under Reward Schemes of/ DEPB, of FTP for payment of duty under EPCG Scheme.  Notification of DFIA scheme aligned with FTP provisions.  Department of Revenue shall issue necessary clarification implementing provisions of FTP related to EOUs, thereby allowing them to supply goods and services at Zero Duty to authorized organizations notified for Zero Duty import.RELIEF MEASURES ANNOUNCED BYGOVERNMENT OF INDIA TO EXPORTERS:The Government of India had earlier announced a package ofrelief measures to the exporters on account of the losses sufferedby the exporters due to steep appreciation of Indian Rupeeagainst overseas currencies in the past 8-9 months. The reliefmeasures included upward revision of the DEPB Rates uniformlyfor leather and leather products by 3%, reduction of the interestrates on pre-shipment and post-shipment Rupee Export Credit by2% for the period Apr. 1- Dec. 31st, 2007 for Leather Products and10% reduction in ECGC Premium on Coverage Charges. 60
  61. 61. INDIAN LEATHER INDUSTRY SERVICE TAX EXEMPTION ON CERTAIN SPECIFIED SERVICES:The Department of Revenue, Ministry of Finance, Government ofIndia has issued a Service Tax Notification, dated Oct. 2007.The Service Tax exemption has been granted on thefollowing services:S. Taxable ServicesNo. Classification Description under Finance Act, 1994 (1) (2) (3) 1. Section Services provided to an exporter by an 65(105)(d) insurer, including a re-insurer carrying on general insurance business in relation to insurance of said goods 2. Section Services to any person, by a port or any 65(105)(zn) person authorized by the port, in relation to port services, in any manner; 3. Section Services provided by a technical testing and 65(105)(zzh) analysis agency in relation to technical testing and analysis of said goods where such technical testing and analysis is required to be undertaken as per the written agreement between the exporter and the buyer of the said goods 4. Section Services provided by an inspection and 65(105)(zzi) certification agency in relation to inspection and certification of export goods where such technical inspection and certification is required to be undertaken as per written agreement between the exporter and the buyer of the export goods 61
  62. 62. INDIAN LEATHER INDUSTRY 5. Section Services to any person, by other port or any 65(105)(zzl) person authorized by that port in relation to port services, in any manner; 6. Section Services provided for transport of said goods 65(105)(zzp) from the inland container depot to the port of export 7. Section Services provided for transport of said goods 65(105)(zzzp) from the inland container depot to the port of export  EXTENSION OF 2% INTEREST REDUCTION ON RUPEE EXPORT CREDIT UP TO MARCH 31ST, 2008: The Reserve Bank of India (RBI) vide Notification dated July13,2007 announced 2% reduction in interest rates on pre-shipment and post-shipment credit for the period Apr. 1 – Dec.31, 2007 to exporters of certain products including LeatherProducts. The RBI has now issued a notification dated Oct. 6,2007 (copy enclosed) extending this benefit to exporters ofvarious products including leather products up to March 31st,2008.  PERMISSION OF INTEREST EARNING ON EEFC ACCOUNT: As members are aware, Exchange Earner’s Foreign Currency(EEFC) accounts are currently permitted to be maintained in theform of non-interest bearing current accounts. 62
  63. 63. INDIAN LEATHER INDUSTRYThe RBI has issued a Notification dated Oct. 6th, 2007 throughwhich exporters maintaining EEFC accounts are permitted to earninterest on EEFC account to the extent of outstanding balances ofUS $ 1 million per exporter. Members may note that this is atemporary measure valid up to Oct. 31st, 2008. Accordingly, it willnow be possible for account holders to maintain outstandingbalances to the extent of US $ 1 million in the form of termdeposits up to one year maturing on or before 31st October 2008.The rate of interest will be determined by the banks themselves. GOVERNMENT SUPPORT – POLICIES  The entire leather sector is now de-licensed and de- reserved, paving way for expansion on modern lines with state-of-the-art machinery and equipments. 63
