A SURVEY REPORT

ON

“LEATHER INDUSTRY IN INDIA”SUBMITTED FOR THE PARTIAL FULFILLMENT OF

BACHELOR OF BUSINESS ADMINISTRATION

SCHOOL OF MANAGEMENT SCIENCES VARANASI

BATCH: 2011-14

UNDER THE GUIDANCE OF SUBMITTED BY

MR.AMITABH PANDEY SHIVANGI SINGH(READER) BBA-VI /B /15/135

DECLARATION

I hereby declare that this survey titled as, “Leather Industry in India” is my original work under the guidance of Mr. AMITABH PANDEY (READER) towards partial fulfilment of the requirements for the BBA course School of Management Sciences, Varanasi. I have utilized the requisite concepts and applied the required methodologies to analyze the secondary data collected to reach the conclusion present in the report.

This is my original work and the same has not been copied or submitted by

me to any other institution/ university, for the award of any degree/diploma

etc.

SHIVANGI SINGHBBA / VI / B

ROLL NO- 114739

ACKNOWLEDGEMENT

Research work is a combined effort, so one should thank all that have helped in making the report purposeful. Hence I take this opportunity to thank all that have been instrumental in helping me to prepare this report.

It is great honour to be assigned this topic. I am immensely grateful to Mr.AMITABH PANDEY (READER) for his continuous support and guidance while pursuing the project and for taking pains to give his valuable inputs to structure the report. Without his help and valuable inputs and guidelines, the

Completion of this project would not have been possible.I am immensely grateful to PROFESSOR. P.N JHA(Director – SMS Varanasi)for providing me this opportunity to prove my skills and shoulder the responsibilities through this survey report.

I also want to thank Dr. ATISH KHADSE (Coordinator, BBA) for providing me this opportunity.

I also want to thank all teachers, the staff member and library members for their valuable advice and guidance which helped me to make this report purposeful.

I specially wish to thank all other people directly or indirectly related with my research and my friend as without their valuable support this report would not have been possible.

SHIVANGI SINGH BBA / VI / B ROLL NO -114739

PREFACE

It is a great honour to work on a project assigned to me and to prepare a report on that.This project gives information about the “LEATHER INDUSTRY IN INDIA”.

The topic assigned to me was a very challenging one and I had to work really hard to collect the relevant data. After analysing those data I have reached a conclusion which has been clearly stated in the report.

It was not an easy job to work on this project and was possible only with the great help and guidance of my mentor Mr. AMITABH PANDEY (READER)who guided me to the right path in each and every problem that I was confronted with.

Place – Varanasi SHIVANGI SINGH

Date – 03/06/2014

TABLE OF CONTENTS TOPIC PAGE NO

INTRODUCTION 1-14

OBJECTIVES 15

PRODUCTION STRUCTURE OF LEATHER INDUSTRY IN INDIA 16-24

EXPORT OF INDIAN LEATHER 25-31

GOVERNMENT FACILITIES TO INDIAN LEATHER INDUSTRY 32-34

PROBLEMS FACING INDIAN LEATHER INDUSTRY 35-43

SWOT-ANALYSIS OF INDIAN LEATHER INDUSTRY 44-45

GLOBALIZATION AND PROSPECTS FOR LEATHER INDUSTRY INDIA 46-54

FUTURE OUTLOOK FOR PRODUCTION AND EXPORTS 55

RESEARCH METHODOLOGY 56-58

CONCLUSION 59

BIBLIOGRAPHY 60

LEATHER INDUSTRY IN INDIA

INTRODUCTIONIndian Leather Industry has developed to a large extent and is the second largest producer next to China. The industry is equipped mostly with a potential for employment generation, growth and exports, with the annual exports touching 2 billion USD. The industry experienced a positive metamorphosis from being a transporter of raw materials to an established exporter of value added and finished leather products. Currently it is on an ever increasing phase with optimum utilization of available raw materials and maximum returns from exports.

India has less than 3% share in the global trade in leather compared to China's 20%. Government of India realizing the growth potential of the leather industry has been making significant efforts to promote rapid advancement of the industry. On June 30, 2005, the Cabinet Committee on Economic Affairs (CCEA) decided to implement an Rs 2.9 billion scheme for the integrated development of the Indian Leather Industry. Under the scheme, existing tanneries will be modernized and new units will be set up for footwear, components and leather products. This scheme is expected to result in gains in terms of productivity, right-sizing of capacity, cost-cutting, and design-development. The leather and leather products industry is one of the oldest manufacturing industries in India. The Indian leather industry provides employment to about 2.5 million people in the country and has an annual turnover of approximately US$ 5,000,000.

Indian leather Industry occupies a prominent place 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. The exports of leather and leather products gained momentum during the past two decades. There has been a phenomenal growth in exports from Rs.320 million in the year 1965-66 to Rs.69558 million in 1996-97.

HISTORY

The story of leather is long and colourful. Many years before recorded history people wrapped themselves in dried animal pelts. The fact that the skins turned stiff and rotted was a problem, but ways of softening and preserving the hides were discovered. This was the beginning of leather processing. At first the hides or skins were probably dried in air and sunlight. Later they may have processing. At first the hides or skins were probably dried in air and sunlight. Later they may have been soaked in water and dried over a fire. Still later it was discovered that certain twigs, barks and leaves soaked with the hides in water helped to preserve them.

The archaeologists findings, that primitive man used the skins of hunted animals for food as well as clothing. Nomadic tribes made shelters from the hides of larger animals, such as bison . As civilization advanced, preserving hides and tanning them into leather became an important industry. In the 18th century tanning was an old and respectable trade and a tedious one. Nearly a year was spent manipulating a hide before it was delivered as leather to the saddle maker, harness maker or other craftsmen.

Structure And Significance Of Leather Industry In India

The Indian leather industry holds a significant position in the Indian economy in terms of high potential shown for employment, growth and exports. It is estimated that the industry employs around 2.5 million work forces directly or indirectly and 30% of the workforce are women. The skilled and semi-skilled workers constitute nearly 50% of the total work force. The graph below shows the percentage wise workforce employed in different segments of the industry:

45%

7%10%

4%

25%

9%

Flaying,Curing and Carcass Tanning and FinishigFull ShoeShoe UppersChappals and SandalsLeather Goods and Garments

It is amongst one of the industries in which India has abundance of raw material (India is endowed with 21% of world cattle & buffalo and 11% of the world goat & sheep population), adequately skilled manpower and technology, apart from compliance with all international environmental standards and support from associated industries. Since the last three decade the Indian leather industry has undergone a significant structural change, from being merely an exporter for raw materials during 1960’s to a preferred supplier of value added products, the industry is now one of the top ten foreign exchange earners for the country.

The sector comprises of tanneries (where hide and skins are transformed into leather) and manufacturing units (where leather footwear, garments and outerwear, and assorted leather goods are manufactured). These production facilities are spread over organized and unorganized (mostly family owned) units/ production centers with the unorganized units dominating almost 80% of the total production.

Importance of Leather Industry

The leather and leather products industry is one of India’s oldest manufacturing industries. The industry employs about 2.5 million people with a large number of them belonging to poor and marginalized sections of society. The highest number of people is employed in the most basic activity

of this sector which is flaying, curing and carcass recovery followed by Chappal and sandals making. The leather industry also provides employment to a large number of women. More than 80% workers employed in the leather goods and garments and shoes uppers segments are women. Women are also employed in small jobs done on scrap leather.

Moreover, nearly 70% of the leather sector is comprised of small-scale firms, although there also exists a significant number of medium and large-sized firms in all segments of the industry. The Indian leather industry is spread in about six key segments: (i) tanning and finishing; (ii) leather footwear; (iii) footwear components; (iv); leather garments; (V) leather goods; and (Vi) saddlery and harness. The footwear and saddlery and harness segments have the highest shares of the household, tiny and cottage sector. In the tanneries segment, the presence of the medium and large-scale sector is the strongest with a share of 55%. The presence of small- scale units is the highest at 95% in garments, followed by leather goods, saddlery and harness.

Features of Leather Industry In India The Government policies on leather and leather product export started

changing from 1974. Priorities were given for export of value added goods. From the year 1991 onwards only finished leather were exported and export of raw or semi-finished leather was banned.

