Leather

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
  • Export of different categories of Footwear holds a major share of about 47.59% in India’s total leather & leather product exports.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: India has trade agreements with Japan, Korea, ASEAN, Chile etc., and is negotiating Free Trade Agreement with the European Union, Australia etc.
  • The leather industry in India has abundance of  raw materials with 20% of world cattle & buffalo and 11% of world goat & sheep population.
  • Women employment is predominant in Leather products industry with about 30% share. The Leather industry in India has one of the youngest workforces with 55% of the workforce below 35 years of age. 
  • Opportunity to tap the huge domestic market in India: The domestic market is expected to reach USD 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.
  • GOI aims to achieve USD 10 bn leather exports target by 2025. The target for Kolhapuri Chappals is USD one bn exports target.
  • GOI will set up BIS Standards laboratories in close proximity to leather clusters  with the aim to make ‘Made in India’ brand the hallmark of excellence.

 

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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 USD 371 Mn from 2017-18 to 2019-20. Under the programme, 4 projects have been approved with a total outlay of USD 15 Mn. This is to facilitate upgradation of infrastructure, job creation and environmental sustainability in Tamil Nadu.16 
  • In-principal approval for the mega leather cluster in West Bengal with employment potential for around 7000 people and an investment of up to USD 64 Mn. Under the scheme, a total of 9 projects for Common Effluent Treatment Plant upgradation, with a gross value of USD 67 Mn and government assistance of USD 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.17
Recent Announcements

05th September 2021: Government likely to extend incentive scheme IFLADP for leather, footwear industry till 2025-26.

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07th January 2021: QCI in collaboration with DPIIT organized Udyog Manthan in Leather and Footwear Industry to draw in best practices and experiences of sector and industry.

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16th October 2020: Under Skill India mission, Leather Skill Sector Council launches SCALE India Android App for enhanced quality assurance. This platform will boost the use of efficient and intelligent tools in the Leather industry which will support Hon’ble Prime Minister’s vision of making India ‘Aatmnirbhar’ i.e the ‘Skill Capital of the World’.

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Statistics
  • Strong Raw Material Base
  1. India is endowed with 20% 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 major segments namely footwear, finished leather, leather goods, leather garments, footwear components, saddlery and harness. All these segments have high growth potential.
  • Great opportunity to set up a manufacturing facility of footwear components, considering the increasing demand for fashion footwear in India.
  • Exports of Leather & leather products values at  USD 395.90 mn in April 2022 and records positive growth vis-à-vis April 2021 of 36.68%. 
  • The Average Index of Industrial Production of Manufacture of leather and related products in the FY 2021-22 is 101.3 and has grown by 0.7 percent.
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
  • The Leather & leather products that have recorded positive growth during August 2021 vis-à-vis August 2020 are 8.37%.
FDI Policy
  • Leather products manufacturing is allowed 100% FDI through an automatic route. 9
  • The government of India has allowed 100% FDI in single-brand retailing in India, with a clause of 30% mandatory local sourcing. 10
  • The Leather industry in India is de-licensed, facilitating expansion on modern lines with state-of-the-art machinery and equipment.
  • The cumulative FDI equity inflow in the Leather, Leather Goods and Pickers industry is USD 219.48 mn during the period April 2000 to December 2021.18

 

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Financial Support

Indian Footwear, Leather & Accessories Development Programme (IFLADP)

