The proposal for the modernisation fund, in-principle agreed by the commerce and industry ministries, was currently pending with the planning commission, he told reporters here.

Hashim said the only point of contention left in clearing the fund lay in the mode of implementing the scheme.

Tannery modernisation fund, a long term strategy to improve leather exports would provide for the tanning sector to buy equipment and also go in for common effluent treatment plants, he said.

Under the scheme, a total of Rs 1,200 crore is expected to be disbursed among small scale tannery units over a period of five years to enable them replace the obsolete machinery.

The governemnt, on its part, is likely to offer a cash subsidy of 30 per cent on purchase of equipment by leatherunits.

Hashim said small units with their outdated equipment were not able to process imported raw heads which were large in size.

CLE chairman, however said efforts were being made to get about Rs 200 crore sanctioned during the first year of the fund to enable units embark on modernisation.

The modernisation fund is likely to be made operational through the Industrial Developmeent Bank of India (IDBI) and the Small Industries Development Bank of India (Sidbi).

With 30 per cent subsidiary coming from the government, the units are likely to get credit at 10 per cent, sources said.

Hashim said exports of leather and related products were expected to register an increase of over 15 per cent to Rs 8,000 crore during the current fiscal as buyers from the US, Britain and Germany have shifted focus to India from Kosovo, which until recently was the main supplier to European buyers.

"Shoe and shoe-component exporters already have orders for about six to eight months," he said.