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

INDIAN
LEATHER
INDUSTR
Y Submitted by,

AHSAN JAVED
ROLL NO. BM-A-20
POST GRADUATE DIPLOMA IN
BUSINESS MANAGEMENT

Submitted to,

DR. SHAMSHER

YMCA BUSINESS SCHOOL

PRICING AND
DOCUMENTATION

INDIAN LEATHER INDUSTRY

ACKNWOLEDGEMENT

“FOR EVERY OPPORTUNITY MAY GOD BE
THANKED”

I am very thankful to our teacher Dr. Shamsher for
his great assistance to make the successful
accomplishment of the project. Through his able
guidance and knowledge-based interactions, we have
learnt a lot.
I am also thankful to my friends and colleagues for their
support and endurance while preparing this project.
I would like to thank all the people who have directly or
indirectly helped me in completing this project, as and
when I required.

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AHSAN JAVED

PREFACE

The project Indian Leather Industry has been
carried out with a view point of understanding the
role of Leather Industry in the Indian Trade and
Indian economy.
As per the objective of the project, I have tried to
explain, analyze and interpret the role of Leather
sector in Indian as well as in international trade.

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TABLE OF CONTENTS

CHAPTE TOPIC PAGE
R NO.
 Acknowledgement 02
 Preface 03
 Executive Summary 08
 Objectives Of The Study 10

1. INTRODUCTION TO LEATHER
INDUSTRY:
 An Overview 11
 History Of Leather 12
 World Scenario 14
 Environmental Aspects for Leather 17
Products

2. 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


 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
Industry

3. 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 58

4. LEATHER INDUSTRY-TRADE
ORGANIZATIONS:
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 Major Production Centres 60
 Leather Institutes 62
 Council For Leather Exports 64
 Main Markets 66
 International Leather Organizations 67

5. 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 Sector

6. 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

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 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
Agents

7.
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

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 Leather industry glossary 126
 Leather products 144
 Leather Exporters in India 155
 Indian Leather Manufacturers 158

EXECUTIVE SUMMARY

The basic objective of undertaking this project was to
study the role of Leather Industry in Indian economy, to
examine the export potential of leather products, to
analyze the various Documents for findings out the
adequacy and precision of export facilities by financial
institutions and the role of Indian Government in Indian
leather sector.

I collected the data using various primary and secondary
sources. (The sources of data collection have been
mentioned at required chapters in my report).

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The Leather Industry is a significant segment of the
foreign trade in India. India ranks eighth among the
leather producing countries in the world. The industry is
labor intensive.

The Indian leather industry is provided with institutional
infrastructure support through premier institutions like
Council for Leather Exports, Central Leather Research
Institute (Chennai), Footwear Design & Development
Institute (Noida), National Institute of Fashion Technology
(New Delhi), etc in the areas of technological
development, design and product development and
human resource development.
The various phases of export are offer and receipt of
confirmed orders, production and clearance of the
products for exports, shipment, negotiation of document
and realization of export proceeds and obtaining various
export incentives.

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OBJECTIVES OF THE STUDY

1. To study the role of Leather Industry in Indian
economy.

2. To examine the export potential of leather
products.

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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 ONE

INTRODUCTION TO LEATHER
INDUSTRY

THE LEATHER INDUSTRY – AN OVERVIEW:
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The leather industry occupies a place of prominence in the Indian
economy in view of its massive potential for employment, growth
and exports. There has been an increasing emphasis on its
planned development, aimed at optimum utilization of available
raw materials for maximizing the returns, particularly from
exports.

Indian leather industry today has attained well merited
recognition in international markets besides occupying a
prominent place among the top seven foreign exchange earners
of the country.

There came the long awaited dusk to the complacence of the
Indian manufacturers,(the village leather industry in particular)
When the long slammed doors of global markets were opened to
the leather industry. As already project by various economic
wizards, the leather manufacturers met challenge with a renewed
vigor and started capturing markets like Germany, U.S, Italy, U.K.,
and France. The very fact that a major market like U.S. has been
chosen to build up positive image for the Indian leather products
and to promote joint ventures adds one more feather in the cap
of 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 to
survive in market already filled with competitors, it is
indispensable for an exporter to be at par with the latest fashion
development in the country in which he is exporting the goods.
When the fashion speaks for itself, it can play a stimulating role
as spearhead of an entire industrial sector .A search for light,
purity, clear lines has been acclaimed at the basis for fashion in
the leather products. Elegance is the back with the timeless,
thorough bred city –dwellers-inspirations that will characterize
this look. City fashion has new focal points in this new trend
towards elegance. Talking about the contemporary fashion, one

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cannot ignore the timeless crocodile and python prints in elegant
cameo tones have a slightly old fashioned look that is now very
fashionable. The traditional grained leather, caviar, sharkskin,
lizard, clusters and fabrics prints are Omni present, with two-tone
effect and high shine. Thus with the coming back of such age old
and traditional taste in leather products, one cannot clearly
defined that this is the era of renaissance in the Indian.

