LEATHER

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SUMMARY
  • The Leather industry in India holds a significant place in the Indian economy.
  • The Leather industry in India is consistent in its high export earnings and is among the top 10 foreign exchange earners for India.1
  • The Leather industry in India stands at US$ 17.85 bn (Exports – US$ 5.85 bn, Domestic Market – US$ 12 bn). The exports from April-Jan 2018-19 are recorded as US$ 4750.62 mn.2
  • Export of different categories of Footwear (leather & non-leather and components) holds a major share of about 50.34%.3
  • The Leather industry in India is an employment-focused industry, providing jobs to about 4.42 mn people.4 
  • India is the 2nd largest producer of footwear, 2nd largest exporter of Leather Garments, the 5th largest exporter of Leather Goods and 3rd Largest Exporter of Saddlery and Harness items.5
REASONS TO INVEST
  • Opportunity to set-up export units: Exports are projected to reach US$ 9.0 bn by 2020, from the present level of US$ 5.85 bn. India has trade agreements with Japan, Korea, ASEAN, Chile etc., and is negotiating Free Trade Agreement with the European Union, Australia etc.
  • Opportunity to tap the huge domestic market in India: The domestic market is expected to reach US$ 18 bn by 2020.
  • Comparative advantages exist in production cost and labour costs as compared to other major manufacturing countries.
  • Skilled/trained manpower is available for a new production unit or existing production unit.
STATISTICS
  • Strong Raw Material Base
  1. India is endowed with 21% 6 of the world’s cattle and buffalo and 11% of the world’s goat and sheep population.
  2. India produces 3 bn sq. feet of leather on an annual basis.7
  •  The Leather industry in India comprises of major segments namely footwear, finished leather, leather goods, leather garments, footwear components, saddlery and harness. All these segments have high growth potential.
  • Per capita consumption of footwear in India projected to increase up to 4 pairs and total domestic consumption is expected to reach up to 5 bn pairs by 2020.
  • Great opportunity to set-up manufacturing facility of footwear components, considering increasing demand for fashion footwear in India.
GROWTH DRIVERS
  • High growth potential for exports
  • The ready availability of leather
  • The abundance of essential raw materials
  • Rapid strides in the areas of capacity modernisation and expansion
  • Skill development and environment management
  • Favourable government policies
  • Additional steps have been taken to increase the export of leather and leather products:
    1. About 2% across the board enhancement of duty credit scrip under Merchandise Exports from India Scheme (MEIS) for shipments made from 1 November 2017
    2. GST concessions for leather industry items –
      • Finished leather from 12% to 5%,
      • Certain leather chemicals, leather goods, leather garments and saddlery items from 28% to 18%,
      • Common Effluent Treatment Plants (CETPs) from 18% to 12%,
      • Job work from 18% to 5% Footwear from 18% to 5% 8
FDI POLICY
  • Leather products manufacturing is allowed 100% FDI through automatic route.
  • Government of India has allowed 100% FDI in single-brand retailing in India, with a clause of 30% mandatory local sourcing.9 
  • The Leather industry in India is de-licensed, facilitating expansion on modern lines with state-of-the-art machinery and equipment.
FINANCIAL SUPPORT
  • Under the Leather Technology, innovative and environmental issues sub-scheme of Indian Leather Development Programme (ILDP), the following assistance is provided:
    • Up to 50% of the project cost with a ceiling of US$ 7.69 mn for upgradation /installation of Common Effluent Treatment Plants (CETPs)
    • Addressing the environmental pollution caused by leather units
    • Solid waste management through environmental workshops 10
  • Integrated Development of Leather Sector (IDLS) sub-scheme of ILDP, 30% grant is provided on the cost of plant and machinery for Micro and Small units and 20% for other units, with a ceiling of US$ 0.30 mn for each product line.
  • Mega Leather Cluster (MLC) sub-scheme of ILDP, 50% grant with a ceiling of US$ 19.23 mn based on size is provided. This is mainly for the establishment of Mega Leather Clusters to boost infrastructure facility and support services for production and export. 
  • Human Resource Development (HRD) sub-scheme: An assistance for Placement Linked Skill Development training to unemployed persons is provided –US$ 230 per person, for skill up-gradation training to employed workers - US$ 76 per employee and for the training of trainers –US$ 3,076 per person.
  • The Footwear Design and Development Institute (FDDI) has established itself as the premier training institute for the provision of skilled manpower in the Leather industry. It has 55 training centres across India including 8 branches. Another 4 branches are being set up.11 About 25,643 persons have been trained under the primary skill development training programme during 2018-19. 12
  • Mega Leather, Footwear and Accessories Cluster (MLFAC) sub-scheme: MLFAC provides infrastructure support to the leather, footwear and accessories industry. Graded assistance is provided up to 50% of the eligible project cost, excluding the cost of land with Government assistance being limited to US$ 19 mn.
  • Leather Technology, Innovation and Environmental sub-scheme: The help is provided for upgradation/installation of Common Effluent Treatment Plants (CETPs) @ 70% of the project cost. The sub-scheme also offers support to national level industry council/ association and support for the preparation of vision document for Leather Footwear and Accessories Industry.
  • Promotion of Indian Brands in Leather, Footwear and Accessories sub-scheme: Eligible units are approved for Brand Promotion. Government assistance is limited to 50% of the total project cost subject to a limit of US$ 461,538 for each brand, annually for 3 years.
  • Additional Employment Incentive for Leather, Footwear and Accessories Industry scheme: Employers contribute 3.67% to employees provident fund for all working in the leather, footwear and accessories industry. The employees are enrolled in the Employees' Provident Fund Organization (EPFO) for the 1st 3 years of their employment.
