'Address raw material shortage in leather industry'

New Delhi, May 4 (UNI) Taking note of the growing shortage of raw material in India's leather industry, FICCI today suggested the Government to adopt a twin-pronged approach of promoting large tannery parks and also set up warehouses with cold-chain for facilitating imports of raw leather.

In a representation to National Manufacturing Competitiveness Council (NMCC), the industry chamber said the shortage of raw leather could could further weaken the leather industry which has a large employment potential.

''The Government will have to set up warehouses with cold-chain where foreign suppliers can park their raw material for sale in the domestic market, since large number of domestic leather units are small and not in a position to engage with foreign suppliers,'' FICCI said.

In the current fiscal year, the leather industry grew by a mere 0.9 per cent for April-February 2006-07, it said adding that the slow growth implied that employment potential of this labour-intensive sector had not been harnessed adequately.

Countries like Vietnam and Indonesia are fast catching-up in this sector. Besides domestic investment, special efforts be made for attracting large-scale FDI from countries in EU like Italy and Spain and East Asia such as Korea, Taiwan, it added.

According to a study done by Central Leather Research Institute (CLRI) in 2006, a decline in cattle population in the country was observed which could widen the gap between demand and supply of raw leather.

In the country, average size of a domestic unit in the footwear segment is only Rs 18 crore (as per the sales volume) and in case of leather apparels and accessories the size is Rs 10 crore for a unit.

While, more than 70 per cent of the production comes from small-scale sector of the leather industry. As a result, domestic units are not able to supply relatively large quantities in the international market and our share in the world market for leather and leather products remain less than three per cent China's 22 per cent, said FICCI.

Increasing support for capital/machinery through capital subsidy scheme on the lines of Technology Upgradation Fund (TUFS) Scheme for textile sector is needed for the leather sector also, the chamber opined.

In terms of export intensity, almost 44 per cent of the total sale of the domestic leather industry is exported only 16 per cent for the manufacturing sector as a whole.

In the external sector, immediate issue of concern could be the fall in the unit value realisation of Indian leather footwear in the US market.

For January-June 2006, unit value realisation for Indian leather footwear witnessed a decline of three per cent in the US market, whereas that of China, Brazil, Vietnam, Indonesia, Italy and Spain the unit value had increased.

UNI