Many tanners started setting up factories for manufacturing leather products after 1991-92 like shoe uppers, shoes, garments and leather

goods. Similarly many shoe and garment manufacturers began to seek backward linkage, by taking on lease or setting up tanneries. This is a unique development in India, a tanner becoming product maker and the product sector setting up tanneries or leasing out tanneries;

At the same, as incentive to the exporters, the import duties on capital goods have been reduced;

Until 2002, the leather sector was reserved for small scale sector and this may have prevented Foreign Direct Investment (FDI) in this sector. The FDI in this sector from August 1991 to December 2005 is US$ 51.84 million. This is only 0.15% of total FDI inflows and ranked at 30;

Today the industry ranks 8th in the export trade in terms of foreign exchange earnings of the country;

India is largest livestock holding country;

The Indian leather sector meets 10% of global finished leather requirement.

Own raw material source - 21% of world cattle & buffalo and 11% of world goat & sheep population were housed in India.

2nd largest producer of Footwear and Leather Garments.

3rd largest producer of saddler and harness items.

Generating employment for 2.5 Million people, mostly from the weaker sections with 30% women predominance.

Nearly 60-65% of the production is in the small / micro sector5

Promising technology inflow and Foreign Direct Investment

World-class institutional support for Design and Product Development, Human Resources Development and R&D activities.

Types of LeatherThere are various types of leather available in the global market depending on the end usage. These different types of leather are obtained by making them undergo through different processes to give them the required properties. The difference in types of leather can also come from the animal source they are derived from. Accordingly there are leathers made from cow, sheep, goat, pig, lamb etc. Some of the popular types of leather used for manufacturing various leather accessories are:

Vegetable Tanned Leather– This type of leather is obtained from Oak (bark) and other plants that contain natural tannins. Vegetable tanned leather can stretch easily, especially when

soaked in water. It can also be easily carved, molded, hardened, dyed, painted, oiled, waxed... It is one of the most expensive types of leather.

Chrome Tanned Leather– This type of leather is made by soaking the hide of the animal in an acidic bath; high in chromium. The lather is less stretchy, and cannot be carved or molded etc. The leather is relatively cheap.

Oil Tanned Leather-This type of leather is one of the most supple leathers available. It has a slightly oily feel to the surface.

Combination Leather – This type of leather can either be vegetable-oil tanned or made from some other combination.

Buckskin Leather – This type of leather is incredibly soft, is water friendly, strong, and stretchy hide that has been treated wood ash or lime.

Deer hide- This type of leather is made from deer hide and has to be treated by more "modern" tanning methods. The leather is soft and supple, but it lacks many of the other qualities of true buckskin.

Rawhide –This type of leather is made from untanned hide, usually of cattle. It is stiff when dry, and becomes supple and very stretchy when wet.

Cowhide- This type of leather is the most common and is a staple of any supplier. It can be somewhat stiff at times but is available in many weights and cuts.

Pig skin hide- This type of leather is tougher than cowhide of the same weight.

Napa leather-This type of leather is made from sheep skin and is naturally one of the softest leathers and is closest in "hand" to a baby's skin.

Full Grain Leather – This type of leather is the best leather money can buy. Iit is made from the strongest part of leather and hence is quite durable.

Top Grain Leather –This type of leather id of second highest grade. It is obtained by splitting it from the blemished hide and is sanded and refinished.

Genuine Leather – This type of leather is made from layers of an animal's hide that remain after the top is split off for the better grades.

Bonded Leather – This type of leather is leather's bottom and is weak. It degrades quickly and hence not used much.

Nubuck Leather – Nubuck leather is the top grain cow hide with brush kind of effect having short nap along with softness. It is more stain resistant compared to other anilines.

Availability of raw materials

In India, there is a ban on cow slaughter in many states for reasons in most parts of the country, cattle are generally slaughtered only when they become old enough, as permittedby the law. Even so, slaughtering of cattle is done only in a few states like Kerala, West Bengal and those in the North East. Buffalo , sheep and goats are slaughtered for meat and goats are slaughtered for meat all over the country. However, in many parts of North India, the buffalo is used as a draught animal andtherefore not slaughtered until the animals become old.

Collection And Trade In Hides And Skins

The system of collecting hides and skins in India is quite unlikepractices followed in other industrialised countries of the world. A report of the Council for Leather Research in India (CLRI) (which was based on the ‘All India Survey of Hides and Skins’ conducted in 1987) stated that, annually, about 9

million hides and an equal number of skins were lost due to non-recoveryfrom carcasses in far-flung villages. Fortunately, of late, this figure has dropped sharply. A well-established network of butchers, animal breeders, small and big traders, agents, weekly markets and major markets exists across.

Tamil Nadu accounts for more than 60 per cent of the tanning done in the country, with tanners from the state sourcing the bulk of their raw material from other states. They have agents in different parts of the country and the major markets for hidesand skins are Vijayanagaram (AndhraPradesh), Guwahati (Assam), Darbhanga (Bihar), Jabalpur (Chhattisgarh),Ahmedabad, Junegadh, Rajkot and Bahraich (Gujarat), Srinagar and Jammu (Jammu and Kashmir), Trivandrum, Trissur, Cochin and Calicut, Ernakulum (Kerala), Bhopal, Indore and Gwalior (Madhya Pradesh), Mumbai and Sholapur (Maharashtra), Jaipur (Rajasthan), Trichy, Pollachi, Erode and Chennai (Tamil Nadu), Kanpur and Hapur (Uttar Pradesh), Kolkata (West Bengal) and Delhi.

Large traders in major markets have their agents in small feedertowns and villages. They receive hides and skins from villages either through their sub-agents or directly from butchers. Often villagers transport the hides and skins directly to weekly markets from where agents of large traders procure them. A systemof advance payment to butchers also prevails. Generally, it takes7 to 21 days for hides to reach the tannery after the animal has been skinned.

Tanneries in India

Tanneries are spread all over the, country. According to a CLRI report there are 2091 tanneries functioning across the country. This number does not include the activities in the states of Maharashtra (particularly Mumbai),

Karnataka (mainly Bangalore) and Rajasthan have due to economic and environmental reasons.

Preponderance Of Small-Scale Tanneries

As the manufacture of semi processed leather or chrome tanning was reserved for the small-scale sector until recently, there is a preponderance of small-tanneries across the country. Limited resources, small scale of operations, lack of technical expertise and a hand-to-mouth situation prevent a majority of small-scale tanneries from opting for modernization or improved process technologies.

India is now poised to become a major global source of leather accessories. India’s position as the fifth largest global supplier of leather accessories is only going to further strengthen, given the availability of quality raw materials coupled with skilled craftsmanship. The accelerated development and growth of this industry is being aided by the ambitious capacity expansion and modernization plans of the private industry and the Indian government’s encouraging policy measures.

Role Of The Leather Industry In The Upliftment Of Weaker Sections Of Society

The leather industry is employment-intensive, providing jobs to about 2.5 million people, mostly from the economically backward and socially weaker

sections of society. Women account for 30 per cent of the jobs in the leather products sector.

The major production centres for leather and leather products are located in Tamil Nadu (Chennai, Ambur, Ranipet, Vaniyambadi, Trichy and Dindigul), West Bengal (Kolkata),Uttar Pradesh (Kanpur, Agra and Noida), Maharashtra (Mumbai), Punjab (Jallandhar), Karnataka(Bangalore), Andhra Pradesh (Hyderabad), Haryana (Ambala, Gurgaon, Panchkula and Karnal), and Delhi.

Positioning Indian Leather in the Global Market

Indian leather industry today has attained well-merited recognition in the international market besides occupying a place of pride within the domestic market.

India accounts for 6% of the global market in leather goods and 2.78% of the World Import of Leather and Leather Products 6.

India’s export of leather and leather products increased from Euro 1618.01 Million in 2003-04 to Euro 2627.01 Million in 2008-09 registering a phenomenal growth rate of 10.17%.

India is the 5th largest exporter of Leather goods and accessories in the World with a lion’s share of 24.27% in the country’s export of Leather & Leather Products.