  • Indian Footwear and Leather Development Programme (IFLDP) has been approved for continuation from 2021-22 with an approved financial outlay of INR 1700 crore. 
  • IFLDP aims at development of infrastructure for the leather sector, address environmental concerns specific to the leather sector, facilitate additional investments, employment generation and increase in production.
  • Under IFLADP, the following assistance is provided: 11
    • Sustainable Technology and Environmental Promotion (proposed outlay INR 500 crore):- Special Purpose Vehicle constituted for each CETP would be provided assistance @ 80% of the total project cost for Northeastern Areas with industry’s/beneficiary share to be 20% of the project cost and @ 70%  of the total project cost for other areas with industry’s/beneficiary share to be 30% of the project cost with a limit of INR 200 crore.
    • Integrated Development of Leather Sector (IDLS) sub-scheme (proposed outlay INR 500 crore):- Assistance would be provided to the sectoral units for their modernization/capacity expansion/technology up-gradation on or after 1st January 2020 @30% to MSME units and 20% to other units. Financial assistance is being proposed to North-Eastern Areas also @40% of cost of plant & machinery to MSME units and 30% of the same to other units with additional 5% financial assistance for the domestically manufactured plant and machinery. 
    • Mega Leather Footwear and Accessories Clusters sub-scheme (proposed outlay INR 300 crore):- The sub-scheme aims at world-class infrastructure and to integrate the production chain in a manner that caters to the business needs of the leather and footwear industry so as to cater to the domestic market and exports. 
    • The Department has approved the project for setting up of MLFAC at Calcutta Leather Complex, Bantala, Kolkata with project cost of INR 178.84 crore and GoI assistance of INR 89.42 crore. ‘In-principle’ approval has been accorded for the proposal for setting up of MLFAC at Ramaipur, Kanpur Nagar, Uttar Pradesh with tentative proposed cost of INR 451 crore. 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 - USD 230 per person, for skill up-gradation training to employed workers - USD 76 per employee and for training of trainers - USD 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 eight branches. Another 4 branches are being set up.12
    • Graded assistance is proposed to be provided @50% of the project cost or @70% of the project cost in Northeastern areas, for land development, core infrastructure, HRD and social infrastructure, production facilities including ready to use sheds with plug and play facility, R&D support and export services  excluding cost of land with maximum Government assistance being limited to INR 125 crore.
    • During the period 2017-18 to 2019-20, primary skill development training has been provided to 3,24,722 unemployed persons and 2,60,880 trainees provided placement in leather & footwear sector. 12947 workers were provided skill upgradation training in 2019-20.
    • 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 sectoral industry council/ association and support for preparation of vision document for Leather Footwear and Accessories Sector.
    • Approval has been accorded for upgradation of twelve Common Effluent Treatment Plants (CETPs) at Dindigul, Ranipet, Ambur, Vaniyambadi, Vellore, Pallavaram, Trichy, Erode districts of Tamil Nadu, Jalandhar (Punjab) and Bantala (Kolkata). As on 15th February 2022, financial assistance amounting to INR 132 crore has been released in respect of ten CETP projects with total GOI assistance of INR 284 crore. INR 152 crore is the committed liability which would be released in the coming years.
    • During the period 2017-18 to 2020-21, financial assistance amounting to INR 307.84 crore provided for modernization and technology up-gradation of 714 units in leather & footwear sector. 
    • Promotion of Indian Brands in Leather, Footwear and Accessories Sector sub-scheme (proposed outlay INR 100 crore):- The GoI assistance is proposed to be 50% of total project cost subject to limit of Rs 10 crore for each brand in next three year to promote 10 Indian brands in the International Market in 3 years. 
    • Additional Employment Incentive for Leather, Footwear and Accessories Sector scheme: Employers contribute 3.67% to employees provident fund for all working in the leather, footwear and accessories sector.  The employees are enrolled in Employees' Provident Fund Organization (EPFO) for first 3 years of their employment.
    • Development of Design Studios (proposed outlay INR 100 crore):- Assistance would be provided to develop 10 Indian design studio to promote marketing/export linkages, facilitates buyer- seller meets, display designs to international buyers and work as interface for the trade fairs.  Design Studios will be kind of ‘one-stop- shop' providing a wide range of services: design, technical support, quality control etc. Institutes like FDDI, CLRI, NID, NIFT, IBEF, IIFT or institutes of similar standing or any large units of the industry or group of industry would be the implementing agencies.

