Leather industry seeks zero duty on machinery imports

Chennai, March 21 | Updated: Mar 22 2005, 05:46am hrs
There are clear signs of India emerging as a major sourcing hub for leather products. The industry is gearing up to meet the global market requirements. To support this effort, the industry is demanding some concessions in the foreign trade policy.

"We want the foreign trade policy to permit zero duty import of machinery under the Export Promotion Capital Goods (EPCG) scheme and a revision of the input-output norms," according to M Rafeeque Ahmed, chairman, Council for Leather Exports (CLE).

He says the largely traditional and family-based industry is now attaining an organised corporate status. The result of this transition is that exports crossed $2 billion in 2003-04 growing at the rate of 12%. It has signalled a growth momentum in exports. In 2004-05, the growth rate has been over 15%. Exports during April-November 2004-05 has been $1,503.74 million. But this is only a fraction of the $80 billion global trade in leather and leather products.

The Indian leather industrys 2010 target is to treble total production to $12 billion and double exports to $4 billion. The targeted annual growth rate is 11.50%. Of this, 50% is estimated to come from footwear alone.

The west European countries, especially, the UK, Germany and Italy, account for over 60% of Indias export of leather and leather products. Exports to the US, the worlds single largest market for leather and leather products, have been only around 12%.

There has been focussed attempt to increase exports to the US and other European countries. CLE sources say the efforts have been yielding results. Large US retailers have started sourcing from India. Some of them have shortlisted possible suppliers from India. Besides the US, CLE is taking steps to enter the burgeoning Spanish market. It is also looking more aggressively at France, Italy and Portugal.

Japan is also considered to be a market with great potential. New markets in Scandinavian, Latin American and African countries also are being explored to boost exports.

One significant shift in production and marketing plan is the increased focus on modernisation of tanneries, setting up of modern production bases in collaboration with leading global players and entering into long-term supply arrangements. u

To facilitate this, specialised parks are proposed to be set up in Nellore in Andhra Pradesh for tanneries, footwear and components parks in Chennai and Agra, and a leather goods park in Kolkata. The Union government has approved Rs 400-crore modernisation fund for the leather sector to support the initiative.

Leading leather exporters say that there is no room for any complaint against the foreign trade policy as there is no restriction on the export and import of leather and its products. However, the industry wants the foreign trade policy to permit zero duty import of machineries under the EPCG scheme to facilitate import of sophisticated machinery for the modernisation of the sector. The industry also wants a review of the input-output norms.

Apart from this, they say, "Our concern is similar to that of other exporters. It is more about the procedures and interpretations by various authorities."