The leather industry has undergone a dramatic transformation
from a mere exporter of raw materials in the sixties to that of
value added finished products in the nineties. Policy initiatives
taken by the Government of India since 1973 have been
instrumental to such a transformation. In the wake of
globalization of Indian economy supported with liberalized
economic and trade policies since 1991, the industry is poised for
further growth to achieve greater share in the global trade.

HISTORY OF LEATHER
The primitive man, even more than 7000 years ago, made and
used leather goods. He dried fresh skins in the sun, softened
them by pounding in animal fats and brains, and preserved them
by salting and smoking. Of course, the products were crude,
made for protection than as fashion.
The Egyptians and Hebrews developed around 400 BC, the
process of vegetable tanning that involved simple drying and
curing techniques
Under the Arabs during the middle Ages, the art of leather
making became quite sophisticated. Morocco and cordovan
leathers were in great demand.
The ancient puppet theatre in the southern India used primarily
leather dolls. The tradition continues even today.
Following the industrial revolution in Europe, power driven
machines were introduced to perform operations such as
splitting, fleshing, and dehairing. The chemical tannage were
introduced towards the end of 19th century

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COMMON LEATHERS:

 cattle, including calf and ox
 sheep and lamb
 goat and kid
 equine animals, including horse, mule, and zebra
 buffalo
 pig and hog

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WORLD SCENARIO:

WORLD LIVESTOCK POPULATION:
Hides and skins are the basic raw materials for the leather
industry, which originate from the source of livestock. There was
an upsurge in the number of bovine animals and goats and kids
during 2007-2008, while population of heap and lambs was on a
decline. Developing countries accounted for around 78% of the
total population of bovine animals and 93% of world population of
goats and kids.
World bovine animal’s population stood at 1,529 million heads in
2008. India had the largest number of bovine animals (283 million
heads) with a share of 19% followed by Brazil (13%), China (9%)
and USA (6%). World sheep and lambs population stood at 1,079
million heads in 2008. With a total population of 170 million
heads, China had a share of 16% in the world sheep and lambs
population. India (6%) lagged behind at third position, with a
population of 62 million heads. World goats and kids population
stood at 807 million heads in 2008. China has the highest
population of goats and kids, which stood at 195 million heads in
2008. Although in 1990, India had the highest population of goats
and kids (21% of the total), it was overtaken by China in 1995 and
the gap between the two countries has been widening.

WORLD RAW HIDES AND SKINS PRODUCTION:
World production of raw hides and skins was nearly 7 million
metric tonnes, of which production of bovine hides and skins
alone accounted for 90% in 2008. Developing countries are the
major producers of raw hides and skins.
China played a significant role in turning developing countries as
the major source of global imports of raw hides and skins.

WORLD LEATHER EXPORTS:
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World leather exports grew moderately, by a CAGR of 7.3%, from
US$ 46 billion in 2000 to US$ 61 billion in 2004. World leather
exports 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 of
leather in the world. World leather articles exports increased by a
CAGR of 8.06%, from US$ 22 billion in 2000to US$ 30 billion in
2004. China constitutes 34% of the total leather articles exports.
Hong Kong (17%), Italy (11%) and France (9%) are other major
exporters. India’s exports of leather articles have stabilized
around US$ 1,033 million in 2008.

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WORLD 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% of
the total world leather imports, respectively. Leather articles are
predominantly imported by USA, Spain, UK and Belgium; whereas
China, Mexico, Turkey and Romania are mainly into imports of
raw hides and skins. Hong Kong, USA and Italy are chief
importers of fur skins. World imports of leather articles are
estimated to have grown marginally from US$ 27 billion in 2000
to nearly US$ 34 billion in 2008. USA, the largest importer of this
product, is predominantly captured by China.
China’s share in USA’s import of leather articles has increased
gradually, from 54% in 2000 to 70% in 2008.

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ENVIRONMENTAL ASPECTS FOR LEATHER
PRODUCTS:
Manufacturers who produce environmentally sound products will
enjoy a competitive advantage in all business relations. The pitch
has to be to successfully emphasis the environmental soundness
of the product in the information to the buyers since major
attention is being paid to the increasing role of the environmental
regulations. Therefore, the manufacturers have to view their
products and production processes not just by looking at
traditional aspects like price, quality, customer demands, etc. but
also at the environment. Environmentally sound production,
consequently, opens new market opportunities.
The regulations concerning the ban on the use of Azo Dyes and
PCP need to be specially taken care of. Use of both these inputs
has been banned due to their carcinogenic nature. Likewise, for
compliance with the German packing regulations, Indian
suppliers have to stick to the basic principle that packaging
material be reusable and recyclable. Consumers may have a
tendency to choose products, which are easily recognizable as
such and are labeled according to legal stipulations. The
hallmark for these environment-friendly products is normally
referred to as ‘ECO-LABEL’. This indicates that the product is
manufactured in consonance with the environmental regulations.

