To make matters worse supply of hide for leather has gone down and the prices have shot up killing the profitability
India has recently lost grounds on leather exports to countries like China, Bangladesh and Vietnam owing to a slew of factors that have adversely impacted the leather exports businesses that are run by the Micro Small Medium Enterprises (MSMEs) sector.
Businesses run in Kanpur, the leather hub of Uttar Pradesh have been run down to half over a span of last two years. To make matters worse supply of hide for leather has gone down and the prices have shot up killing the profitability of the operators, many of whom were forced to shut shop or reduce the number of workers in their units. This has thrown open opportunities for rival countries in the neighborhood and they have flooded the global market with cheaper leather rendering Indian leather exports uncompetitive.
The USD 17 billion industry largely comprising small players had suffered severely in wake of GST following demonetization close on heels.
This has rendered traders of their regular cash flow operations and faced hard time to pay their workers or for even buying raw material. The currently concluded financial year has witnessed only USD 5 billion exports and the situation is deteriorating further in wake of lack of demands from the European markets for footwear.
The chairman of the Council for Leather Exports, Mukhtarul Amin painted a gloomy picture stating out of the 402 registered businesses in Kanpur nearly 200 have shut shop permanently. Piquantly, Kanpur accounts for a third of the leather exports from India.
To add to the woes of the industry, even the remaining workers in the sector are forced to take pay cuts to the tune of 20% on their meager emoluments. This is because of a steep increase in hide prices that have shot over the INR 1400 per square feet mark. Consequently, the workers’ take home has been drastically reduced to INR 200 mark.
According to Amin, “More than 3 million people were under direct or indirect employment of these leather units. Majority of them hail from the country’s marginalized and poor communities.
We represent upward of 3,500 such businesses employing these people.” Following the slew of obstacles like cow vigilantism, GST and demonetization and government policy on slaughter of cows, on average the businessmen operating the export houses have been forced to cut staff by nearly a fifth. He added.
Needless to say, the orders also took a beating in the recently concluded financial year and fell by 20%. It is continuing on a downward spiral in the current fiscal year. The sharp fall in the sourcing of hide from abattoirs following several state government’s crackdown on unauthorized slaughter houses further accentuated the tanners’ woes. In fact, cow vigilantism has taken an ugly turn of events and people associated with raw material supply are scared to sell even buffalo skins that account for a significant proportion of the country’s leather value chain.