Objectives

To study on leather industry in India

To study the structure and significance of leather industry in India

To study the export performance of Indian leather industry

To study the problems related to Indian leather industry

To study the facilities provided by the government to Indian leather industry

PRODUCTION STRUCTURE OFLEATHER INDUSTRY IN INDIA

Unorganized sector plays a dominant role in the entire production of leather and leather products. The small scale, cottage and artisan sectors account for over 75 per cent of the total production. Though the small scale industries (SSI) are classified as organized sector most of them are in the unorganized sector. A contrast of product segments with the production structure of the leather industry in India reveals that while footwear production is undertaken both in large and small scale sectors, leather garments and other products are mainly produced in the small-scale sector. In fact, though footwear is produced both in the large and small scale sector, the small scale sector has almost 90 per cent share in the total production of footwear in India. There are about 42,000 registered SSI units in India producing leather footwear.

Location wise Indian leather industry can be divided into 5 regions namely, southern region, northern region, eastern region, western and central region Among the five regions southern region is relatively wide spread and comprises states like TamilNadu, Andhra Pradesh and Karnataka. Chennai, Ambur, Ranipet, Vaniyambadi, Trichy and Dindigul are the major producing centers in the state of Tamil nadu. Whereas, the capital cities of Hyderabad and Bangalore are the major production centres in the state of Andhra Pradesh and Karnataka respectively. Tamil Nadu is the leading state in India in terms of number of registered factories for leather and footwear industry. The state of Tamil Nadu had 37% (810) of total leather and footwear factories in India at the end of 2004-05. In the northern region the state of Punjab and national capital territory of Delhi are the two main producing locations.

Jallandhar is the major producing centre in Punjab. In the eastern region West Bengal is the only state which produces significantly where Kolkata is the major producing state for major producing centre. In the western region,

Maharashtra is the leather and leather products where Mumbai is the major producing centre. Similarly, in the central region Uttar Pradesh is the major producer with Kanpur and Agra as the two major producing centers. Uttar Pradesh is the second major state in India in terms of number of registered factories with 15% of total factories in India at the end of 2004-05. The states of Tamil Nadu and Uttar Pradesh together accounted for 52% of total factories in 2004-05. West Bengal and Punjab are the other key states in India with significant number of registered leather and footwear manufacturing units.

The nature of these production centers varies in terms of the distribution of producing units and product segments. For example, the small scale industries producing leather are mainly concentrated in the state of Uttar Pradesh and Tamil Nadu.

As far as the concentration of various product segments are concerned, Agra and Ambur are the major production centers of footwear and footwear components. Similarly,Bangalore, Chennai, Delhi, Hyderabad etc. are leading producers of leather apparels whereas Kanpur, Kolkata, Mumbai etc. are the major producing centers for of leather accessories. Thus, the different production centers cater to different segments of leather industry. Nevertheless, there is a great deal of overlapping in this respect also because various segments of the leather industry are more or less interrelated due to scale benefits on account of location.

Wages Salaries in Leather Sector-In the leather industry, that both female and male workers are offered the same wage and there is no discrimination against female workforce. The total number of shifts across firms is approximately in the region of 26 per month. Large variations in wages paid to workers across firms are observed. These variations are noticeable in terms of both payments made via piece rates or monthly wages.

Since the work in this industry is very skill based and people with any prior industry training are always preferred. Such workforce is scarce in supply. In the case of machinery usage, it is observed that across most units, firms have increased their machinery usage. This shows that leather manufacturing units across the country are purchasing more machines and upgrading their technology as new machines by and large embody better and improved technology of production.

Mixed response is found to adoption of modern technology in the recent past. It is asserted that this is due to the fact that large firms have the financial capability to undertake investment in modern machineries and hence consider technological up gradation as a natural phenomenon of moving to a higher end of value chain. On the other hand, small firms because of several constraints- skilled manpower, expensive machinery and fluctuating market demands are unable risk technological up gradation.

Competitive Benchmarking-The competitive benchmarking of India has been done with China, Italy and Brazil to identify the areas where India has competitive advantages and disadvantages as compared to these countries. The exports of India have registered CAGR of 3.61% from 2000 to 2006 as compared to 10% achieved by China. While the exports of India has registered a higher CAGR as compared to Italy and Hong Brazil which are the other two major exporters of leather and footwear products, the analysis of the value of exports show that the share of India in total exports of leather and leather products in world is very low at 3.14%. The higher CAGR of India can also be attributed to lower exports in absolute terms in 2001 as compared to Brazil and Italy.

The labour productivity index of India is among the lowest in the Asian Countries at 0.94 in 2005 as per the study conducted by Asian Productivity Organisation (APO). Mongolia and China have the highest labour productivity index at 1.65 and 1.56 in 2005. The labour productivity in India is very low as compared to China in production of shoes, garments and leather goods. The pairs of shoes per employee per day in India are 20 pairs as compared to China which was at 40 pairs. Similarly, the pieces of leather goods per employee per day in India are low at 6-8 pieces as compared to China at 12-15 pieces. The labour productivity of India has been impacted due to rigid labour laws like lack of flexibility in contract labourlaws. Units employing over 100 people currently fall under the purview of Industrial Disputes Act. The Act stipulates that employers must obtain necessary approvals to effect lay-offs. This proves to be a hindrance especially for small and medium enterprises.

Measures For Anti-Dumping By Companies In India-As in most other countries, protection appears to have been the dominant motivation behind the levying of anti-dumping duties in India. General Agreement on Tariffs and Trade (GATT) therefore contains some contingent measures, which permit the signatories to withdraw their normal obligations under specified circumstances and impose higher protection against import

of one or more goods from one or more countries. Contingent protection measures fall under three categories -- antidumping, countervailing and safeguard measures. Anti-dumping duties are expected to overcome only the problem of dumping. To deal with the problem of direct and indirect Government subsidies there is provision for countervailing duties. In both cases injury and causal link must necessarily be proved. Safeguard measures dealing with the problem of "increased imports" and neither dumping nor subsidies need be present. For safeguard measures to be implemented serious injury to the domestic industry is required to be established. Some safeguard measures are tariff increases or quantitativerestrictions; it remains a sparingly used measure, as compensation may have to be paid to the trading partners in appropriate cases. The subject of anti-dumping is very topical and highly controversial. There seems to be some ambiguity in the definition of trade-distorting phenomenon ''dumping''.

A product is said to have been dumped in the Indian market if it is introduced into the commerce of the country at less than the normal value of the product and it causes/threatens material injury to an established industry of the country. The phenomenon of dumping is per se not condemnable as it is recognized that producers sell their goods at different prices to different market. Differences in price are also due to demand and supply. Export prices are generally lower than domestic prices. However, where dumping causes or threatens to cause material injury to the domestic industry of India, the Authority (Ministry of Finance) initiates necessary action for investigations and subsequent imposition of anti-dumping duties. Normal Value is the comparable price at which the goods are sold, in the ordinary course of trade. The Normal Value cannot be determined by means of domestic sales. The act provides for the following two alternative methods.

1. Comparable representative Export Price to an appropriate third country.

2. Cost of production in the country of origin with reasonable addition for administrative, selling and general costs and for profit.

Leather Manufacturing Process

The processing of hides and skins into leather is a complex procedure that requires a precise combination of many chemical and mechanical operations.

Curing:-Deterioration begins immediately when a cow is killed. After the hides are removed from the carcass, they are salted through and through at the slaughterhouses to prevent decay. After they are salted, 55% of the water in the hide is removed, and they are dried for 3 to 6 days. The rawhides are then sold to tanneries.

Soaking:-In order for the tanning process to work properly, the dry salted hides must be washed free of the salt. This is done by soaking the hides in water to which chemical wetting agents (similar to household detergents) and disinfectants are usually added for 8 to 20 hours, depending on the thickness of the hides. This soaking procedure rehydrates the hides to their original flaccid condition and removes the dirt.

De-hairing:-

The hair must now be removed from the hides. This is done by soaking the hides in chemicals, or depilatory agents, which destroy the hair by attacking the hair root so it will release freely from the hides, loosen the epidermis, and remove certain soluble skin proteins that lie within the hide substance without destroying the desirable collagen of the hides.