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CHAPTER TWO

THE INDIAN LEATHER INDUSTRY

INDIAN SCENARIO:
With about 15% of the world livestock population, India
accounted for only 8% of the leather production in 2008.The
Indian 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. A
survey by Central Leather Research Institute (CLRI) estimated
that about 1,600 tanneries were present in India in 2000. The
concentration of tanning industries is mainly in Tamil Nadu, with a
share of 52%. Other states where tanning industry is
concentrated include West Bengal and Uttar Pradesh. Small scale

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sector 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

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 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 LEATHER
EXPORTS:
Composition of Indian leather exports has undergone a radical
change, from being a mere exporter of raw hides and skins, to a
status of an exporter of value added leather products. From 1991-
92, India has been exporting only finished leather because of
export restriction on semi finished leather. Total leather and
leather 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 CAPACITY
Hides 65 million pieces
Skins 170 million pieces

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Leather Footwear 909 million pairs
Leather shoe uppers 100 million pairs
Non-leather footwear 1056 million pairs
Leather Garments 16 million pieces
Leather Goods 63 million pieces
Industrial Gloves 52 million pairs
Saddlers & Harness 12.50 million pieces
Source: CLRI

STRENGTHS OF INDIAN LEATHER
SECTOR:
 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

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 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 LEATHER
PRODUCTS FOR FIVE YEARS:

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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 2007-08
CATEGORY (VALUE IN MILLION US$)
Finished Leather 555.71 607.73 636.27 724.00 766.93
Footwear 767.73 910.77 1045.24 1236.91 1475.83
Leather
Garments 301.08 329.44 333.30 309.91 343.99
Leather Goods 539.21 585.72 660.17 706.28 784.95
Saddlery &
Harness 52.71 61.71 77.52 82.33 105.81
Total 2216.45 2495.37 2752.50 3059.43 3477.52
% Growth 18.20% 12.58% 10.30% 11.15% 13.67%
Source: DGCI&S

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The leather industry, one of the major foreign exchange earners
of the country recorded significant growth since the beginning of
the decade. Today the share of the value added finished products
in the total exports from leather sector are 80% as against 20% in
1970s.

Export Scenario for the last 5 Years

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% Share of Leather Products in Export
Performance (2007-08):

IMPORT SCENARIO:

26


INDIA’S IMPORT OF RAW HIDES & SKINS AND
LEATHER FOR FIVE YEARS:

YEARS
CATEGORY 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 84.12
Leather 171.01 212.70 233.11 288.85 336.56
TOTAL 220.81 262.91 291.32 358.44 420.68

MAJOR IMPORTING COUNTRIES OF INDIAN
LEATHER AND LEATHER PRODUCTS
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THE COUNTRY-WISE PERFORMANCE FOR FIVE
YEARS:

(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%.
NETHERLAND
S 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%.
SOUTH
AFRICA 20.64 21.71 24.38 35.23 27.49 7.42%.
SWITZERLAN
D 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%.
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SAUDI
ARABIA 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%.
NEW
ZEALAND 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

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Country-wise Export Performance
(2007-08):

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ANALYSIS 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 top
exporting country of leather handbags. However, China has
overtaken Italy and emerged as major exporter in markets like
USA, Canada, Hong Kong and Russia. India has lot of potential in
these markets, as it has unique advantage of economies of scale
and capability of producing niche products.

Footwear is a critical segment for the Indian leather industry as
this is expected to be the engine of growth for the Indian leather
sector. Currently, the trend in export of Indian footwear has been
encouraging; however the trend for footwear components exports
has been declining. India’s exports of
footwear components have dropped from US$ 238 million in
2000-01 to
US$ 164 million in 2004-05. Top importers of leather footwear
uppers 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 leather
garments in the world in 2004. India was placed
among the top three exporting countries of leather garments in
these markets. Further, India is the largest sourcing partner of
leather garments to Spain and Italy, which are the major markets
for Indian leather garments. India’s other major export markets
are Germany, USA and France. But, India must be cautious of
China, as its unit price of leather garments is cheaper than that of
India.

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INDIAN LEATHER FOOTWEAR INDUSTRY
India is the world's second largest producer of footwear; its
production estimated over 700 million pairs per annum. At about
US $ 300 million per year, footwear accounts for 18 percent share
of total exports of leather exports.

Various types of shoes produced and exported from India include
dress shoes, casuals, moccasins, sports shoes, horacchis, sandals,
ballerinas, and booties. Major production centres are Chennai
(Madras), Delhi, Agra, Kanpur, Mumbai (Bombay), Calcutta and
Jalandhar.

Most of the modern footwear manufacturers in India are already
supplying to well establish brands in Europe and USA. The large
domestic market and the opportunity to cater to world markets
make India an attractive destination for technology and
investments. Equally relevant is it for the footwear components
industry, at this juncture, it is posed for real growth and
diversification.

INDIAN LEATHER GOODS INDUSTRY
Items 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 and
saddlery goods.