INVESTMENT OPPORTUNITIES
  • As per the Doing Business 2019, World Bank, India is ranked 77. Many initiatives under the National Trade Facilitation Action Plan (2017-2020) have upgraded the productivity of cross-border trade, reducing border and documentary compliance time for both exports and imports.13 
  • The National Manufacturing Policy identifies leather as a special focus industry, for growth and employment generation. The policy aims at a GDP of 25% along with the creation of 100 mn jobs in all industries by the year 2025. 14 
  • Presence of huge production centres in the form of Mega Leather Clusters (MLC) with all required infrastructure, where investors can set-up one of these MLCs.
  • As on 2018, setting up of Mega Leather Footwear and Accessories Cluster (MLFAC) at Kota Mandal, Nellore District of Andhra Pradesh have been approved. In addition to this, in-principle approval has been accorded for setting up of MLFAC at Bantala, Kolkata, West Bengal. 15

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)
  • Sandila Industrial Area in Hardoi district & Ramaipur in Kanpur district. (Area: 150 acres) 16
FOREIGN INVESTORS
  • Apache Group (Taiwan), Nellore, Andhra Pradesh
  • Feng Tay Shoes (Taiwan), Cheyyar, Tamil Nadu
  • Itares (Italy), Ambur, Tamil Nadu
AGENCIES
  • Council for Leather Exports (CLE)
  • Central Leather Research Institute (CLRI)
  • Footwear Design and Development Institute (FDDI)
  • National Institute of Fashion Technology (NIFT)
  • Central Footwear Training Institute (CFTI)
KEY ACHIEVEMENTS
  • Indian Footwear, Leather & Accessories Development Programme (IFLADP), a special package for employment generation in the Leather and footwear industry has been launched in December 2017. The approved expenditure for this is US$ 371 mn from 2017-18 to 2019-20. Under the programme, 4 projects have been approved with a total outlay of US$ 15 mn. This is to facilitate upgradation of infrastructure, job creation and environmental sustainability in Tamil Nadu.17 
  • In-principal approval for the mega leather cluster in West Bengal with employment potential for around 7000 people and an investment of up to US$ 64 mn. Under the scheme, a total of 9 projects for Common Effluent Treatment Plant upgradation, with a gross value of US$ 67 mn and government assistance of US$ 46 mn have already been approved and are under implementation.
  • During 2017-18, primary skill development training has been provided to 94,231 unemployed persons in the Leather & footwear industry and of them, 71,125 trainees have been provided placement.18
SOURCES
  1. Press Information Bureau, Government of India, Ministry of Commerce & Industry, Potential for Growth of Leather Based Industries, http://pib.nic.in/newsite/PrintRelease.aspx?relid=95785 accessed on 27 May 2019
  2. Council for leather exports, Export Performance of Leather and Leather Products from India, http://leatherindia.org/category/exports/ accessed on 27 May 2019
  3. Council for leather exports, Export Performance of Leather and Leather Products from India, http://leatherindia.org/category/exports/ accessed on 27 May 2019
  4. Council for leather exports, Industry at a glance, http://leatherindia.org/industry-at-a-glance/ accessed on 27 May 2019
  5. Press Information Bureau Government of India Ministry of Commerce & Industry, Growth of Leather Industry, http://pib.nic.in/newsite/PrintRelease.aspx?relid=186811 accessed on 27 May 2019
  6. Ministry of Commerce & Industry, Potential for growth of leather-based industries, https://dipp.gov.in/sites/default/files/ru4501.pdf accessed on 27 May 2019
  7. Council for leather exports, Indian Leather Industry, http://leatherindia.org/indian-leather-industry/ accessed on 27 May 2019
  8. Department for Promotion of Industry and Internal Trade, Promotion of leather industries, https://dipp.gov.in/sites/default/files/lu_4316.pdf accessed on 27 May 2019
  9. EY reports, Footwear (India) – Industry Overview – FY18, accessed on 27 May 2019
  10. EY reports, Footwear (India) – Industry Overview – FY18, accessed on 27 May 2019
  11. EY reports, Footwear (India) – Industry Overview – FY18, accessed on 27 May 2019
  12. Press Information Bureau, Ministry of Commerce & Industry, Year End Review 2018- Ministry of Commerce & Industry, http://pib.nic.in/newsite/PrintRelease.aspx?relid=186255 accessed on 27 May 2019
  13. Ministry of Commerce & Industry, Statement of Activities 2018-19, https://commerce.gov.in/writereaddata/uploadedfile/MOC_636850524269073529_Statement_of_Activities_2018-19.pdf accessed on 27 May 2019
  14. Planning Commission, The Manufacturing Plan, http://www.planningcommission.nic.in/aboutus/committee/strgrp12/str_manu2703.pdf accessed on 27 May 2019
  15. Make in India, Achievement Report – Leather sector - 30 October 2018, accessed on 27 May 2019
  16. Government of Uttar Pradesh NRI Department, Mega Leather Cluster (MLC)Project, http://www.upnri.com/mega-leather-cluster-project.htm accessed on 27 May 2019
  17. Press Information Bureau - Ministry of Commerce & Industry, Four Projects Approved in Tamil Nadu under IFLADP, http://pib.nic.in/newsite/PrintRelease.aspx?relid=184110 accessed on 27 May 2019
  18. Press Information Bureau, Achievements of Ministry of Commerce and Industry 2018, https://pibindia.wordpress.com/2018/12/12/achievements-of-ministry-of-commerce-industry-during-2018/ accessed on 27 May 2019
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