Fleshing:-

Excess flesh, fat and muscle must now be removed from the hides. This is done with a fleshing machine.

De-liming:-All the depilatory chemicals must now be removed from the hides. This is done by washing the hides in ammonium sulfate or ammonium chloride and then clear water in big drums. These chemicals not only clean the depilatory chemicals from the hides, they also adjust the receiving the bate, which are enzymes similar to those acid-alkaline conditions (pH) to the proper point for found in the digestive system of animals. When the bates are applied, they attack and destroy most of the remaining undesirable constituents of the hide.

Pickling:-The hides must be placed in an acid environment (low pH) so they will be ready to accept the tanning materials, because chrome tanning agents are not soluble under alkaline conditions. This is accomplished by adding salt and acid to the hides. This is a preserving process in itself,and hides can be kept inthis state for extended periods of time without any deterioration.

Tanning:-The raw collagen fibers of the hides must be converted into a stable product which is no longer susceptible to rotting. This is done by adding chrome tanning agents to the hides in a revolving drum. These tanning agents also significantly improve the hide's dimensional stability, abrasion resistance, resistance to chemicals and to heat, the ability to flex innumerable times without breaking, and the ability to endure repeated cycles of wetting and drying.

Wringing:-

The excess moisture must be removed from the hides. This is done by placing each hide through two large rollers similar to those on a clothes.

Splitting:-The hides must now be split into the desired thickness. Unsplit hides average to be 5mm thick. The thickness for upholstery leathers range from .9mm to 2.0mm. The hides are put through a splitting machine that is set to split the hides to the desired thickness. It cuts the top grain off first. Another layer, and sometimes two, is cut. These layers are called splits.

Shaving:-The thickness of the hides must be made uniform all over the hide. This is done with a shaving machine through which the hides are run. The helical shaped cutting blades level the overall thickness to exact specifications and open the fiber structure to better receive subsequent chemical processing.

Re-tanning:-This process is done to impart special end-use properties with other tanning chemicals. The substances used add solidity and body to chrome leather and help minimize variations in the character of the leather that may still exist between different parts of the hide.

Coloring:-As soon as the retainning process is completed, aniline dyes, derived primarily from petroleum and added to very hot water, are added to rotating drums to penetrate the hides for desired color.

Fatliquoring:-

This is the last of the wet chemical operations to which the leather will be subjected. Fatliquoring has the most pronounced effect on how soft leather will be and it contributes greatly to its tensile strength. The more fatliquors that are added, the softer the hides will be.

Setting Out:-This operation smoothes and stretches the hide, while compressing and squeezing out the excess moisture. This puts the hides in the proper condition for drying.

Toggling:-The hides are stretched across a perforated frame and held in place with clips called toggles. One hide is clipped to each side of the frame. The frames are then slid into channels in drying ovens.

Staking:-Leather is staked to make it pliable. In combination with the correct fat liquoring treatment, staking governs the final firmness or softness of the leather.

Dry Milling:-The hides are placed in a large dry drum and tumbled until the desired softness is obtained.

Buffing:-

This process improves the final appearance of the hides by lightly sanding the surface to remove some of the natural imperfections such as scratches, healed scars, etc. It provides the hide with better cutting yield.

Finishing:-This process applies film-forming materials on the surface of the hide. Here is where layers of pigments are added

Plating:-This is the final step in the leather process. During this process, heat presses a chosen grain into the surface of the hides.

EXPORT OF INDIAN LEATHER

The importance of exports in the growth of an industry cannot be underestimated in the era of globalization. The exports of leather and leather products to the rest of the world have registered a steady increase over the years as it increased from 1279.19 million US $ in 1991-92 to 3433.30 million US $ by 2007-08.The global trade in leather and footwear is expected to further increase after the abolition of quota regime in January, 2005. The relative shares of the components have changed over the years. The share of leather footwear has declined over the years from 36.56% to 33.92% and even the share of saddlery and harness has registered a small increase over the years from1.20% in 1995-96 to 3.08% in 2007-08. The shares of leather garments and leather footwear components have registered a steep decline over the years and the share of finished leather and leather goods has declined marginally in the past few years but ultimately increased in2007-08 as compared to 1995-96India’s leather and leather products exports are growing at the rate of 6.80% during 1991-92to 2007-08provides the direction of trade with respect to leather and leather products from India. Germany, USA, UK, Italy and Hong Kong are the major destinations of India’s exports of leather and leather based products.

Though the volume of Leather export from India has been increasing during 1991-92 to 2007-08, the shares of Germany, USA and Australia have decreased whereas the shares of UK, Italy, Hong Kong, Spain, France, Netherlands and UAE have increased over time. Germany remains the major importer of leather and leather based products though its share in India’s total exports is decreasing.

Export of Finished Leather

India’s export of finished leather has been growing at the annual rate of 6.42% from 1993-90 to 2007-08 provides the direction of trade with respect to finished leather products from India. Hong Kong is one of the major export destinations of India’s finished leather products. Hong Kong cornered the largest share (42.25%) of India’s finished leather exports in 2007-08. There has been a rise in both absolute and relative shares of most of countries in exports of India’s finished leather except USA, Germany, France and Spain registered a marginal fall in recent years. Also, volume of imports by Germany, France and USA has decreased over the years.

Export of Leather Footwear

India’s export of leather footwear has been growing at the rate of 3.50% during 1991-92 to 2007-08. The leading importer of Indian leather footwear product is UK followed by Germany, USA, Italy and France. The volume of imports by all the major countries has been increasing over time. The share of UK has been declining since 2000-01showing a slight increase in recent years. Still it is a major importer of India’s leather footwear. The shares of USA has been declining in India’s leather footwear exports while, Germany’s share has increased marginally. Italy, France, Spain Netherlands, Belgium and UAE have increased their relative shares in India’s exports of leather footwear.

Export of Leather Goods

India’s export of leather goods have been decreasing at the rate of 1.58% during 1991-92 to2007-08 periods provides the direction of trade with respect to leather goods from India. Germany’s position as the major destination of India’s leather goods exports during the early 90’s has changed drastically. It was displaced by UK as the leading importer of India’s leather goods. The imports by Germany, Italy and France have increased recently from 2006-07 to 2007-08 but finally have shown a decrease in absolute terms along their shares when compared with 1991-92. USA, Spain, Netherlands, Australia, UAE and Belgium have increased their imports from India in absolute as well as relative terms.

Export of Leather Garments

India’s export of leather garments have been decreasing at a rate of 2.46% during 1995-96 to2007-08. Germany is the leading importer of leather garments in 2008-09. Germany, Italy, USA, France, UK and Netherlands have all started importing less of Indian leather garments overthe years. USA’s import from India increased once during 2000-01 otherwise it has declinedfrom over the period. Surprisingly, Spain and Canada has experienced drastic increase in exports India in this sector.

Export of Leather Footwear Components

India’s export of leather footwear components have been decreasing at a rate of 2.27% during1995-96 to 2007-08. Italy, Germany and France are the major importers of Indian Leather Footwear components. Despite this decline India’s exports of leather footwear has increased to most of the countries except U.K. and Austria in both absolute as well as relative terms. Though shares of Spain, Portugal and Slovakia has declined in recent years but their shares have increased drastically from 1991-92 to 2007-08.

Export of Saddlery and Harness

India’s export of saddlery and harnesses has been increasing at a rate of 8.96% in the period of 1995-96 to 2007-08provides the direction of trade with respect to saddlery and harness from India. India’s volume of exports of saddlery and harness to all the ten major importing nations has been increasing in the period 1995-96 to 2007-08 but the shares of USA, Netherlands and Australia have been declining in India’s saddlery and harness exports Despite this, there is a phenomenal increase in the growth rate of India’s diversifying and exporting to more and more countries exports of saddlery and harness indicates that India is capable of.

World Leather Exports Growth

The volume of world trade in leather and leather products has been steadily increasing. The growth rate during 1991-90 55.48% compared to 5.99% in the previous 2000-04 time period. This shows that there was impressive

growth in world trade of leather and leather manufactures in the post 2000 period.