A surfeit of modern units in Chennai, Kanpur and Calcutta
employing skilled human resources and equipped with modern
and sophisticated machinery account for a diversified range of
superlative 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 bulk
buyers and consumers in Europe, USA and Australia.

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The major market for Indian leather goods is Germany, with an off
take of about 25 per cent of the leather goods produced in India
followed by USA, UK, France and Italy. With products ranging from
designer collections to personal leather accessories, this sector
has a share of 20.53 per cent in the leather industry, while
maintaining an average growth rate of 11 per cent recorded in
the last five years.

INDIAN SADDLERY INDUSTRY
India is one of the largest producers of saddlery and harness
goods in the world. The saddlery industry was established in the
19th century primarily to cater to the needs of military and police.
From then on initiatives were taken to develop, the industry and
today there are over 150 units in the organised sector, out of
which approximately 105 are 100% export oriented units.

Kanpur, in the state of Uttar Pradesh, is a major production centre
for saddlery goods in India accounting for more than 95% of the
total exports of saddlery items from India. Kanpur, because of its
specialization in tanning and finishing of buffalo hides is the only
centre in the country where harness leather, which is major input
for saddlery industry, is manufactured.

The export of saddlery and harness items has showed an annual
growth 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 New
Zealand.

INDIAN LEATHER GARMENTS INDUSTRY

The Leather Garment Industry occupies a place of prominence in
the Indian leather sector. The product classification of leather
garments comprise of jackets, long coats, waist coats, shirts,

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pant/short, children garments, motorbike jackets, aprons and
industrial leather garments.

Indian leather garments, which entered the world market only in
the mid-eighties with exports of Rs. 15 crores in 1997-98, account
for about Rs. 1530 crore in 1997-98. The major export
destination of leather garments from India is Germany. In 1997,
German imports of leather garments aggregated DM 1786 million
of which DM 304 million worth of imports went from India. India,
China and Turkey were the major suppliers of leather garments
for the German market, as they accounted for about 78% of the
market share.

Among the three major exporting nations of leather garments,
India maintains a similar level of market share of about 20%, in
both German and EU markets.

Other markets for India include Italy, U.K., U.S.A. France, Spain
and Netherlands. Recently, successful attempt had been made
for exports to Denmark, Switzerland and Canada.

STRATEGIES FOR INDIAN LEATHER
SECTOR
The Indian leather industry is targeting over US$ 5 billion exports
by 2010 and is expected to add about additional 1 million direct
and indirect jobs during this period. At present, the industry
employs 2.5 million people directly and indirectly.

SHIFTING OF MANUFACTURING BASE:

Major world tanning firms are in the process of shifting their
manufacturing base to developing countries due to high wage
levels and strict environmental norms in developed countries.
Factors such as availability of leather, production know-how,

34


processing of shoes work in India’s favour. India could effectively
use these advantages to augment its share in global production
and exports.

GOVERNMENT SUPPORT:

Technology up gradation and Modernization of the entire leather
Value chain should be given priority. Recently, the Government
has approved Rs. 290 crores for modernization and technology up
gradation programme.

STRONG PRODUCTION BASE:
The industry should lay emphasis on design and technology,
quality and innovation and economies of scale. Skill development
for the manpower engaged in the sector is vital for enhancing the
export potential of this sector.

INVESTMENT BY LARGE CORPORATES:
Indian leather industry is dominated by household and small scale
sectors. Corporate presence would enhance the capability of
producing quality leather products. The large capacity would also
bring down the unit cost and increase the competitiveness in
international markets.

NEW MARKETS:

Diversification of export markets is another important strategy for
Indian leather industry. Consolidation in new markets such as
Croatia, Slovakia and Serbia would sustain the export growth
momentum for the Indian leather industry. Imports of leather
articles by these countries have increased in the range of 20-
30% in a period of five years.

35


NEW TRENDS:

The industry needs to keep itself abreast with latest fashion
trends in the sector. It is observed that Italian buyers pay
attention not only to the quality of the leather products but also
to the accessories used in the garments. It is imperative that
adequate care is taken about the packing material.

DIVERSE MARKETING TECHNIQUES:

India needs to adopt aggressive marketing techniques in order to
endure global competition. The industry could undertake business
delegation to secure overseas investments and technology
partnerships, besides building brand image. Developing countries
like India should have two pronged marketing strategy of
simultaneously targeting both low price and high quality markets,
rather than the traditional strategy of being a low price-low
quality supplier.

ENABLING INFRASTRUCTURE:
The development of the Calcutta Leather Complex is a positive
sign as all amenities are available at one place. Such exclusive
leather complexes could be developed in other major production
centres. Improvements in efficiency of ports, internal transport,
customs procedures and supply chain management are
necessary for augmenting the productivity and exports in this
sector.
FAIRS AND EXHIBITIONS:

It is imperative that Indian exporters participate in fairs and
exhibitions organized in the international market. It could serve
as a good platform to showcase our products. Lack of information

36


about Indian leather manufacturers also acts as a hurdle for
international buyers.

