The leather sector is facing increasing threat from their Chinese counterparts who are gaining on the international clients due to their low cost as compared to the ones supplied by India.
This is true not only for international customers but the threat is also being noticed in the domestic market as well, where the Chinese leather has seen good penetration and acceptance.
"Due to rupee appreciation, we have lost our grip over our international clients, especially in the European Union. Besides this, the increased penetration that China is gaining in supplying leather products at a highly competitive price is posing a problem for the indigenous industry to survive," said Mukhtarul Amin, chairman, Council for Leather Exports in an exclusive interview with Business Standard in Lucknow.
Deliberating on the issue Amin said that earlier a proposal was made to customers in America, where it was suggested covering the rupee appreciation loss equally; that is 50 per cent of loss being borne by the Indian exporters and remaining 50 per cent by the client.
"But rather, the foreign customers played safe and invited international tenders form exporting countries, by way of which, the complete business went to China. It supplied the entire amount at a price much below our original cost," he added.
The loss in terms of business that the industry has already suffered is over 40 per cent in the present fiscal.
For the records, the leather industry in the country is primarily in the shape of cottage industry, where majority of manufacturers are small and medium entrepreneurs (SMEs).
The industry imparts employment to over 2.5 million people, of which about five lakh individuals have already lost their jobs on account of decline of business.
"The workers engaged in this particular sector are too industry specific, which means they are virtually out of employment once a unit is shut down. They do not have any alternative plan to earn a livelihood," Amin urged.
To resolve the problem, CLE has demanded the Government to introduce Foreign Exchange Fluctuation Allowance (FEFA) to the extent of 6.22 per cent of FoB value to support the leather industry till the rupee settles at pre-March level.
Besides this, CLE has plans to revive the industry through cluster development programme. The Council is mulling over the idea to have at least ten 'integrated leather parts' under the cluster module, which shall be completely operational by the next five years.
To keep the competition alive in the international market, Amin urged on the urgency for the leather industry to switch roles, from being a traditional supplier of products to being more consumer friendly manufactures.