Indian export’s growth rate has shown a marginal increase in the past 2004 period and its growth rate lags behind that of China, which registers an impressive growth rate of 11.79% in the pre-2004 period and 28.02% in the post 2004 period. Romania is another country, which registers an impressive growth rate of 18.78% and 21.63% during the time period 2000-04and 2004-06 respectively. Italy is another nation which has shown an impressive growth rate of 16.80% during 2004-06 as compared to 5.86% during 2000-04. But India is better off than some nations like Brazil and Taiwan, which have been suffering from negative growth rates for both the post 2004 period.

Impact On Exports Due To Financial Turmoil:-

As per compilation of export data by council of Leather Exports, based on Customs Monthly Data, export of leather & leather products for the period April-October 2008 was USD 2,177 million as compared to USD 1,914 million in the corresponding period of last year, registering a positive growth of 14% in USD. In Rupee terms, the total export from India increased to Rs. 94,852 million in the period from April October, 2008 as compared to Rs. 77,869 million in the period from April-October, 2007 growing at 22%. The above growth in exports of leather and footwear industry in both Rupee and USD in the first six months of FY 2008-09 shows that exports of the industry has not been impacted by financial turmoil in period from April-October, 2008. The impact of financial turmoil on the exports of leather footwear industry is expected to be felt in the last two quarters of FY 2008-09.

Current output and exportsThe current (2007) value of output of this industrial sector is estimated at over Rs. 250,000 millions per annum. Of this, export accounted for Rs. 134,920 millions in 2005-07 and the remainder, by the domestic market. The main products of leather sold in the domestic market are footwear and assorted leather goods. There is a very small demand for leather garment in the colder regions of the country.

Export performance and prospects

The Leather Industry holds a prominent place in the Indian economy.This sector is known for its consistency in high export earnings and it is among the top ten foreign exchange earners for the country.

With an annual turnover of over US$ 8.5 billion, the export of leather and leather products increased manifold over the past decades and touched US$ 4.99 billion in 2012-13, recording a cumulative annual growth rate of about 8.54% (5 years).

The Leather industry is bestowed with an affluence of raw materials as India is endowed with 21% of world cattle & buffalo and 11% of world goat & sheep population. Added to this are the strengths of skilled manpower, innovative technology, increasing industry compliance to internationalenvironmental standards, and the dedicated support of the allied industries.

The leather industry is an employment intensive sector, providing job to about 2.5 million people, mostly from the weaker sections of the

society. Women employment is predominant in leather products sector with about 30% share.

GOVERNMENT FACILITIES TO INDIAN LEATHER INDUSTRY

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 equipment.

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 declaration to this effect to the Reserve Bank is required.

Promotion of industrial parks (one leather park in Andhra Pradesh, one leather goods park in West Bengal, one footwear park in Tamil Nadu and one footwear components park in Chennai).

Funding support for modernizing manufacturing facilities.

Funding support for establishing design studios.

Duty free import of raw materials (namely raw skins, hides, semi-finished leather and finished leather) and of embellishments and components under specific scheme.

Confessional duty on import of specified machinery for use in leather sector.

Government Supportive Measures

1. Leather is one of the ‘FocusSectors’ under the Foreign TradePolicy of the Government of India.

2. Funding support is being providedfor export promotion and marketdevelopment activities.

3. Funding support is being providedfor technological up gradationand modernization of productionunits, environmental safety measureshuman resource developmentand other projects.

4. Entire leather sector is delicensed,which facilitates expansionlong modern lines with state-of-the-artmachinery and equipment. Thereis a provision for 100 per cent foreigndirect investment through theautomatic route.

5. Specified machinery for use inthe leather and footwear industryhas been allowed a 5 per cent concession.

6. The government permits duty freeimport of raw hides and skins,wet blue chrome tanned leather,crust leather and finished leather ofall kinds, including splits and sides.

7. Specified critical inputs formanufacture of leather garmentsand other leather products, includingfootwear, can be imported underthe Duty Free Import Scheme(DFIS).

8. Basic customs duty is exemptedon machinery or equipmentfor effluent treatment plants in theleather industry.

9. Duty neutralization, exemptionor remission schemes arein place. These include the DutyDrawback, Advance Authorization,Duty Entitlement Passbook Scheme(DEPB), Duty Free Import Authorization.

10.Gradual lowering of importtariffs—the current peak customsduty is 10 per cent.

11. Simplified import/export procedures ensuring quick customs clearances.

The leather industry holds aprominent place in the Indian economy. It is known for its consistenthigh export earnings and is amongthe top 10 foreign exchange earnersin the country. The leather industryis bestowed with an abundanceof raw materials. Added to this are the strengths of skilled manpower,the use of innovative technology, increasing industry compliance

tointernational environmental standards, and the dedicated support ofthe allied industries. With the implementation of various industrialdevelopmentalprogrammes as wellas export promotional activities,the Indian leather industry aims to augmentproduction and enhance exports to $7.03 billion by 2013-14. This would create additional employmentopportunities for over onemillion people.

Problems Facing Indian Leather Industry

Issues

The Industry’s Global PerspectiveThe leather and its related downstream industries can claim to be the world's largest industrial sector based upon a by-product. In the case of leather, the raw material is a by-product of the meat industry. Hides and skins and their downstream products are vital earners of foreign exchange and they

compare very well with the other agricultural commodities and, in fact, with any internationally traded commodities. This industry helps convertible a putrescible material into a stable and marketable product.

Hides and Skins Production and TradeDependence on the market for meat:

Availability of hides and skins is governed mainly by the demand for red meat. A governing feature of the leather industry is in the elastic nature of its raw material supply. The bulk of bovine hides and ovine and caprine skins in industrialized countries are marketed to the leather industry and thus the number of heads slaughtered is roughly equivalent to the number of hides and skins available. A significant part of hides and skins is lost to tanners mainly in least developed countries in Africa owing to lack of marketing infrastructure, monopolies of various kinds or diversion into other uses such as food, tents, ropes, etc. Bovine hide is by far the most important raw material for the leather industry. Off-take ratio (i.e. weight per hide and skin) is very high in developed countries as compared to the developing countries which contribute about 70% of world bovine hide.

Change in global pattern of demand for hides and skins:-

The leather industry has expanded substantially in the developing countries. A consequence of production expansion in some developing countries is that tannery input demands have outstripped locally available supplies and imports from the developed countries have become essential.

Environmental Impact of Leather IndustryThe leather sector is well known for its effluent problems. The polluting nature of tanneries is evident from the notorious odour that characterizes tanneries and tannery zones. While local populations are daily aware of the air pollution, local authorities are equally, if not more concerned about

tanneries' liquid effluents which tend to be high in organic and inorganic suspended solids content accompanied by propensities for high oxygen demand and containing potentially toxic metal salt residues. Treatment technologies in effect reduce pollutants in the liquid form and convert them into semi-solid or solid forms. Threat is being transferred from receiving waters to receiving land. Because sludge can affect the quality of soil and groundwater, it is understandable that local authorities and governments should be concerned that the disposal of sludge to soils and dry wastes to landfill should not adversely affect the fertility of soil, nor that metal salt residues, such as chromium, should inhibit crop growth in any way.

Market ExternalitiesEconomic, political and technological developments in several industries impinge upon the future characteristics of the leather industry, covering all contingent industry,covering all contingent industries from livestock agriculture to finished goods industries and the markets that they serve. With the growth in the purchasing power of people, there is always an increased demand for inexpensive leather.

Challenges

Technical Barriers:-By nature, tanners are very conservative. This is not simply obstinacy against change; it is because the quality and character of leather is prone to change when the parameters of processing are altered. Changes in the length of chemicals etc. influence the ultimate character of the leather. Leather being produced from a complex, non-uniform natural protein material still requires considerable craft in its manufacture. The adoption of low waste technology often requires a radical alteration of most tannery processes while, at the same time, ensuring that the ultimate product retains

its marketable properties.

Therefore if a tanner is producing consistent quality of leather which satisfies his customers using a process which may be wasteful in water, energy and chemical utilization, he may resist altering his operations to comply with environmental demands.