  64. 64. INDIAN LEATHER INDUSTRY 100% Foreign Direct Investment and Joint Ventures permitted through the automatic route 100% repatriation of profit and dividends, if investments made in convertible foreign currency. Only a declaration to this effect to the Reserve Bank is required. Promotion of Industrial Parks (one leather park in A.P; one leather goods park in W.B; one footwear park in T.N. and one footwear components park in Chennai) Funding support for modernizing manufacturing facilities during Tenth Plan period 2002-07 Funding support for establishing Design Studios Duty free import of all types of raw materials Duty-free import of embellishments and components under specific scheme Concessional duty on import of specified machinery for use in Leather Sector. Duty neutralization/remission scheme in place like DEPB and Duty Drawback Liberal import-export of consumer products and components Gradual lowering of import tariff - Peak Rate 10% Simplified import-export procedures, facilitating quicker customs clearances LEATHER INDUSTRY TARIFFS 64
  65. 65. INDIAN LEATHER INDUSTRYTHE DUTY PRESENTLY APPLICABLE ON RAW MATERIALS, CAPITALGOODS AND INPUT USED BY THE LEATHER & LEATHER PRODUCTSINDUSTRY ARE BRIEFLY STATED BELOW:The raw hides and skins falling under Customs Tariff Heading No.41.01, 41.02 & 41.02 is exempted from import duty in accordancewith Chapter 41 of the Customs Tariff Act.The import of wet blue chrome tanned leather, crust leather,finished leather of all kinds including splits and sides thereofexempted from customs duty in terms of CN 17/2001 vide SI No.136. These are exempted from Countervailing Duty also.Raw, tanned dressed fur skins etc., including lamb fur skins fallingunder Chapter 43.01 & 43.02 have been exempted from BasicCustoms duty in terms of SI No. 137 of CN 17/2001.265 specified machinery & equipments for use in leather &leather products Industry are eligible for concessional import dutyof 5% as per List 6 of CN 17/2001. And these are also exemptedfrom levy of Countervailing Duty (CVD)Certain leather chemicals, finishing axillaries, components,consumables etc used in leather & leather products Industry areeligible for concessional import duty 25% CVD equivalent toCentral Excise duty is leviable on such inputs. These are listedunder List 3A & 3B of CN17/2001 vide SI No. 159.The import of saddle tree required for Harness & Saddlery goodsIndustry and which fall under Sub Heading 3926.90 of theCustoms Tariff, is allowed at concessional duty of 5% in terms ofSI.No. 128 of CN 17/2001.The import of fasteners and poly wadding materials and certainother inputs are allowed duty free import by the manufacture-exporters of leather garments to the extent of 3% of theirprevious year’s export performance.Tags, label, printed bags, stickers, belts, buttons or hangers, 65
  66. 66. INDIAN LEATHER INDUSTRYimported by bona fide exporters, are exempted from duty interms of SI No. 130 of CN 17/2001.Tanning extracts like wattle extract, quebracho extract etc areallowed to be imported with 10% Basic Customs Duty. Nocountervailing duty is leviable on Wattle Extract falling underChapter 3201.20. However, import of other vegetable tanningextracts under Chapter 32 would continue to attractcountervailing duty of 16%.4% Special Additional Duty of Customs (SADC) will continued tolevied on imports of all items. However, the imports underAdvance Licenses, DEPB Scheme, EPCG Scheme etc areexempted from levy of Special Additional Duty of Customs,.10% surcharge on the Basic Customs duty has been removed forall the imports.Leather chemicals and finishing axillaries, component,accessories and consumables indigenously produced will besubject to 16% Central Excise duty. 66
  67. 67. INDIAN LEATHER INDUSTRYCHAPTER FOURLEATHER INDUSTRY-TRADEORGANIZATIONSThe Indian leather Industry occupies a place of prominence in theIndian economy in view of its substantial export earnings,employment generation and growth.There has been increasing emphasis on its planned development,aimed at optimum utilization of available raw material formaximizing the returns particularly from exportsMAJOR PRODUCTION CENTRES:The major production centers in India for leather and leatherproducts are located in: SOUTH REGIONTamil Nadu Chennai, Ambur, Ranipet, Vaniyambadi, Trichy, DindigulAndhra Pradesh HyderabadKarnataka Banglore NORTHERN REGION 67
  68. 68. INDIAN LEATHER INDUSTRYPunjab JalandharHaryana Ambala, Gurgaon, Panchkula and KarnalDelhi Delhi EASTERN REGIONWest Bangel Kolkatta CENTRAL REGIONU.P. Kanpur, Agra WESTERN REGIONMaharashtra Mumbai (Bombay)LEATHER INSTITUTES 68