TRAINING FACILITIES:
Training programmes should enable the industry to foresee and
adapt to changing trends and technology. It is imperative that the
staff is skilled and well qualified to train the students. Further,
programmes need to be conducted to make Indian exporters
aware of different standards and requirements in the global
market to ensure that Indian exports do not get rejected due to
environmental norms.

MAJOR ISSUES AFFECTING THE SECTOR
The issues that are hindering the export growth of the Indian
leather industry are as follows:

ENVIRONMENTAL ISSUES:
37


The leather industry is traditionally considered as a polluting
industry in the tanning and finishing stages of the production
chain. Global standards set by importing countries affect the
entry and increase the cost of market access to products of
developing countries. Usage of many chemicals has been banned
by various countries. The product specifications for leather are
constantly under review, leading to greater stringency.

IMPACT OF PETA:

Campaigns by NGOs, such as People for Ethical Treatment of
Animals (PETA), related to cruelty against animals have led to
boycott of Indian leather products by many foreign companies.

WTO RELATED MATTERS:

With the advent of WTO, the average and bound tariffs for
manufactured products have fallen in the developed countries.
However, the average and bound tariffs for leather products
remain relatively high. Many developed countries are
implementing Technical Barriers to Trade (TBT) as Non-Tariff
Barriers to restrict leather exports from developing countries like
India.

COST ESCALATION:

Leather exporters have to meet domestic as well international
environmental norms. Testing and certification requirements add
to the However, it is observed that small supplier firms may not
be able to comply with stringent environmental standards. High
costs of compliance impose real economic costs on firms.

CHINESE COMPETITION:

38


Chinese leather industry ranks top on the raw material resources,
product yield and import and export trade in the world. China is
one of the major competitors to India’s leather sector as it has the
capability to produce large
volume at low price. Chinese leather exports have increased by
three-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


Analysis of Export Performance of leather and leather products
during
April-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 million
in the corresponding period of last year, registering a positive
growth of 11.17% in Dollar Terms. In rupee terms the export
touched Rs.98058.07 million against the previous year’s
performance of Rs.82370.01 million showing a positive growth of
19.05%.

A Statement showing the Product-wise Export
performance during April-October 2008 vis-à-vis April-
October 2007 is given below:

(Value in Million Rs)
CATEGORY APR-OCT APR-OCT
2007 2008 % VARIATION
Finished 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


(Value in Million US$)
CATEGORY APR-OCT APR-OCT
2007 2008 % VARIATION
Finished 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


2.0 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


These 12 countries together accounts for nearly 77.98% of
India’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


• 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


3.0 TREND IN MAJOR IMPORTING COUNTRIES OF
LEATHER PRODUCTS

(In Million US$)
Country April-Oct April-Oct % Variation
2007 2008
Germany 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


Source: DGCI & S

4.0 PORT-WISE EXPORT PERFORMANCE
As per the Port-wise compilation for the period April-October
2008, export of leather and leather products from all the Regions
are showing positive growth.

(Value in Million
US$)
APR- APR- %
Region OCT Share in OCT Share in Variation
Total Total
2007 Export 2008 Export
Souther
n 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%
Norther
n 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 not
reflect the accurate regional performance:

Source: DGCI& S

46


47


SWOT 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


direct standards by many players
marketing

CHAPTER THREE

GOVERNMENT ROLE IN INDIAN
LEATHER INDUSTRY

49


PROSPECTS FOR INDIAN LEATHER EXPORTS:
Exports has brightened in the recent year as India has emerged
natural and alternate supplier of leather and leather goods to the
global market. India has one of the highest concentrations of
cattle population and produces close to 10% of global leather
every year. Within the export basket, finished leather exports still
constitute a significant 24%. Footwear as is known is the main
driver of growth with more than 41% of the share in the export
market.

India with its advantage in the availability of raw material and
large number of people available in the employment sector with
its low manufacturing cost provides ample opportunities for
entrepreneurs to invest and grow. Government of India policy of
allowing 100% FDI has opened the gate for global leather
entrepreneurs to explore this leather rich country.

Special Economic Zones (SEZs) are created in India for producing
leather products. These zones are deemed foreign territories
where exports and imports are duty free. A foreign investor can
own his factory in these zones and could repatriate 100% profit.
There are huge concessions in taxes with five year holiday on the
profit tax (income tax) and another five year with lesser
percentage of tax as compared to units outside the SEZ. Plots are
available in SEZ for investments

Joint ventures and business collaborations are the known
business models in Indian leather sector. As the consumption in
the domestic market is increasing day by day, India is poised to
import large quantities of leather from abroad. It would be
beneficial for the overseas brand owners to forge business
partnerships with the existing manufacturers in India with or
without equity participation and manufacture goods for domestic
market. Large numbers of living examples of JVs are there for
anyone to see.

