The Hindu Business Line : Leather industry to get tech upgradation fund

According to Mr Rafeeque Ahmed, Chairman, Council for Leather Exports (CLE), the fund will be available to all segments of the leather industry as a capital subsidy for plant and machinery. Units in the small-scale sector can avail themselves of a 30-per cent subsidy and others will be eligible for 20 per cent up to a ceiling of Rs 50 lakh.

Over the next two or three years this fund will catalyse investments of about Rs 1,200 crore by the industry that is on a modernisation and capacity expansion drive thanks to demand from the developed countries.

International trends such as increasing costs in China are pushing international brands to diversify their source. More companies are looking at India as a source for leather goods, he said.

Tanning units, footwear manufacturers and leather goods and garments units - the growth areas in leather - are expected to absorb most of the funds.

The modernisation fund, which was approved by the Planning Commission over two years ago, was approved by the Cabinet Committee on Economic Affairs last week and is to be notified within two weeks, according to Mr Ahmed.

In 2004-05, exports touched $2.38 billion (Rs 10,961 crore) against $1.87 billion (Rs 9,075 crore) in the previous year.

The leather industry is targeting exports of $5 billion (Rs 23,000 crore) by 2010, which means that it has to maintain a growth rate of 13.50 per cent. This is not going to come just from marketing initiatives but from a multifaceted strategy that includes infrastructure development, capacity expansion, modernisation, availability of raw materials and components, according to Mr Ahmed.

China has a 22-per cent share of the world trade in leather sector. This did not come from cheap labour but by a planned approach that gave manufacturers there a competitive edge in terms of infrastructure and economies of scale. Once India reaches its target in 2010, it would carve for itself a 4-per cent market share, he said.

Among the initiatives to encourage exports, the CLE has appointed a representative in Italy to enable joint ventures between Italian and Indian companies. Italy exports annually over $16 billion in leather and leather goods and has a strong brand image internationally.

As in other European centres, it is facing increasing costs of production and is looking for other centres of production. CLE hopes to exploit this opportunity, he said.

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