Tamil Nadu, which is a dominant player in the footwear industry at both the national and global levels, on Tuesday launched its Footwear & Leather Products Policy 2022 with a vision to transform the State into a favoured destination for footwear and leather products manufacture in Asia.
The policy will offer a special package for footwear and leather products (FLP) manufacture and incentives for FLP Design Studios.
Interestingly, even as the event was happening in the morning, social media was abuzz with news that Income Tax Department officials were searching the premises of several leather companies in the state.
Tamil Nadu accounts for 26 per cent of national leather manufacturing output and 48 per cent of exports. Global brands such as Louis Vuitton, Giorgio Armani, Gucci, Clarks, Cole Haan, Daniel Hechter, Bugatti, Prada, Zara, Coach, Tommy Hilfiger, Hush Puppies, Ecco, Johnston & Murphy, Hugo Boss, Pierre Cardin, and Florsheim, are either manufactured in the state, or it serves as a sourcing point for raw materials.
Chief Minister M.K. Stalin launched the policy at the Footwear & Leather Sector Conclave. The State government signed MoUs with five companies - KICL SEMS; Wagon International; KICL; Walkaroo and KICL (footwear cluster) - with a total investment of ₹2,250 crore, to generate employment for 37,450 persons. It had already launched a series of policies for various sectors, including industrial, MSME, start-up and innovation.
The foundation stone for a ₹400-crore Mega Footwear Manufacturing park at Panapakkam, Ranipet, was also laid at the conclave.
The State government is targeting investment of Rs 20,000 crore in footwear and leather products manufacture, besides attracting 2,00,000 jobs in the segment, Stalin said in his speech.
The policy mission includes creating a conducive eco-system and resilient supply chain for footwear manufacture, by supporting infrastructure through clusters, parks and common facilities, to enhance the non-leather footwear and component ecosystem by supporting ancillary units, and improving ease of doing business for FLP units.
‘Large’ FLP manufacturing projects in “B” and “C” category districts (₹300 crore+) will be eligible for Special Packages, while ‘Mega’ projects in “A” category districts (₹500 crore +) will be eligible for a ‘Structured Package of Assistance” as per the Tamil Nadu Industrial Policy (TNIP) 2021.
Considering the labour-intensive nature of FLP manufacturing, the eligibility criteria for firms applying for incentives will be relaxed under the “Special Package for FLP Manufacturing” . For leather FLP and standalone non-leather footwear, the eligibility is a minimum investment of Rs 50 crore and minimum employment of 2,000 people; for component cluster ₹300 crore and 3,000 persons and for allied footwear industries (outside the cluster) ₹150 crore and 100 persons, the policy said.
Investments made from April 1, 2022, will be considered eligible for availing of incentives.
Considering the higher turnover to asset ratio in FLP manufacturing, a turnover-based subsidy will be applicable as a percentage of the turnover in each financial year. For leather FLP in B category districts, it will be 1.5 per cent, and for C category districts, it will be 1.75 per cent; for standalone non-leather footwear manufacturing 1.75 per cent and 2 per cent, and for component clusters, it will be 1.5 per cent and 1.75 per cent.
The companies can choose to avail of turnover-based subsidy from the date of commercial production or upon achieving the minimum eligible investment for structured package in the given industry category type, whichever is later, up to a cap of 4 per cent of cumulative investment in eligible fixed assets per annum for a period of 10 years, the policy said.
Fixed Capital Subsidy
Industries allied to footwear manufacturing or component industries located outside the clusters will be eligible for a Fixed Capital Subsidy of 10 per cent of investment in Eligible Fixed Assets to be disbursed in 10 equal annual instalments.
The company can choose to avail of the Fixed Capital Subsidy from the date of commercial production or upon achieving the minimum eligible investment threshold of ₹150 crore and minimum employment threshold of 100 jobs, whichever is later, the policy said.