Leather industry overview

INDIAN LEATHER INDUSTRY

1. LEATHER INDUSTRY REVIEW 2015-17 FACULTY OF COMMERCE Banaras Hindu university Varanasi Presenter: Roli Srivastava Roll No. 23 MBA-Foreign Trade Sumitted to: Dr. Ishi Mohan

2. Indian leather industry OBJECTIVES COVERED INTRODUCTION OVERVIEW EXPORTS CHALLENGES OPPORTUNITIES GROWTH DRIVERS FUTURE PROSPECTS

3. What is leather Leather  is a durable and flexible material created by  tanning  animal  rawhide  and skin, often cattle hide. It can be produced at manufacturing scales ranging from  cottage industry  to  heavy industry. People use leather to make various goods—including clothing (e.g., shoes, hats, jackets, skirts, trousers, and belts),  bookbinding,   leather wallpaper, and as a furniture covering. It is produced in a wide variety of types and styles, decorated by a wide range of techniques

4. PROCESSES OF LEATHER MAKING

5. Types Of Leather

6. Types of leather Full grain leather- refers to the leather which has not had the upper “top grain” and “split” layers separated. Top-grain leather- is the second-highest quality and has the split layers separated away, making it thinner and more pliable than full grain Corrected grain leather- is any leather that has had an artificial grain applied to its surface Split leather- is leather created from fibrous part of the hide left once the top grain of the raw hide has been separated from the hide.

7. FLOW CHART OF LEATHER MAKING

8. Raw materials SKIN/HIDES -from cows, pigs, goats, sheep -exotic animals such as alligators, ostriches and Kangaroos

9. RAW MATERIALS TANNING MATERLAS -Vegetables- extract from the bark and wood of trees (oak, wattles etc.) -Mineral-in the main, trivalent chromium sulphate -Aldehydes-formaldehyde, glutaraldehyde or oxazolidine -Synthetic Replacement

10. Important leather products exported by india Leather Footwear Leather Garments Leather Goods (including harness & saddlery Leather Gloves etc.) Footwear components (shoes uppers, soles etc ) Finished Leather

11. INDUSTRY at a glance Indian leather sector stands at USD 17.85 billion (Exports – USD 5.85 billion, Domestic Market – USD 12 billion). Indian leather industry currently is one among the top 8 industries for export revenue generation in India, holding 10% of the global raw material and 2% of the global trade. India has become biggest livestock producer in the world, with the capacity of 1.8 billion square feet of leather production annually India is the second largest producer of footwear and leather garments in the world 13 % of global leather production 2 nd largest footwear and leather garment producer Leading position globally USD 18 BILLION BY 2020

12. INDUSTRY at a glance 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 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. 55% of workforce below the age of 35 years India accounts for 12.93% of the world’s leather production of hides/skins. 100% FDI allowed

13. MARKET CAPITALISATION Among all the industries the footwear industry in particular holds a greater potential for investment in india . Today India produces approx. 700 million pairs of footwear every year and accounts for an 18% share of the total indian leather export.

14. CONTRIBUTION TO THE ECONOMY/SALES With an annual turnover of over US$ 12 billion, the export of leather and leather products increased manifold over the past decades and touched US$ 6.5 billion during 2014-15, recording a cumulative annual growth rate of about 13.10% (5 years).

15. Export highlights India’s leather industry has grown drastically, transforming from a mere raw material supplier to a value-added product exporter. Total leather and leather good exports from India stood at US$ 5.92 billion in FY 2015-16. During 2015–16, the major markets for Indian leather products were US (14.25 per cent), UK (12.24 per cent), Germany (11.5 per cent), Italy (6.9 per cent), Spain (5.6 per cent), Hong Kong (5.4 per cent), France (5.3 per cent), UAE (4.5 per cent), Netherlands (3.2 per cent), China (2.8 per cent) and Australia and Belgium (1.45 per cent each). At 47.0 per cent, footwear accounted for the lion’s share of leather exports in FY 2015-16, followed by leather goods and accessories with 23.0 per cent share, finished leather with 18.0 per cent share, leather garments with 9.0 per cent share, and saddlery & harness with 3.0 per cent share. Per capita footwear consumption in India is expected to increase up to four pairs, while domestic footwear consumption is expected to reach up to five billion pairs by 2020.