  69. 69. INDIAN LEATHER INDUSTRY Central Leather Research Institute (CLRI),Adyar, Chennai 600020. Footwear Design and Development Institute (FDDI),Noida 201301. National Institute of Fashion Technology (NIFT), New Delhi 110016. Anna University, Sardar Patel Road, Guindy, Chennai 600025. Bharath Institute of Science and Technology, 173, Agharam Road, Selaiyur PO, Chennai 600073. Dr. B.R. Ambedkar Regional Engineering College, P.O., REC Jalandhar 144011. College of Leather Technology,Salt lake City, Calcuttta 700091. Central Footwear Training Institute (CFTI), Agra. AVI School of Fashion and Shoe Technology, S.C.O., 493-94, 2nd Floor, Sector 35-C, Chandigarh. Shoe Design Centre,5477/72, Kikarwala Chowk, Karol Bagh, New Delhi 110005 Central Footwear Training Institute (CFTI), 65/1, GST Road, Guindy, Chennai 600032. 69
  70. 70. INDIAN LEATHER INDUSTRY Indian Institute of Leather Products (IILP), 102, Mangalapuram, SIDCO Industrial Estate, Ambattur, Chennai. Prototype Development and Training Centre (PDTC), National Small Industries Development Organization, Guindy Industrial Estate, Ekkaduthangal, PO, Chennai 600097. VTA Institutes of Leather and Leather Products,21, Kailashgiri Road, Udaendram, Vaniyambadi 635734. Muzaffarpur Institute of Technology,Muzaffarpur 842003. Priyadarshini Engineering College, Anna Salai, Konamedu, Vaniyambadi, 635751, Vellore Distt. Harcourt Butter Technological Institute, Kanpur 208002. 70
  71. 71. INDIAN LEATHER INDUSTRY COUNCIL FOR LEATHER EXPORTSThe council for Leather Exports was set up in July 1984.A non-profit company registered under the Indian Companies Act, 1956,the Council functions under the Ministry of Commerce,Government of India. The council is entrusted with exportpromotion activities and overall development of the Indian leatherindustry. The Council’s activities also include promoting ForeignDirect Investment and Joint Ventures in the Indian Leatherindustry. The CLE serves as a bridge between Indian leatherexporters and buyers all over the world. COUNCIL’S SERVICES TO THE INDIAN LEATHER INDUSTRY:  Collecting, Collating and disseminating world market intelligence.  Updating the information on global trends in fashion and design, product development.  Dissemination of information of commercial and technological nature through seminars and magazines.  Organizing participation of Indian exporters in international fairs and buyer-seller meets.  Sponsoring sales-cum-study teams and trade delegations. 71
  72. 72. INDIAN LEATHER INDUSTRY  Inviting foreign experts for providing technological inputs to Indian leather exporters.  Organizing international leather fairs in India.COUNCIL’S SERVICES TO OVERSEAS BUYERS INCLUDE:  Serving as a focal point for disseminating information on Indian manufacturers and exporters.  Organizing visits of buyers’ delegations dealing with trade information.  Liaising with various international organizations dealing with trade information.  Providing trade and commercial information on Indian leather industry 72
  73. 73. INDIAN LEATHER INDUSTRY MAIN MARKETSNORTH AMERICAFor leather jackets of high value these people are ready to payany price.GERMANYFor shoes and upper shoe.EUROPEFor valets, purses, hand bags and ladies itemCISFor all products together more than 25% goes to these parts.OTHER MARKETS:DENMARK,SAUDI ARABIA,SOUTH AFRICA 73
  74. 74. INDIAN LEATHER INDUSTRYLATIN AMERICA becoming strong markets for India. INTERNATIONAL LEATHER ORGANISATIONSU.S.A.ALCAThe American Leather Chimists Associationc/o University of Cincinnati - Tanners Bldg, P.O.Box 210014CINCINNATI, OHIO 45221-0014E-mail: donmezk@email.uc.eduFFANYFashion Footwear Association of New York1414, Avenue of the Americas, Suite 203 NEW YORK, N.Y. 10019The Fashion Footwear Association of New York, fondly known asFFANY, is a non-profit organization. Our goal is to promote andimprove the general awareness and demand for fashion footwearand related products and to serve as an advocate of the multi-billion dollar footwear industry globally. FFANY represents 300corporations, and 800 of the most prestigious footwearbrandnamesworldwide. 74
  75. 75. INDIAN LEATHER INDUSTRYFFANYs primary purpose is to organize and implement 6international trade shows a year in New York City. All arkets areheld at the Hilton New York located at 1335, Avenue of theAmericas at 54 th StreetFIAFootwear Industries of America1420 K street, NW suite 600 WASHINGTON, DC 20005LLGMALuggage and Leather goods manufacturers of America Inc.NSRANational Shoe Retailers AssociationTrade organisation representing independent shoe retailers.7150, Columbia Gateway Drive, COLUMBIA, MD 21046SSIAShoe Service Institute of AmericaRobert J. Galvin - Webmaster12114 Old Line Center Waldorf, 20602 BALTIMORE, MDSSIA is the Trade Association for the shoe repair industry in NorthAmerica. Founded in 1904, its members are wholesalers,manufacturers and importers of shoe repair and shoe careproducts and machinery.VENEZUELACAFACAVenezuelan Association of Manufacturers of Componentsand Products for the Footwear Industry.Av. San Felipe, Quinta Adina 65, La Castellana, CARACAS 1060E-mail:cafaca@hotmail.comCAFACA promotes the interests of its members both at a national 75