50


Government of India is facilitating the development of
infrastructure by promoting leather product parks. These parks
are expected to have a complete link in the supply chain and they
are expected to increase the production of leather goods and
products in the next five years.

51


INDIAN LEATHER DEVELOPMENT
PROGRAMME (ILDP)
IMPLEMENTATION DURING 11TH FIVE YEAR PLAN
(2007-12)

Leather Sector is the 10th largest manufacturing sector in India
and it plays an important role in Indian economy in view of its
substantial overall output, export earnings and employment
potential. The Leather Sector employs 2.5 million people with
majority from weaker sections of the society and about 30%
women. The Sector is dominated by small and medium
enterprises. In order to augment raw material base, enhance
capacity, address environmental concerns, human resource
development, attract investment and global marketing of Indian
Leather, the Central Government has approved implementation of
the Indian Leather Development Programme (ILDP) for the 11th
Five 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


II. 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


(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


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


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


SUPPLEMENT TO FOREIGN TRADE POLICY
2004-2009 ANNOUNCED ON 26TH
FEBRUARY, 2009

Union Minister for Commerce and Industry Shri Kamal Nath
announced the Supplement to Foreign Trade Policy 2004-09 on
February 26, 2009. The major benefits announced in this
supplement are given below:

PROMOTIONAL SCHEMES FOR LEATHER, TEXTILES
ETC.

 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


 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


 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 and
Department of Revenue provisions have
been aligned in following matters:

59


 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 BY
GOVERNMENT OF INDIA TO EXPORTERS:
The Government of India had earlier announced a package of
relief measures to the exporters on account of the losses suffered
by the exporters due to steep appreciation of Indian Rupee
against overseas currencies in the past 8-9 months. The relief
measures included upward revision of the DEPB Rates uniformly
for leather and leather products by 3%, reduction of the interest
rates on pre-shipment and post-shipment Rupee Export Credit by
2% for the period Apr. 1- Dec. 31st, 2007 for Leather Products and
10% reduction in ECGC Premium on Coverage Charges.

60


SERVICE TAX EXEMPTION ON CERTAIN
SPECIFIED SERVICES:
The Department of Revenue, Ministry of Finance, Government of
India has issued a Service Tax Notification, dated Oct. 2007.

The Service Tax exemption has been granted on the
following services:

S. Taxable Services
No.
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


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 July
13,2007 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 Leather
Products. The RBI has now issued a notification dated Oct. 6,
2007 (copy enclosed) extending this benefit to exporters of
various 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 the
form of non-interest bearing current accounts.

62


The RBI has issued a Notification dated Oct. 6th, 2007 through
which exporters maintaining EEFC accounts are permitted to earn
interest on EEFC account to the extent of outstanding balances of
US $ 1 million per exporter. Members may note that this is a
temporary measure valid up to Oct. 31st, 2008. Accordingly, it will
now be possible for account holders to maintain outstanding
balances to the extent of US $ 1 million in the form of term
deposits 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


 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


THE DUTY PRESENTLY APPLICABLE ON RAW MATERIALS, CAPITAL
GOODS AND INPUT USED BY THE LEATHER & LEATHER PRODUCTS
INDUSTRY 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 accordance
with 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 thereof
exempted 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 falling
under Chapter 43.01 & 43.02 have been exempted from Basic
Customs 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 duty
of 5% as per List 6 of CN 17/2001. And these are also exempted
from levy of Countervailing Duty (CVD)

Certain leather chemicals, finishing axillaries, components,
consumables etc used in leather & leather products Industry are
eligible for concessional import duty 25% CVD equivalent to
Central Excise duty is leviable on such inputs. These are listed
under List 3A & 3B of CN17/2001 vide SI No. 159.

The import of saddle tree required for Harness & Saddlery goods
Industry and which fall under Sub Heading 3926.90 of the
Customs Tariff, is allowed at concessional duty of 5% in terms of
SI.No. 128 of CN 17/2001.

The import of fasteners and poly wadding materials and certain
other inputs are allowed duty free import by the manufacture-
exporters of leather garments to the extent of 3% of their
previous year’s export performance.

Tags, label, printed bags, stickers, belts, buttons or hangers,

65


imported by bona fide exporters, are exempted from duty in
terms of SI No. 130 of CN 17/2001.

Tanning extracts like wattle extract, quebracho extract etc are
allowed to be imported with 10% Basic Customs Duty. No
countervailing duty is leviable on Wattle Extract falling under
Chapter 3201.20. However, import of other vegetable tanning
extracts under Chapter 32 would continue to attract
countervailing duty of 16%.

4% Special Additional Duty of Customs (SADC) will continued to
levied on imports of all items. However, the imports under
Advance Licenses, DEPB Scheme, EPCG Scheme etc are
exempted from levy of Special Additional Duty of Customs,.

10% surcharge on the Basic Customs duty has been removed for
all the imports.
Leather chemicals and finishing axillaries, component,
accessories and consumables indigenously produced will be
subject to 16% Central Excise duty.