16. PERCENTAGE SHARE OF LEATHER AND LEATHER PRODUCTS (2015-16)

17. Percentage share of various countries in india’s leather and leather product Export (2015-16 )

18. Employment of different sector of leather industry

19. Structure of industry

20. PRODUCT WISE GROWTH CATEGORY APR-MAR 2014-15 APR-MAR 2015-16 % VARIATION FINISHED LEATHER 81263.05 68509.14 15.69% LEATHER FOOTWEAR 139296.09 140574.13 0.92%

21. MAJOR MARKET SEGMENT SIZE FOOTWEAR COMPONENTS 22090.86 18613.91 -15.74% LEATHER GARMENTS 36952.09 36288.62 -1.80% LEATHER GOODS 88831.47 89626.45 -0.89% SADDLERY AND HARNESS 9948.33 9583.6 -3.67% NON LEATHER FOOTWEAR 18736.82 20054.69 -7.08% TOTAL 397118.71 383250.52 -3.49 %

22. PRODUCTION CENTRES Leather production centres for leather products are situated in Tamil Nadu-Chennai, Ambur , Ranipet , Vaniyambadi , Trichy , Dindigul ; West Bengal-Kolkata; Uttar Pradesh-Kanpur, Agra and Noida; Maharastra —Mumbai; Punjab- Jallandhar ; Karnatka -Bangalore; Andhra Pradesh-Hyderabad; Haryana- Ambala , Gurgaon, Panchkula and Karnal ; Delhi

23. Here are 7 cities famous for leather industry in india 1. Jajmau – Kanpur, Uttar Pradesh Jajmau is also known as Jajesmow , is a district of Kanpur. This is the main and the largest center for the leather industry in India. Home to some of the largest leather tanneries in the Northern part of India. The Kanpur’s leather and tannery industry contribute to around Rs 6,000 crore worth foreign exchange for the country and also gives direct livelihood to more than one lakh people . 2. Unnao – Uttar Pradesh Located approximately 18 km from Kanpur & 60 km from Lucknow city. Tanning is one the biggest industry in Unnao and this city is very popular for its huge leather industry. Big leather manufactures like, Superhouse Group, Mirza Tanners, Rahman Exports, and Zamzam Tanners have their factories in Unnao   3. Chennai- Tamil Nadu Chennai is located on the Coromandel Coast off the Bay of Bengal. In south India, Chennai is the biggest industrial and commercial center . And also a major cultural, economic and educational center . It contributes far more than 50 percent of India’s total leather exports. It also has a CSIR research institution named the Central Leather Research Institute. 4. Ambur – Tamil Nadu Located on the banks of the Palar River, it is a town and the state Assembly Constituency in the Vellore District of Tamil Nadu. Home to a major part of the India’s leather tanning industry. This town has also earned its nickname as the Leather City of South India. India’s largest and finest tanneries are located here, which makes it one of the leading exporters of leather goods in India. The finished and unfinished products include shoes, garments, and gloves  

24. 7 cities famous for leather industry 5. Kolkata – West Bengal Also known as the City of Joy, is the capital city of the Indian state of West Bengal. It is located on the east banks of the river Hooghly. It is the major commercial, educational and cultural center of the Eastern India. It is the second most important tanning center in the India. Home to around 500 tanneries which contribute about 22-25 % of the total country’s tanning. It also contributes to about 55% of the total country’s export contribution .   6. Agra – Uttar Pradesh Agra is located on the banks of the river Yamuna; it is the northern most state of Uttar Pradesh. Total 40% of the population largely depend on agriculture, and the others on the leather and footwear business. Agra city is very popular for its leather goods in the country. The Leather footwear of Agra is very popular all across the world for its superb craftsmanship . 7. Ranipet – Tamil Nadu Located on the northern bank of the Palar river, this city is also known as Ranipettai . It is a suburb, town and also the industrial hub of the Vellore city. It houses nearly 400 small and medium leather units. The large number of medium-scale leather industries which make both finished leather and leather articles for export. The Indian Government has identified the Leather Sector as a Focus Sector, as it has immense potential for export growth prospects and also in employment generation. The Indian leather industry aims to increase the production even more in the future, and thereby enhance exports, and resultantly create more and more employment opportunities.  