  76. 76. INDIAN LEATHER INDUSTRYand international level and is developing an export programmefor the Venezuelan components sector. It is also sponsoring thecomponents fair EXPOCOMP 200.VIETNAMLEFASO VNVietnam Leather and Footwear Association25, Ly Thuong Kiet Str. HANOIE-mail: hhdg@hn.vnn.vnYear of establishment: 1990Vietnam Leather and Footwear Association (LEFASO VN) is asocial economic affiliated and voluntary organization representingmanufacturers, traders, technical and science researchers andservices suppliers engaged in the industry from all sectors of theeconomy those are operating in Vietnam. The Association isestablished and run on the principles of voluntary, equality andmutual benefits among the members.The Association has its own logo, stamp and account. Workingregulation of the Association has been approved by the Ministerof Industry.Targets of the Association are to conduct economic affiliatedactivities, designate and coordinate in action among themembers relating to manufacture, exportation, importation,material supply, product consumption, etc… in the leather andfootwear business, aimed at taking fullest account of the existingpotential, improving product quality and social - economic effectsto the member enterprises, in the meantime, increasingcompetitive edge in export markets and representing a voice forthe members interests. 76
  77. 77. INDIAN LEATHER INDUSTRYVietnam Leather and Footwear Association has become an officialmember of the Asian International Footwear Association since1996. The Association plays a key role in promoting internationalcooperation, providing technical - technological and trainingsupport and giving related information.Organization of the Association: The Executive Committeeincludes 16 members representing all economic sectors involvedin the industry throughout the country. The PermanentCommittee consists of 7 members: Chairman, 05 Vice Chairmanand General Secretary. Secretarial group managed by theGeneral Secretary, help the Executive and Permanent Committee.The Association is now having 90 members and new members arecontinuing to join the AssociationVietnam Leather and Footwear Association looks forward tohaving cooperation with all organization and companies at homeand abroad on the different areas of the industry.VIETNAM LEATHER AND FOOTWEAR PRODUCERSASSOCIATIONHead Office: 26, Le Dai Hanh Str. HANOIThe Vietnam Leather and Footwear Producers Association is avolunteer organization with more than 60 members of differenteconomic components in manufacturing and trading areas ;leather, shoes, rubber, plastic, canvas, imitation leather and otherfields of activity concerned.The association has relations with Leather and FootwearAssociations of many countries in the region and in the world.The association has pleasure to get new members from thecountry and abroad based on the principle of volunteer andabiding by the regulations of the Association. 77
  79. 79. INDIAN LEATHER INDUSTRYA potential supplier seeking to enter the market must ensure firstof all that he can compete with other suppliers on quality andprice. Before embarking on an export venture, the exporter mustbe assured about his product and to which segment he wants toserve. A delicate care of following points can go along a long wayis enabling the exporter to reach the right market.  Segmentation of the market.  Supplying to the upper most group-elite cream of the society.  Since the product is very expensive, the supplier cannot compromise even on simple aspect which may “deglamourize” the hide.  The supplier should make many pieces since they are exclusive – unique.  Since the manufactures is a social trends setters, he has to always keep ahead as he has to offer something new, always i.e. to say that in the export market Change is Constant.  One should never think of reducing the price as for the buyer, even if it is an exceptionally high price because the buyer, here are abnormal buyers not normal buyers.  One should never supply a very big quantity at any given movement he should not supply more than 8-10 pieces each month.Large export organization particularly manufactures exportersmaintain a separate research development with qualify staff forhis purpose. In department collects information about foreignmarket from all available sources and agencies. Even surveys areconducted. The conclusion drawn from such research activities 79
