Leather & Footwear - Group 2

8/2/2019 Leather & Footwear - Group 2

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Shakshi Garg

Arushi Bansal

Manisha Devi

Kshamta Sharma


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India is a traditional leather exportingcountry. Status changed from a country

exporting finished Leather to finished

products. India is a 8th Largest earner of foreign

exchange for the country.


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Government of India shall make concerted efforts to

promote exports in these sectors by specific sectoral

strategies that shall be notified from time to time. Exports during 2005-06 were close to 3 Billion.

Employs 2.5 million people mostly women has

huge social impact.

There are more than 2300 member exporters in theCountry, situated in clusters in Chennai, Kanpur,

Kolkata, Agra, Noida and Mumbai.

90% of raw materials for the tanneries are fromwithin the country and only 10% are imported.


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The export of Leather and Leather Products for theperiod April-March 2007-08 touched US$3477.52million against the performance of US$3059.43million in the corresponding period of last year,registering a positive growth of 13.67% in DollarTerms

Nearly 75% ofIndias Export of Footwear is to theEuropean Countries and the USA

MNC Brands sourced from India areAcme,Clarks, ColeHann, Deichmann, Ecco, Elefanten,

Florsheim, Gabor, Hasley, Hush Puppies, Double H,Justin etc.


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The Footwear Sector is now de-licensed and de-

reserved, paving the way for expansion of capacities

on modern lines with state-of-the-art machinery. To further assist this process, the Government has

permitted 100% Foreign Direct Investment through

the automatic route for the Footwear Sector.

The Indian Footwear Industry provides employment

opportunities to a total of 1.1 million people


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The Footwear Sector is now de-licensed and de-

reserved, paving the way for expansion of capacities

on modern lines with state-of-the-art machinery. To further assist this process, the Government has

permitted 100% Foreign Direct Investment through

the automatic route for the Footwear Sector.

The Indian Footwear Industry provides employment

opportunities to a total of 1.1 million people


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(a) Duty free import entitlement of specified items is3% of FOB value of exports of leather garmentsduring preceding financial year.

(b) Duty free entitlement for import of trimmings,

embellishments and footwear components forfootwear (leather as well as synthetic), gloves,travel bags and handbags is 3 % of FOB value ofexports of previous financial year. Such

entitlement shall also cover packing material, suchas printed and nonprinted shoeboxes, smallcartons made of wood, tin or plastic materials forpacking footwear.

(c) Machinery and equipment for Effluent Treatment


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(d)Re-export of unsuitable imported materialssuch 12 as raw hides & skins and wet blueleathers is permitted.

(e) Countervailing Duty (CVD) is exempted onlining and interlining material.

(f) CVD is exempted on raw, tanned anddressed fur skins falling under Chapter 43 ofIndian Trade Classification (HarmonisedSystem) Classification for Export & ImportItems [ITC (HS)].

(g) Re-export of unsold hides, skins and semifinished leather shall be allowed from PublicBonded warehouse at 50% of the applicableexport duty.


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Hides, Skins and semi finished leather may beimported in the Public Bonded warehouse forthe purpose of Domestic Tariff Area (DTA) sale

and the unsold items thereof can be re-exported from such bonded warehouses at 50%of the applicable export duty. However, thisfacility shall not be allowed for import under

Private Bonded warehouse. Leather Sector (excluding finished leather) is

eligible for Status Holders Incentive Scrip


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Duty Credit Scrip benefit under Focus Product Scheme (FPS) notifiedunder Chapter 3 of the Foreign Trade Policy has been enhanced from2% to 4% for leather products and footwear

Leather sector shall be allowed re-export of unsold imported rawhides and skins and semi-finished leather from Public bonded

warehouses, without payment of any export duty. This will facilitatethe logistics for establishment of such warehouses and easy access toraw material for the leather sector.

Finished Leather export shall be entitled for Duty Credit Scrip @ 2%under Focus Product Scheme (FPS).

Agra has been notified as a Town of Export Excellence for LeatherProducts

Zero duty EPCG scheme, introduced in August 2009 and valid foronly two years upto 31.3.2011, has been extended by one more yeartill 31.3.2012. The Leather Sector is one of the sectors eligible foravailing this scheme.

The Status Holders Incentive Scrip Scheme (SHIS) was announced inthe Foreign Trade Policy 2009-14

Exporters shall now have the flexibility to get a high value EPCGauthorisation by filing their EPCG application on Annual basis,without the need to file the application for individual capital goodsfrom time to time. It will reduce transaction time and cost.


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India has the world's largest source of leather-its

livestock population. With the present availabilityof 33.2 million raw hides and 69.9 million rawskins per annum, India is well placed to satisfy asignificant part of the world's requirement ofleather footwear and leather goods.

The share of finished leather in the total exportshas gone up from about 19 per cent during 1974-75to about 57 per cent during 1979-80. Anappropriate policy would be evolved andexpeditiously implemented to increase on a

sustained basis the export of leather footwear andleather goods, along with the generation ofincreased employment. In this effort, the variousState leather Development Corporations and theBharat Leather Corporation would play a

significant role.


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The leather industry in India, being atraditional industry, is highly employment

oriented. There is need for technological improvement in

the methods of tanning and finishing of leatherwith a view to upgrading the quality and

output, and realizing optimum value in theexport markets. Pollution has been anothermajor problem of the industry and needs to becontrolled by lesser use of water pollutants,toxicants, economic treatment methods, fullerutilization of materials, recycling and betterutilization of solid and liquid wastes.


