Leather Sector Gears Up For FDI

Chennai, July 25 | Updated: Jul 26 2004, 05:57am hrs
The Indian leather industry, with over $2 billion exports, is readying itself for major growth through increased investments by Indian industrial houses and foreign leather manufacturers.

The Council for Leather Exports (CLE) is pressing the Planning Commission for the finalisation of the leather industry modernisation plan. The 10th Plan allocation for the leather sector is Rs 290 crore. This is expected to generate an investment of Rs 1200 crore by the existing units, according to Mr S Audiseshiah, executive director, CLE.

The expected foreign direct investments are mainly from Spain, Portugal and Italy. Several companies in these countries are planning to relocate their manufacturing units to Asia, which is emerging as the major supply centre for finished leather and also cost-effective centres for the manufacturing of finished products.

A CLE team has just concluded its tour of Spain and had interactions with over 40 companies. At least five or six of them are expected to come to India shortly for further discussions and firming up of investment plans. Two companies are coming in August. One of them has manufacturing bases in China, Mexico and Brazil. CLE Team is also going to Italy in November-December and to Portugal sometime before March.

We are also in talks with some of the major industrial houses in the country and inviting them to invest in leather sector, Mr Audiseshiah said.

The CLE proposal is to increase exports to $4 billion by 2010. Of this $2.5 billion is planned to come from footwear alone against $800 million now. We can achieve this only through increased investments and production, he said.

To provide the Indian and foreign investors well-laid out infrastructure and logistics, CLE is setting up a leather goods park in Kolkata and footwear components park in Agra and at Irungattukottai, near Chennai.

The Andhra Pradesh government will be setting up a modern tannery complex in Nellore. Tamil Nadu government is also planning to set up a footwear park at Irungattukottai, close to the CLE components park.

According to CLE chairman Mr S S Kumar, these parks will, to a large extent, address the issue of adding new capacities. The components park will take care of the present inadequate availability of quality components and volume as well.

The 10th Plan allocation for the leather industry will mainly be used to catalyse the modernisation of the exisiting units. This modernisation will certainly make positive contribution towards product development, productivity, unit viability and also capacity addition, Mr Kumar adds.

In order to increase its global image in the supply chain of leather, a by-product of the meat industry, CLE is playing the lead role in modernising the systems and procedures in animal market yards, abettoirs and transportation of animals.

Mr Audiseshiah told FE that a pilot project to introduce the best practices has been initiated in Pollachi, near Coimbatore, South Indias largest animal market, with the support of the German buyers of Indian leather products, the People for Ethical Treatment of Animals (PETA) which is a US-based non-governmental organisations fighting against leather all over the world, and the Tamil Nadu government through the district administration.

The project costing Rs 1 crore, mostly funded by the supporting agencies, will be replicated in 20 other major market places in the country. One of them will be in Kolkata. Another one will be in Kerala. The exact location is yet to be decided.

Meanwhile, leather exports for the first time crossed $2 billion during 2003-04 and touched $2094.33 million aganst $1875.21 million in the previous year. Leather footwer was the star performer with 27.5 per cent jump in exports to $539.70 million from $423.30 million. Export of footwear components are steadily going down since the overseas buyers prefer full shoes and not parts.