  80. 80. INDIAN LEATHER INDUSTRYare supplied to policies maker for forming short term and longterm marketing strategies, which play a decisive role in thesuccess of the whole marketing efforts which is very wellaccepted at the government level and also at the level ofbusiness at present.Various official and all other agencies collect and publish marketinformation for the benefits of exporters, such information isimportant in all types of research activities. In fact, researchactivities, a lot of secondary information is available in exportmarketing though official and non- official agencies in India. Thegovernment has made elaborate institutional arrangement tohelp exporters in the field of market intelligence. It is imperativethat before we sell or market the leather product in theinternational market, we make a very close look and the intensiveabout the various factors influencing the selling of the product.Needless to say, that the study has to be in the light of suchfactors pertaining to the importing country. Absolute care,through sincerity, correctness and relevance of data, rightchannels and perfect contacts alone can lead the exporter toknow the market well.An exporter should thus, take care of the following pointswhile marketing the products: Climate Tradition Demand Government policy Competition FashionCLIMATE:A careful study of the geographical condition and demand of thecountry in which the goods to be exported enables the marketingmanager to trigger the right shot in matters internationalbusiness. The temperate belt in both the hemisphere isconsidered as an ideal location for leather products. 80
  81. 81. INDIAN LEATHER INDUSTRYTRADITION:Tradition plays an important role in marketing the leatherproduct. However, this applies only to a few of the leatherproducts, such as shoes or the whole foot ware range in generalas regard other leather products such as jacket the impact oftradition dampens.DEMAND:The need for the particular leather product in the country where itis exported should be ascertained. The demand and supplyshould be on even terms. If the demand is less then we might failto market our product successfully.GOVERNMENT POLICY:The most instances of different government policies in differentcountries are that of quantity restraint or a quota restriction. Inmost of the other countries where quantity restraint is applicableit is the government which fixes the quota for a particular productand the local suppliers do not suffers.COMPETITION:One of the intelligent ways of entering the export market in aparticular country with the level of quality and the price of thecompetitors.FASHION:Fashion is one of the most important and to some extends, ratherinconvenient factor, which affects the selling of the leatherproducts. It is the most important because fashion trends andfashion sensitivity are more apt in the U.S. and western Europeancountries. Coincidentally, leather product enjoys a good market inthese countries. Again, it is an inconvenient factor for an ordinaryexporter because of its flexibility. The fashion trends seem tochange every year and so-called fashion trends have an equalurge to discard the things, which are out of fashion as they havefor embracing the things, which are in fashion. It is therefore, the 81
  82. 82. INDIAN LEATHER INDUSTRYduty of the marketing manager to either stay or tune with thelatest fashion or created a new test for the consumer. The latterone being difficult is not just impossible to be done with a carefulstudy of the previous marketing trends. Qualitative advertisingand sales promotion policies new test can be developed. RECENT MARKETING EFFORTS TO PROMOTE THE INDIAN LEATHER INDUSTRY  International Fairs & Buyer- Seller Meets.  International Leather fairs continued to be an effective medium of establish business relation with potential overseas buyers.  The council current year organize participation of Indian leather exporters in 15 major international fairs. Several are in European Union, USA and China.  Buyer – Seller meets between Indian product exporter and overseas importer in several countries like Spain, Portugal, Brazil, Venezuela, Chile, Argentina, Australia, New Zealand, Finland & Estonia. 82