Small and Medium Enterprises:-In most developing countries tanning operations is a family business, carried out in small to medium scale semi-mechanized units, very frequently grouped tightly in clusters which used to be outside residential areas. Tanners in such units have no formal education and have little or no understanding of the complexities of the leather processing, their skills acquired from their elders with hardly any perception of environmental protection Low waste technologies, generally speaking, require better skilled personnel and closer technical control than conventional processing. Thus, lack of properly trained staff at different levels remains one of the crucial constraints.

Economic Barriers:-In developing countries, leather industry suffers from economic constraints. They suffer the often inordinately high cost of capital or inflation rates. Amount of capital tied up in work in-progress has increased along with the necessity to keep higher inventories of chemicals, machinery spares, etc. Because of problems with poor infrastructure in many developing countries, the tanneries have always kept higher stocks of chemicals than their counterparts in developed countries, against the contingency of delays in delivery from ports. Another disadvantage is the impositionof import duties on chemicals and machinery. Few specialty chemicals for tanning are producedin developing countries, although basic chemicals such as salt, lime, sulphuric acid, sodium sulphate or sodium carbonate may be available indigenously. Most tanning materials, dyes, fat liquors, special auxiliaries and finishes need to be imported.

Inadequate Legislation and Lack of Monitoring Facilities:-

Pollutant discharge standards in most developing countries are by nature rigid and have a disregard for specific site conditions. Instead of a gradual approach as called for which would phase installation of treatment facilities (for example the physico-chemical first followed by the biological treatment and appropriate sludge handling) a tanner is under pressure to put up a complete treatment system and meet all discharge limitations at once which is beyond his financial and technical means. However, very few tanners have the necessary process and effluent treatment control facilities and legislation enforcement agencies usually lack skilled personnel to monitor performance of the installed treatment plants.

Social Barriers:-Governments often feel inhibited from dealing with problems related to modernizing of the tanneries because of the social and even political upheaval that would occur. The problem is further exacerbated where tanners are traditionally regarded as socially inferior because of the nature of their work. These groups, because of traditional discrimination, have amassed considerable political privileges. Consequently there are difficulties in altering the structure of artisan industry.

Technical Assistance Laboratories:-Most of the major leather and footwear producing developed and developing countries have research and development laboratories and technological teaching facilities. It is usual that either the R & D laboratories or the teaching establishments, or both, have pilot tanneries in which technological developments are taken a stage further towards commercial leather production by industry. Some of these have pilot effluent treatment facilities which are of benefit in helping the local industry adopt relevant methods of emission limitation and treatment. Nevertheless there remains a problem in transferring technology from laboratory and pilot plant of an R & D to practical everyday use in the industry.

Challenges for the tannery sector

Increased cost of production per unit area of finished leather due to stringent environmental norms.

Expansion of production capacities – issue in Tamil Nadu due to local laws despite compliance.

Increasing demand of raw material – raw hides, skins and semi-finished leathers.

Low level of technology in small tanneries.

No specific dedicated industrial areas for leather sector in Tamil Nadu.

Poor capacity utilization in most tanneries leading higher financial cost and overheads.

Challenges In Leather Product Sector, Particularly Footwear Sector:-

Varying levels of technology in the factories depends on the size of the factories

Low quality of shoes – threat of shift in production to other areas or countries where wages levels are low if the quality is maintained at same level

Most companies work on subcontract basis – design, component selection and methods of production are given by the buyers and do not provide their own fashion collections, however companies are able to make prototypes based on ideas provided by the buyer

Strong requirement to increase quality as well as quantity

Availability of right raw material (finished leather) at right time

Under developed designs for footwear components sector

Absence of own collections and poor development of footwear components, particularly for women’s footwear

Effect on Environment

The pollution load from the tanning activity has been estimated to be 50% more in weight than the weight of the hides processed. Pollution comes from several of the sub-processes due to the usage of 175 different chemicals, and is both organic and chemical. Wastes and chemicals released to water system are the main pollution concerns for the leather industry. They are produced during washing, dehairing and tanning of the leather. The water discharge from turnover is called ‘Raw Effluent’.

More than 95% of the Indian tanneries have pollution control devices. Central Pollution Control Board has constituted a Special Task force to identify the waste minimization techniques and control pollution.

Action Plan

Chrome Recovery ─Chrome is entirely extracted from the Chrome Liquor produced during chroming process and the resident water is used for other purposes apart from drinking. 20% of the extracted chrome is also reused for chroming.

The Common Effluent Treatment Plants (CETPs) –Ithave been established in all the tannery clusters. The TDS (Total Dissolved Solids) in Tannery effluent is high because common salt is widely used for preserving raw hides and skins. There are 19 ‘CETPs’ operational in India and out of which 14 are operational in Tamil Nadu. More than 150 individual Effluent Treatment Plants (ETPs) are operational in isolated tanneries and locations where the common facilities are not possible.

Zero Liquid Discharge Technology –

By implementing the reverse osmosis (RO) system for recovery of water from tannery effluent is being implemented in the South Indian tanneries ( i.e. 120 individual units and 14 effluent treatment plants). Establishment of decentralized secure landfill system linked with CETPs has been implemented in many tannery clusters (First of its kind in the World). This process facilitates in the recovery of water, apart from meeting the TDS norms.

Bio Processing–R&D activities are under progress for this method of effluent treatment.

Water Conservation And Other Pollution Methods-

All the tanneries have installed water meters and flow meters to measure actual consumption and waste water discharge.

Consumption of water reduced to 22 m3/tonne of hides/skins.

Ground water quality being monitored to strengthen wherever the treated effluents are applied on land for irrigation.

Deployment of qualified and well-trained staff for Observation and Monitoring of the ETPs (Effluent Treatment Plants) / CETPs.

Separate energy meter for ETPs / CETPs.

Replacement of open anaerobic lagoons with cleaner technology options.

SWOT Analysis of Indian Leather Industry

WEAKNESSES

Lack of warehousing support fromthe government.

International price fluctuation.

Huge labour force resulting in highlabour charges.

Lack of technological inputs.

Lack of strong presence in theglobal fashion market.

Unawareness of internationalstandards by many players.

Opportunities of Indian leather industry

Abundant scope to supply finished leather to multinationals setting up shop in India.

Growing fashion consciousness globally.

Use of information technology and decision support software to help eliminate the length of the production cycle for different products.

Product diversification - There is lot of scope for diversification into other products, namely, leather garments, goods etc.

Growing international and domestic markets.

Threats

Entry of multinationals in domestic market.

Stiff competition from other countries.(The performance of global competitors in leather and leather products indicates that there are at least 5 countries viz, China, Indonesia, Thailand, Vietnam and Brazil, which are more competitive than India.)

Non- tariff barriers - Developing countries are resorting to more and more non – tariff barriers indirectly.

Improving quality to adapt the stricter international standards.

Fast changing fashion trends are difficult to adapt for the Indian leather

industries.

Limited scope for mobilising funds through private placements and public issues, as many businesses are family-owned.

GLOBALIZATION AND PROSPECTS FOR LEATHER INDUSTRYIN INDIA

The post liberalization era has opened up a plethora of opportunities for the Indian leatherindustry. Along with China and Vietnam, India stands to gain a bigger share of global market.Since global players are looking at new sourcing options for their trade in leather products.Leading brands from the US and Europe, are planning to source leather and leather productsfrom India The Hindu Business Line, February 04, 2005). Global players who participated atthe India International Leather Fair, 2005, emphasized on India as sourcing destination fortheir trade in leather products.The domestic producers have also realized the opportunities ahead. In fact, almost everyplayer in the organized sector is on an expansion spree, and many are doubling capacities.

Currently India has a share of nearly 2.3 per cent i.e. 2 billion in the global trade of leatherand leather products of nearly US $ 88 billion. Moreover, India has significant costadvantages in terms of labour and raw materials in comparison to the other developedcountries which are evident from the interest shown by the global players as mentioned above.Taking the current meager share in global trade and the cost advantages into account it maybe said that Indian leather industry has a significant potential for higher share in global trade.In addition to the global market, Indian leather industry is yet to capture the existing untappedpotential in the domestic market. India has a large and growing consumer class (annualincome > US$ 449), estimated to constitute nearly 90 million households by 2006 - 07,having a Compound Annual Growth Rate (CAGR) around 12%. Global players in the leatherbusiness, big or small are today focusing increasingly on India's domestic market which is already, witnessing numerous developments. Not only quantity-wise but also quality wisethere has been significant development in the Indian leather sector: The number of peoplewithin the

country who are today ready to buy high priced shoes, in the range of US $ 30 toUS $ 45 a pair, has gone up significantly. Besides, the retail revolution is also boostingavailability of goods, and the market for branded footwear (www.tdctrade.com (2006)International Market News, May).

