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Domestic leather sector flattened as $1-b export orders stand cancelled

TE Raja Simhan Chennai | Updated on April 28, 2020 Published on April 28, 2020

Representative Image   -  Arunangsu Roy Chowdhury

India’s leather industry, which employs nearly 4.42 million people, is bearing the brunt of the pandemic, with exports worth nearly $1 billion (₹7,600 crore) cancelled by buyers in countries such as the US and Europe.

The industry has been hit hard by shipments being put on hold by buyers as well as a delay in receipt of payment for shipments made. “It will take at least a year for the industry to bounce back,” said PR Aqeel Ahmed, Chairman, Council for Leather Exports (CLE), which is the apex trade promotion organisation of the Indian leather and leather products industry.

The leather, leather products and footwear industry is a labour-oriented one, employing people belonging to economically weaker sections. Over 90 per cent of the exporters are in the MSME segment, Ahmed told BusinessLine.

Production hub

With exports of over $5 billion, India’s leather sector is the second largest producer of footwear and leather garments in the world, the second largest exporter of leather garments and the third largest exporter of saddlery and harnesses.

The major production centres are located in Tamil Nadu, West Bengal, Uttar Pradesh, Maharashtra, Punjab, Karnataka, Telengana, Haryana (Gurugram), Delhi, Madhya Pradesh, Kerala, Rajasthan and Jammu & Kashmir.

In Tamil Nadu alone the export order cancellations are at nearly $370 million (₹2,800 crore), said Ahmed, who is also the Managing Director of the Chennai-based Florence Shoe Co Pvt Ltd. In a video conference that Tamil Nadu Chief Minister Edappadi K Palaniswami held with industry leaders, Ahmed sought government support for the industry.

China and Vietnam are now operating at full capacities, he said. At the same time, stores in Italy, Spain and Germany are gradually reopening. “We hope it will create some opportunities for us in the near future,” he added.

Post lockdown, it has to be seen if global buyers would still wait to buy from India, as Bangladesh has given huge support to their respective industries, said Ahmed. “I hope we don’t miss another opportunity as exports totally depend on buyers and the importing country,” he added.

Short- and long-term challenges

The short-term challenge is to complete the pending orders. The long-term challenge depends on samples that have to go before May begins, said Ahmed, adding that six months’ orders are at stake.

The CLE has sought a comprehensive economic stimulus package from the government for the leather industry, he further said. This calls for improving liquidity and cash flow, enhancing export competitiveness and quicker tax refunds.

Other suggestions include postponing the statutory due dates to June 30, a 25 per cent increase in working capital loans, and interest subventions and wage subsidies up to June 30, he said.

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Published on April 28, 2020
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