25. SORCING HUBS

26. Top leading companies 1.

27. Foreign investors Apache Group (Taiwan), Nellore, Andhra Pradesh Feng Tay Shoes (Taiwan), Cheyyar , Tamil Nadu Itares (Italy), Ambur , Tamil Nadu

28. PROBLEMS OF LEATHER INDUSTRY IN INDIA Problems of tanneries Environmental issues :  The leather industry is considered to be a major pollutant, especially during the last stages of production in tanning. As the leather industry also releases its waste and chemicals in to water bodies it is known to badly affect groundwater. Due to its nature, importing countries have set global standards, besides banning usage of many chemicals. . • lack of financial assistance • high cost of semi-tanned leather • Unhygenic working conditions leading to health hazards for the workforce. • No facilities for quality testing Problems faced by Manufacturers Lack of proper working environment • Illiterate and poverty struck workforce U nderutilisation of capacity:  Due to deficient raw materials, shortage of finance, labour problems and regular power failures there is underutilisation of capacity in the industry. • Lack of financial assistance • non availability of design and art centers • Absence of technical research and development institutions • absence of training centers • Illiteracy causing unawareness of various incentives/promotional schemes. Unavailability of raw materials:  The unavailability of raw materials is a serious problem for both the developed countries and the developing countries like India. Other components like fittings, adhesives and many more are also less accessible in preferred scale.

29. PROBLEMS OF LEATHER INDUSTRY IN INDIA Hindrances encountered by the traders Wide disparity in market prices of end products lack of financial assistance Chinese competition:  China dominates the global leather industry due to its low production costs. cheap, second hand imported I nability to export directly leading to untapped export potential Lack of technology :  In India leather is produced in the old fashioned way through tanning that takes a lot of time to process raw hide skin into leather. Further, the activities of designing, cutting and stitching are done manually, which affects the quality and unit value realisation of products. Evidently, the industry lacks in terms of level of modernisation and technology readiness . Inadequate investments:  The leather industry needs to make high capital investments for proper production processes and infrastructure.

30. Government initiatives The Integrated Development of Leather Sector (IDLS) sub-scheme implemented as part of the ILDP has significantly contributed to capacity modernisation and technological up-gradation of the leather sector . No Central Excise duty and import duty on raw hides and skins, semi-processed leathers like wet blue, crust leather or finished leather . Capital goods (machinery) required by the industry can be imported without import duty under the Export Promotion Capital Goods (EPCG) Scheme of Foreign Trade Policy, subject to meeting the export obligation of six times the duty saved in six years . No Central Excise Duty on footwear with Retail Price upto USD 7.69. Concessional Excise duty of 6% for all footwear with Retail Price above USD 7.69 and USD 15.38 . Excise duty on footwear with leather uppers and having retail price more than USD 15.38 reduced from 12%to 6 %. Under leather technology, innovation and environment issues, a sub-scheme of the Indian Leather Development Programme (ILDP), assistance is provided for technology benchmarking and environment management for the upgradation of Common Effluent Treatment Plants (CETPs), for Solid Waste Management and for holding environmental workshops .

31. Government initiatives State governments have a single window clearance system in place to fast-track clearances for the establishment of production units . 3 % reduction in interest on Rupee Export Credit to MSME units and all footwear units under Interest Equalisation Scheme for 5 years from 1st April 2015 . No Central Excise duty and import duty on raw hides and skins, semi-processed leathers like wet blue, crust leather or finished leather . Imported leather too is now available to the industry at competitive prices.Technology Mission scheme planned for tanning sector to utilize 100% tanning capacity of existing tanneries, to upgrade Common Effluent Treatment Plants (CETPs), systematic and large collection of hides and skins etc.

32. INVESTMENT OPPORTUNITIES The National Manufacturing Policy identifies leather as a special focus sector, for growth and employment generation. Huge Production Centres in the form of Mega Leather Clusters (MLC) with all required infrastructure for production to be set-up in next 5 years. These include the following projects. Investors can set-up their units in one of these MLCs. LOCATION OF THE MLC Project Approved Kothapatnam Village, Kota Mandal , Andhra Pradesh (Area: 537 acres) Project under consideration IMT Rajkot, Mewat , Haryana (Area: 105 acres)

33. Growth drivers

34. Swot analysis

35. Swot analysis

36. Thank you!!