Hence, looking at the global trade scenario and domestic demand it may be said that theIndian leather industry has the potential to grow leaps and bounds in the future years to come.And hence it has an enormous potential for offering huge employment opportunityparticularly in rural and semi-urban areas. It is estimated that the potential for employmentacross all skills to be in the tune of semi-skilled and unskilled labourers - 92%; technicalsupervisory, shop floor - 7%; entrepreneurs, senior managers and technologists - 1% (CII-2006).However, the extent to which the growth potentials of Indian leather industry can be realizeddepends its competitive strength vis-a–vis its competitors. Otherwise, the absence of requiredProductivity& competitive strength in the era of globalization will turn a producing economy into a consuming one only.

Competitive Strengths of Indian Leather Industry

The perception about growth potential of Indian leather industry draws its inspiration fromvarious sources constituting the strength of the industry. Some of the important ones could be the followings.

a) Raw Material Source: Fortunately, the industry has access to one of the cheapest andabundant source of raw material. The livestock is the raw material for the leatherindustries. Cattle, buffaloes, goat and sheep are the four live stock species which providethe basic source of raw materials for the leather industry. As per the latest lives stock census i.e. 17th live stocks census of India-2003. India has 194 million cattle, 70 millionbuffaloes, 95 million goats and 48 million sheep population. Also, India ranks firstamong major livestock holding countries in the world.

b) In fact, India has the capacity to fulfill 10% of the global leather requirement1. Moreover,not only the country has access to abundant supply of raw materials but also the availableraw material is diverse in variety. The annual availability of 218 million pieces of hides and skins is the main strength of the industry. Quality wise, some of the goat/calf/sheepskins available in India are regarded as specialty products commanding a good market.Thus, the rich endowment of raw

material for the production of leather puts the countryon a competitive footing.

c) Availability of Labour: Along with the rich endowment of raw materials the industry hasalso access to large supply of labour. Along with the large supply of labour, the industry has access to abundant of traditional skills in tanning, finishing and manufacturingdownstream products. Thus, the large supply of skilled labour which has resulted inrelatively low wage rate certainly puts the industry in a cost advantageous position vis-àvisits competitors.

d) R & D facilities: Over the years through government support the industry has been ableto develop its R & D facilities considerably. Though there is yet much to be done in orderto meet the challenges of globalization, the industry has established a sound base for thesame.

e) Apart from the above discussion on the competitive strengths of Indian leather industry itis essential to have a brief look at the estimated picture of India’s export competitivenessin leather and leather products.

Indian Leather Industry: Constraints

Despite the fact that Indian leather industry has comparative advantage owing to factors likeabundance of raw material, cheap source of labour, traditional skills, R&D facilities etc., thereis no guarantee that it can achieve its growth potentials since it has been facing severalhurdles. Some of the hurdles could be listed as follows.

Firstly, on the quality front, there continues to be acute shortage of good quality finishedleather. As a result the industry is dependent on import from china and other countries. Lackof adequate product quality adversely egested India exports complement appreciation ofrupee.

Secondly, on the technology front, most of the existing tanneries use outdated technologywhich inhibits them from producing good quality leather in spite of access to quality rawmaterials such as hides and skins. The tanneries require high doses of capital investment inorder to improve the existing technology so that Quality raw material could be produced andsupplied to leather manufacturing units.

Thirdly, in recent years the leather industry across the globe has been subjected to stringentpollution control norms due to growing environmental concerns. Adhering to pollutioncontrol norms helps them to access better market and lower tax regimes. But unfortunately,the pollution control measures adopted for a large segment of Indian leather sector has beenfound to be in adequate which ultimately erode their competitive advantage. In fact, in Indiain recent years a number of tanneries have been closed on environmental considerations.

Since the Leather and leather products sector especially the tanneries are facing a lot ofproblems in terms of Environmental norms, there is an urgent need for modernizing theexisting ones and also setting up new common effluent treatment plants at various leatherindustry clusters as per international standards.The Tannery Modernization Scheme of the Government of India provides investment grantsfor enabling the small and medium enterprises to readjust quickly to the changedcircumstances of WTO regime. Tanneries in China and other major competing countries haveinvested significant amounts of funds in large tanneries.Suitable measures to attract large FDIs and JVs in leather sector from potential investors fromabroad would help in meeting the additional capital requirement of the sector.

Fourthly, from the financial point of view, since the industry has been dominated by small and tiny producers, the availability of finance and cost of capital turns out to be a major constraint.

Fifthly, from a planning perspective, at the government level there is no clear cut road mapfor the Indian leather industry to achieve its potentials. Moreover, not only there exist lacunaat the planning and policy level but also the sector suffers from weak statistical reportingsystem. The Council for Leather Exports (CLE) markets the products abroad and maintainsthe export figures and other associated functions for exports. But the domestic sales, production and statistics of the unorganized sector producing leather and leather and productsare not available adequately. This hinders in taking a holistic view of the sector. As a result, theassessment of future potential based on forecasting tends to be far from reality.

Finally, on the global competitiveness front Indian leather sector is much behind that of itscompetitors. In fact, all the aforesaid obstacles directly or indirectly but adversely affect theproductivity and competitiveness of Indian leather industries in comparisons to its competitorssuch as China, Indonesia, Thailand, Vietnam and East European countries.

As a result Indiahas a very low share in the aggregate global trade in leather in comparison to its majorcompetitor i.e. China. For example, India has a less than 3% share in the global trade inleather compared to China’s 20%. As

regards to competition emanating from these countries, immediaterequirement is to make available quality raw material to Indian leatherManufacturing Units. Apart, from that the present level of technology adopted by Tanneriesand manufacturing units need urgent upgradation.In fact, not only the leather industry in general, but also the Indian footwear componentindustry which is the pride of India in terms of its contribution to total leather exports is alsofacing stiff competition from China in a number of shoe components - cellulose insole fabrics,coated, impregnated fabrics and interlinings, where the price of the imported materials isbetween 40% and 50% lower than the indigenously produced materials. Components worthUS $ 35 million were imported into the country last year, and Indian Footwear ComponentManufacturer Association (IFCOMA) expects a 100% increase in imports in the componentarea from China in the current fiscal.

Along with the lack of competitiveness the size of the Indian footwear segment appears to betoo small in comparison to that of China. This is evident from the fact that India's share of theglobal footwear imports is 1.5%, as against China's share of 14%.Indian Shoe Federation, a body representing footwear export views that "China has a very bigfootwear industry, and there is no way we can compete with China. In the low cost products,orders cannot come to India, not just because of the price, but also because we do not havefactories that can undertake such huge orders."This is precisely because of the fact that India's footwear manufacturing, even today isconcentrated in the unorganized and small scale sector. In fact, about 85% of footwearproduction in India is still in tiny, cottage and small scale sector. However, in the footwear business ifat all India has some competitive advantages in the global scenario; it is in the mid pricesegments. But here also, we are facing competition from Vietnam.

The major reason for the low scale of operation in the leather industry in general and in thefootwear segment in particular could be lack of investments in the sector. Over the last 20years china has attracted more than 10 times of investment that India has attracted. This isprecisely because of the fact that for a long time the sector almost in its entirety was in the SSIlist. Only recently, i.e. since 2001 it has been freed from the SSI clutch. And in the absence ofappropriate regulatory environment it takes more than the required time for capacities to beenhanced.

Strength Of The Leather Industry In India

Own raw material source—approximately 186 million square metres of leather produced annually.

Some varieties of goat, calf and sheep skins command premium prices.

A strong and eco-sustainable tanning base.

Modernised manufacturing units.

Skilled manpower at competitive wage levels.

World-class institutional support for design and product development.