66


CHAPTER FOUR

LEATHER INDUSTRY-TRADE
ORGANIZATIONS

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

MAJOR PRODUCTION CENTRES:

The major production centers in India for leather and leather
products are located in:

SOUTH REGION
Tamil Nadu Chennai, Ambur, Ranipet,
Vaniyambadi, Trichy, Dindigul

Andhra Pradesh Hyderabad

Karnataka Banglore

NORTHERN REGION

67


Punjab Jalandhar

Haryana Ambala, Gurgaon, Panchkula and
Karnal

Delhi Delhi

EASTERN REGION
West Bangel Kolkatta

CENTRAL REGION
U.P. Kanpur, Agra

WESTERN REGION
Maharashtra Mumbai (Bombay)

LEATHER INSTITUTES

68


 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


 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


COUNCIL FOR LEATHER EXPORTS
The 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 export
promotion activities and overall development of the Indian leather
industry. The Council’s activities also include promoting Foreign
Direct Investment and Joint Ventures in the Indian Leather
industry. The CLE serves as a bridge between Indian leather
exporters 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


 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


MAIN MARKETS

NORTH AMERICA
For leather jackets of high value these people are ready to pay
any price.

GERMANY
For shoes and upper shoe.

EUROPE
For valets, purses, hand bags and ladies item

CIS
For all products together more than 25% goes to these parts.

OTHER MARKETS:
DENMARK,
SAUDI ARABIA,
SOUTH AFRICA

73


LATIN AMERICA becoming strong markets for India.

INTERNATIONAL LEATHER ORGANISATIONS

U.S.A.
ALCA
The American Leather Chimists Association
c/o University of Cincinnati - Tanners Bldg, P.O.Box 210014
CINCINNATI, OHIO 45221-0014
E-mail: donmezk@email.uc.edu

FFANY
Fashion Footwear Association of New York
1414, Avenue of the Americas, Suite 203 NEW YORK, N.Y. 10019
The Fashion Footwear Association of New York, fondly known as
FFANY, is a non-profit organization. Our goal is to promote and
improve the general awareness and demand for fashion footwear
and related products and to serve as an advocate of the multi-
billion dollar footwear industry globally. FFANY represents 300
corporations, and 800 of the most prestigious footwear
brandnamesworldwide.

74


FFANY's primary purpose is to organize and implement 6
international trade shows a year in New York City. All arkets are
held at the Hilton New York located at 1335, Avenue of the
Americas at 54 th Street

FIA
Footwear Industries of America
1420 K street, NW suite 600 WASHINGTON, DC 20005

LLGMA
Luggage and Leather goods manufacturers of America Inc.
NSRA
National Shoe Retailers Association
Trade organisation representing independent shoe retailers.
7150, Columbia Gateway Drive, COLUMBIA, MD 21046

SSIA
Shoe Service Institute of America
Robert J. Galvin - Webmaster
12114 Old Line Center Waldorf, 20602 BALTIMORE, MD
SSIA is the Trade Association for the shoe repair industry in North
America. Founded in 1904, its members are wholesalers,
manufacturers and importers of shoe repair and shoe care
products and machinery.

VENEZUELA

CAFACA

Venezuelan Association of Manufacturers of Components
and Products for the Footwear Industry.
Av. San Felipe, Quinta Adina 65, La Castellana, CARACAS 1060
E-mail:cafaca@hotmail.com
CAFACA promotes the interests of its members both at a national

75


and international level and is developing an export programme
for the Venezuelan components sector. It is also sponsoring the
components fair EXPOCOMP 200.

VIETNAM
LEFASO VN

Vietnam Leather and Footwear Association
25, Ly Thuong Kiet Str. HANOI
E-mail: hhdg@hn.vnn.vn

Year of establishment: 1990

Vietnam Leather and Footwear Association (LEFASO VN) is a
social economic affiliated and voluntary organization representing
manufacturers, traders, technical and science researchers and
services suppliers engaged in the industry from all sectors of the
economy those are operating in Vietnam. The Association is
established and run on the principles of voluntary, equality and
mutual benefits among the members.

The Association has its own logo, stamp and account. Working
regulation of the Association has been approved by the Minister
of Industry.

Targets of the Association are to conduct economic affiliated
activities, designate and coordinate in action among the
members relating to manufacture, exportation, importation,
material supply, product consumption, etc… in the leather and
footwear business, aimed at taking fullest account of the existing
potential, improving product quality and social - economic effects
to the member enterprises, in the meantime, increasing
competitive edge in export markets and representing a voice for
the member's interests.
76


Vietnam Leather and Footwear Association has become an official
member of the Asian International Footwear Association since
1996. The Association plays a key role in promoting international
cooperation, providing technical - technological and training
support and giving related information.