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The industry has a great export potential. Theexports of leather and leather goods in 1984-85were of the order of Rs. 584 crores. The share ofsemi-finished leather in total exports has comedown from 82 per cent to 12 per cent in 1983-84,with a corresponding increase in the exports offinished leather and leather goods. It should be

possible to achieve the target of Rs. 1000 crores by1989-90 with the use of sophisticated modernmachinery and increase in productivity. Duringthe Seventh Plan, the value of exports rose from alevel ofRs.584 crores to Rs.2030 crores

The leather industry is reserved for the small scalesector, which along with the cottage sectoraccounts for over 75 per cent of the total leathergoods production.


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One of the problems in the leather sector has beeninadequate supply of raw materials i.e. raw hidesand skins.

A major objective of the Ninth Plan would bemodernization of leather processing industry aswell as artisan sector in footwear and leathergoods segments. This would include (a) cost-reduction through higher productivity, (b) puttingin place cleaner production systems, and (c)focusing on global market leadership in selectedvital sectors through improvement of quality andconsistency of products.

The Inter-Ministerial Group constituted to evolve a

comprehensive strategy for the development of theleather sector has assessed that India has thepotential to expand exports from the level of US $2.7 billion in 200506 to US $ 7 billion in 201112.


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The indigenous raw material base of the industry isdeficient. As of now about 90% (1.8 billion sq ft) ofleather is produced in the country from indigenoushides and skins.

4 billion sq ft needed to meet out the future targets.

Another challenge is the problem faced by theexisting tanning units has the imposition of rigorous

environmental requirement (Zero Liquid Discharge)by the State Pollution Control Board under thedirections of the High Court.


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There is acute shortage of skilled and semi-skilledworkforce

It is estimated that if the full potential is to berealized 0.5 million workers would need to be trainedManufacturers are unable to meet the large volumeorders from the US, which accounts for a large shareof world importsIt is needed to scale up the production and diversifythe product mixThe competitiveness of Indian exporters of leatherproducts suffers on account of bad roads, delays inInland Container DepotsThis is mainly due to the fact that the channels in theports lack the depth necessary to allow large ships tocome to these ports


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In order to address the above challenges thefollowing significant interventions areproposed

For augmenting the raw material base, rearing

of animals would be encouraged as per thescheme for modernization of slaughterlaunched under PPP

In order to stimulate fresh investment in

leather products, it is proposed that at least 10leather complexes would be established on thepattern of the SITP scheme of the Ministry ofTextiles in the 10th five year plan


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A large Human Resource DevelopmentMission will be launched for onsite training of

workers and artisans in the unorganized sectorand also for entrepreneurship development.

The Footwear Design and DevelopmentInstitute (FDDI), will be provided with

additional machinery, equipment, workshops,and laboratory facilities for running courses ondesign and technology with increased intakeand a new branch of the FDDI will be set up

In the 11th

Five year Plan an allocation of Rs1300 crore has been made for the ILDP.


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766.93

1163.82

266.11

343.99

784.95

105.81 45.9

finished leather

leather footwear

footwear components

leather garments

leather goods

saddlery and harness

non leather footwear


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CONCUSIONS ANDRECOMMENDATIONS Key conclusions for Indian leather and footwear sector:

Low market share, declining over a period a time Indias share of global exports was only about 2.2% for the period 2001

2005

Indias share declined from 8% in 1980s to current levels. In comparison, Chinas share increased from 0.41% in 1981 to around35% in 2005

Low share of value-added products Indias footwear exports formed less than half (41%) of its total exports.

On the contrary, finished leather which has significantly lower valueaddition compared to footwear constituted 29% of Indias exports. In comparison, China exported 68.2% as footwear and 2.8% as finished

leather.


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Export portfolio not aligned to key segments

India exported about 71% as value added products namely leatherfootwear, leather apparel and leather goods.

Footwear constituted 62% of world imports. However, Indias

footwear exports as mentioned earlier formed less than half (41%) of itstotal exports. However, finished leather constituted 29% of Indiasexports while the share of finished leather in the global imports is only18%.

In comparison, China exported as high as 97.2% as value addedproducts.

Geographic portfolio not aligned to key markets

One of the largest markets for footwear USA (which accounted for28.1% of global imports) is not among the top three destinations forIndian footwear exports. Similarly, USA forms 33.9% of global importsof leather apparel but only 16.9% of Indias portfolio.

One segment where India is aligned to key customer markets isfinished leather which is in the upstream side of the value chain.

In comparison, the USA which is the largest importer of leatherproducts is the top destination for China. In summary, China has aaligned itself significantly better to the global leather trade compared to

India.


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RECOMMENDATIONS:

Improving cost competitiveness through value chain

efficiencies: Implementing best practices at a firm level and at the sect oral

level through cluster based approach, setting up cross-industry clusters and support them through governmentalinterventions on infrastructure like port clearances and power.

Promoting footwear component clusters near leatherclusters: Promotion of footwear component industries near the leather

and footwear clusters or incentives for building scale for thecomponent industries would boost the leather sector.

Focus on Training: Increasing the capacity of traininginstitutes The existing capacities of the training institutes would not be

sufficient to meet the employment generation projections for2011.


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Increasing the tanning capacity :

Indias current capacity of tanneries is around 2

bn square feet whereas to achieve the exporttarget of 7 bn $ in 2011, around 4 bn square feetof finished leather is required.

Attracting Foreign Direct Investment:

The leather and footwear sector had seen onlyRs.200 Crores of FDI (Which is only 0.15% ofIndias total FDI from 1991 to 2005).

FDI brings in scale, efficiency in operations andlatest management practices for the industry tobenefit.


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Leather & Footwear - Group 2

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