Presence of support industries like leather chemicals and finishing auxiliaries.

Emerging Strengths Of The Leather Industry In India

1. Design development initiatives by institutions and individuals

2. Continuous modernization and technology up gradation

3. Constant human resource development programmes to enhanceproductivity.

4. Increasing use of quality components.

5. Shorter prototype development time frames

6. Improved delivery compliance

Recent scenario

Global trade started getting liberalized right through the 1970s and 80s. From a global turnover of products industry grew to an estimated $70 billion in 2000. Globally, there were major structural changes in this sector—the manufacture of leather products such as shoes, garments and other assorted goods migrated from industrialized countries in the West to the developing countries of the East in a big way, primarily motivated by cost considerations. The differences in wages were too vast to be bridged by any technological improvements, particularly because the leather industry is labour intensive.

The different types of leather goods exported from India are wallets, purses, pouches and ladies handbags. Other products include luggage, passport and credit card holders, briefcases, belts, caps, diary and cheque-book covers, desktop accessories, covers for cameras and calculators, leather toys, pet accessories, etc. Leather goods and accessories manufactured in India are for multinational brands like Coach, Pierre Cardin, Yves St Laurent, Etienne Aigner, GeofferyBeene, Harrods, Marks & Spencer,LizCaliborne, Guess, Next, Tommy Hilfiger, Kieffer, Waldhausen, Biemen, Nederinum, Zaldi, Kallquists, Shires, GFS, Millers, Eisers, Weco etc.

The Global Leather Industry Scenario

At present, 15 industrialized countries account for about 85 percent of the global import of leather and leather products from primarily 15 developing countries, many of which are in Asia. Nearly 50 per cent of the various leather products and more than 70 per cent of the footwear produced in the world comes from eight Asian countries, with China alone contributing 54 percent. Other characteristic features of the global industry are:

1. In many industrialized countries, 80 per cent of domestic leather goods consumption is fed by imports.

2. Industrialized countries also produce large quantities of hides and skins, as a byproduct of the meat industry. With the decline of their leather-based industries (except in industry. With the decline of their Italy, Spain and Portugal), much of their hides and skins are exported as raw, semi-processed or finished leather.

3. To meet their growing demand for leather, many developing countries depend on the import of raw materials from industrialized nations.

Over the last ten years, the global leather trade has grown by about 17.6 per cent at a simple average annual growth rate of 1.76 per cent India’s share in this global leather, traderaised from 2.75 per cent in 1997 to 3.31 per cent in 2000; however, in 2001, it declined to 3.15 percent. Commanding over 10 per cent of the global raw material requirement, a liberal import policy regime for raw materials, skilled labour at competitive wages, sound supporting infrastructure, and a host of responsive government policies, experts feel that India has considerable scope in this sector. There was talk of India touching 10 per cent of global leather trade by 2000 but that did not materialise.

In India, the marketing of exports of leather footwear is largely through foreign middlemen. Though India has a large raw material base, Indian footwear exporters have not adequately penetrated the global footwear market. The main reason is that marketing of leather footwear in the global market involves high costs, requiring a marketing network with extensive brand-building, etc.

Future Outlook For Production And Exports

The sector’s perception of the leather industry based on the survey of 100 firms and by theICRA Study has observed that the major factors limiting the growth of firms in the leatherindustry were access to capital, high per capita cost, shortage of skilled labour, taxation andregulations, appreciating rupee, competition from imports and high employee cost. At the macro level,the key constraints of the leather industry particularly in its shift to a high valuechain segment is quality of raw materials, absence of an institutional mechanism for design,inability of Indian producers to build the brand despite a huge domestic markets andtechnology gaps. However, given the responsiveness of this sector to the policy initiatives asillustrated by the study, it is possible to be optimistic about the future prospects of this sector.

A rising disposable income and a low share of the footwear and leather components in theoverall consumption expenditure of the households, abundance of leather as a raw material and low cost manufacturing base are the strong points on which the leather sector could buildup its future growth story. The de‐reservation and de‐licensing of several leather goods fromthe small scale sector in 2001, 100% FDI allowed in the leather and footwear sector since 2002and focused market scheme introduced by Department of Commerce have created the groundwork for the expansion of this sector. Comprehensive scheme of the ILDP for modernizationand technological up gradation of the leather sector covering tanneries, footwear, leather goodsand garments have created the basic conditions for building growth in future.

It is expected that the future outlook of the leather production and exports to be really promising. Thefuture production and export outlook have been projected on the assumption that the share ofthe footwear consumption in private final consumption expenditure would reach 1.5% in nextten years. India’s share in the global leather market is also expected to increase by around 5%in 2027. Within these two considerations it is assumed that a growth of 12% in the private finalconsumption expenditure of footwear, giving the elasticity of expenditure to GDP at 1.3. Theexport sector is expected to growth at 15% per annum in rupee terms.

RESEARCH METHODOLOGY

Research methodology describes the overall typology of research (i.e. experimental, survey, case study, or action research) used and the data collection method (Observation, interviewing, mailing etc.) employed.

Research Problem:A formal statement of question or hypothesis that implies empirical investigation. The research process first and foremost step is to select and properly define a research problem.

Research problem of my survey is:“To study The Leather industry in India”

RESEARCH DESIGNA research design is the arrangement of conditions for the collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure.

In fact, the research design is the conceptual structure within which research is conducted. It constitutes the blueprint for the collection, measurement and analysis of data.

Research design facilitates smooth sailing of various research operations, thereby making research as efficient as possible yielding maximum with minimal expenditure of effort, time and money.

Research design stands for advance planning of methods to be adopted for collecting the relevant data and the techniques to be used in their analysis, keeping in view the objective of the research and the availability of staff, time and money.

NATURE OF STUDY:-

● EXPLORATORY● DESCRIPTIVE

The present research is of descriptive and exploratory type.

Exploratory studies are those which are common methodsforspecifying and evaluating survey content relative to concepts.

.Descriptive studiesare those which are concerned with describing the characteristics of a particular individual, or of a group. Studies concerned with specific predictions, with narration of facts and characteristics concerning individual, group or situations are all examples of descriptive studies.

In descriptive studies, researcher is able to define clearly, what he wants to measure and able to find adequate methods for measuring it with clear-cut definition of ‘population’.

Collection of primary data

Primary data are those which are collected afresh and for the first time, and thus happens to be original in nature.

Primary data can be obtained either through observation or through direct communication with respondents in one form or another or through personal interviews.

The information required for the study ids collected in the form of primary through structured questionnaire and personal interview. The information was gathered from counselor and students. For this extensive survey was carried out.

Personal interviews require a person known as interviewer asking questions generally in face to face contact to the other person or persons.

The method of collecting information through personal interviewers is carried out in structured way. Such interviews involve a set of predetermined questions and standardized technique of recording. Interviewer follow rigid procedure in a form and order prescribed.

The interviewer is allowed much greater freedom to ask, in case of need, supplementary questions or at times he may omit certain questions if the situation so require.

Collection of secondary dataSecondary data are those which have been collected by someone else and which have passed through statistical process.

Secondary data required for the study was collected from various websites, magazines, brochures, pamphlets and newspapers.

CONCLUSION

Indian leather industry holds a good position in terms of employment, growth, and exports in the Indian economy.

In India the system of collecting hides and skins is quite unliked practices, so it is ban in many states.

The leather industry in India providing 30% job to women from the economically backward and socially weaker sections of society.

India is the fifth largest exporter of leather goods or products in the world.

In India the small scale, cottage and artisan sectors holds 75% of the total product, so they play a dominant role in leather industry.

Indian leather industry offered both female and male the same wage and there will be no discrimination against female.

The government provides all the facilities to Indian leather industry.

There is several challenges and issues which adversely affect the leather industry in India.

Currently India has a share of nearly 2.3% in the global trade of leather and leather products.

It is expected that the future of the leather production and exports is to be really promising. The production and export share of the footwear would reach 1.5% in next ten years. The India’s share in the global market is also expected to increase by 5% in 2027.

BIBLIOGRAPHY

www.wikipedi.org/wiki/Leather

www.leatherindia.org

www.leatherpanel.org

www.planningcommission.gov.in

www.contratleathers.com