Organization of the Association: The Executive Committee
includes 16 members representing all economic sectors involved
in the industry throughout the country. The Permanent
Committee consists of 7 members: Chairman, 05 Vice Chairman
and General Secretary. Secretarial group managed by the
General Secretary, help the Executive and Permanent Committee.
The Association is now having 90 members and new members are
continuing to join the Association

Vietnam Leather and Footwear Association looks forward to
having cooperation with all organization and companies at home
and abroad on the different areas of the industry.

VIETNAM LEATHER AND FOOTWEAR PRODUCERS
ASSOCIATION
Head Office: 26, Le Dai Hanh Str. HANOI

The Vietnam Leather and Footwear Producers Association is a
volunteer organization with more than 60 members of different
economic components in manufacturing and trading areas ;
leather, shoes, rubber, plastic, canvas, imitation leather and other
fields of activity concerned.
The association has relations with Leather and Footwear
Associations of many countries in the region and in the world.
The association has pleasure to get new members from the
country and abroad based on the principle of volunteer and
abiding by the regulations of the Association.

77


CHAPTER FIVE

PROMOTION AND MARKETING OF

ENTRY INTO THE MARKET: BASIC
CONSIDERATION

78


A potential supplier seeking to enter the market must ensure first
of all that he can compete with other suppliers on quality and
price. Before embarking on an export venture, the exporter must
be assured about his product and to which segment he wants to
serve. A delicate care of following points can go along a long way
is 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 exporters
maintain a separate research development with qualify staff for
his purpose. In department collects information about foreign
market from all available sources and agencies. Even surveys are
conducted. The conclusion drawn from such research activities

79


are supplied to policies maker for forming short term and long
term marketing strategies, which play a decisive role in the
success of the whole marketing efforts which is very well
accepted at the government level and also at the level of
business at present.
Various official and all other agencies collect and publish market
information for the benefits of exporters, such information is
important in all types of research activities. In fact, research
activities, a lot of secondary information is available in export
marketing though official and non- official agencies in India. The
government has made elaborate institutional arrangement to
help exporters in the field of market intelligence. It is imperative
that before we sell or market the leather product in the
international market, we make a very close look and the intensive
about the various factors influencing the selling of the product.
Needless to say, that the study has to be in the light of such
factors pertaining to the importing country. Absolute care,
through sincerity, correctness and relevance of data, right
channels and perfect contacts alone can lead the exporter to
know the market well.

An exporter should thus, take care of the following points
while marketing the products:
 Climate
 Tradition
 Demand
 Government policy
 Competition
 Fashion

CLIMATE:
A careful study of the geographical condition and demand of the
country in which the goods to be exported enables the marketing
manager to trigger the right shot in matters international
business. The temperate belt in both the hemisphere is
considered as an ideal location for leather products.

80


TRADITION:
Tradition plays an important role in marketing the leather
product. However, this applies only to a few of the leather
products, such as shoes or the whole foot ware range in general
as regard other leather products such as jacket the impact of
tradition dampens.

DEMAND:
The need for the particular leather product in the country where it
is exported should be ascertained. The demand and supply
should be on even terms. If the demand is less then we might fail
to market our product successfully.

GOVERNMENT POLICY:
The most instances of different government policies in different
countries are that of quantity restraint or a quota restriction. In
most of the other countries where quantity restraint is applicable
it is the government which fixes the quota for a particular product
and the local suppliers do not suffers.

COMPETITION:
One of the intelligent ways of entering the export market in a
particular country with the level of quality and the price of the
competitors.

FASHION:
Fashion is one of the most important and to some extends, rather
inconvenient factor, which affects the selling of the leather
products. It is the most important because fashion trends and
fashion sensitivity are more apt in the U.S. and western European
countries. Coincidentally, leather product enjoys a good market in
these countries. Again, it is an inconvenient factor for an ordinary
exporter because of its flexibility. The fashion trends seem to
change every year and so-called fashion trends have an equal
urge to discard the things, which are out of fashion as they have
for embracing the things, which are in fashion. It is therefore, the

81


duty of the marketing manager to either stay or tune with the
latest fashion or created a new test for the consumer. The latter
one being difficult is not just impossible to be done with a careful
study of the previous marketing trends. Qualitative advertising
and 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


INTERNATIONAL LEATHER FAIRS IN INDIA -
2008-09

S.N DETAILS OF PARTICULARS OF THE
PRODUCTS
o. THE FAIR ORGANIZER
India Trade Promotion
Leather Goods
Organisation Pragati
(like wallets, purses,
Bhawan, Pragati
Delhi hand bags, travel-
MaidanNew Delhi 110001.
International ware etc.,), Leather
India Trade Promotion
Leather Fair Garments, Footwear
OrganisationPragati
Pragati (including non-
Bhavan, Pragati
1 Maidan New leather footwear),
Maidan,New Delhi - 110
Delhi Footwear
001(India)
Components,
Phone: 91-11-23378802,
Oct 16-18, Finished Leather,
23371965
2008 Accessories,
Fax: 91-11-23371869,
Saddlery & Harness
1492, 1493
items
www.dilfleatherfair.com

83

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