 

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Investment Opportunities
  • As per the World Bank Doing Business 2020 report, India is ranked 63. Many initiatives under 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. 14
  • The National Manufacturing Policy identifies leather as a special focus sector, for growth and employment generation. The policy aims at a GDP of 25% along with a creation of 100 mn jobs in all sectors by the year 2025. 15
  • 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.

 

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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)
Sources
  1. Potential for Growth of Leather Based Industries, Ministry of Commerce & Industry, PIB, http://pibarchive.nic.in/newsite/PrintRelease.aspx?relid=95785
  2. Council for leather exports, Export Performance of Leather and Leather Products from India, http://leatherindia.org/analysis-export-performance-of-leather-and-leather-products-during-april-august-2019-20-vis-a-vis-april-august-2018-19/ 
  3. Council for leather exports, Export Performance of Leather and Leather Products from India, http://leatherindia.org/analysis-export-performance-of-leather-and-leather-products-during-april-august-2019-20-vis-a-vis-april-august-2018-19/ 
  4. Council for leather exports, Industry at a glance, http://leatherindia.org/industry-at-a-glance/ 
  5. Growth of Leather Industry, Ministry of Commerce & Industry, PIB, http://pibarchive.nic.in/newsite/PrintRelease.aspx?relid=186811
  6. Council for leather exports, Export Performance of Leather and Leather Products from India, http://leatherindia.org/analysis-export-performance-of-leather-and-leather-products-during-april-august-2019-20-vis-a-vis-april-august-2018-19/ 
  7. Council for leather exports, Indian Leather Industry, http://leatherindia.org/indian-leather-industry/ 
  8. Department for Promotion of Industry and Internal Trade, Promotion of leather industries, https://dipp.gov.in/sites/default/files/lu_4316.pdf 
  9. Consolidated FDI Policy, Government of India, https://invest-india-revamp-static-files.s3.ap-south-1.amazonaws.com/2020-04/FDI%20Policy%202019%20revised_19%20April%202020.pdf
  10. Consolidated FDI Policy, Government of India, https://invest-india-revamp-static-files.s3.ap-south-1.amazonaws.com/2020-04/FDI%20Policy%202019%20revised_19%20April%202020.pdf
  11. Status of Leather Industry, Ministry of Commerce & Industry, PIB, https://pib.gov.in/PressReleseDetailm.aspx?PRID=1594913 
  12. Year End Review 2018- Ministry of Commerce & Industry, PIB, http://pibarchive.nic.in/newsite/PrintRelease.aspx?relid=186255
  13. Statement of Activities 2018-19, Ministry of Commerce & Industry, https://commerce.gov.in/writereaddata/uploadedfile/MOC_636850524269073529_Statement_of_Activities_2018-19.pdf 
  14. "Doing Business 2020: Reforms Boost India’s Business Climate Rankings; Among Top Ten Improvers for Third Straight Year", Press Release, The World Bank, https://www.worldbank.org/en/news/press-release/2019/10/24/doing-business-india-top-10-improver-business-climate-ranking 
  15. National Manufacturing Policy, DPIIT, https://dipp.gov.in/sites/default/files/po-ann4.pdf
  16. Four Projects Approved in Tamil Nadu under IFLADP, Ministry of Commerce & Industry, PIB, http://pibarchive.nic.in/newsite/PrintRelease.aspx?relid=184110

  17. Achievements of Ministry of Commerce and Industry 2018, PIB, https://pibindia.wordpress.com/2018/12/12/achievements-of-ministry-of-commerce-industry-during-2018/ 
  18. Factsheet on FDI - April 2000 to December 2020, Department for Promotion of Industry and Internal Trade, https://dpiit.gov.in/sites/default/files/FDI%20Factsheet%20December%2C%202021.pdf

  19. PIB Release, https://www.pib.gov.in/PressReleasePage.aspx?PRID=1684674

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