Leather Industry


 

OVERVIEW

The leather industry has an influential share among traded commodities in global markets. Leather-based industry is huge and influential in Indian markets too and is mostly driven by its luxurious and grand appeal. In recent years, the demand for leather and leather products has grown, and the production largely comes from the informal sector.

The Indian Leather Industry comprises of major segments namely Footwear, Finished Leather, Leather Goods, Leather Garments, Footwear Components and Saddlery and Harness. All these segments have high growth potential. Apart from retail items, it is also used extensively in industries such as interior designing, automotive and sports. Industry revenue is forecast to reach $91.2 billion in 2018, with a CAGR of 3.4 per cent, over the next five years.

In the early 1900s, India was the eighth largest leather footwear producer, but its performance in the international market improved remarkably, after the government cut out tariffs and non-tariff barriers, and removed restrictions in foreign direct investments. Today, the country ranks second in terms of footwear and leather garments production in the world and accounts for approximately 9 per cent of the world’s footwear production. India’s transformation, from being a mere raw material supplier to a finished good exporter has been phenomenal.

Indian leather industry accounts for about 13% of global production. The value of Indian leather sector stands at $17.85 billion. In which, exports contribute up to $5.85 billion and the domestic market consumes $12 billion worth. The leather garments sector has an annual production capacity of 16 million pieces, which accounts for 9% share of India’s total leather exports. Annual production capacity of leather saddlery and harness items is 12.5 million pieces and production capacity for Industrial gloves is 52 million pairs.

During Apr-Jun 2017, the major markets for Indian leather products were US (14.66 per cent), Germany (11.22 per cent), UK (10.05 per cent), Italy (7.03 per cent), Spain (4.63 per cent), France (5.15per cent), Hong Kong (4.52 per cent), UAE (5.04 percent), China (3.09 per cent), Netherlands (3.05 per cent), Poland (2.23 per cent) and Vietnam 1.88 (per cent).

India is one of the few large global manufacturers of leather products & especially, leather footwear. In 2016-17, total exports from ‘Leather & Leather Manufactures’ recorded export value worth $5325.85 million. Leather exports for six months from April to September 2017-18 showed a marginal increase of 2.41% at $3.01 billion from a year ago. Total leather and leather good exports from India stood at US$ 1.42 billion during April-June 2017 as against $1.43 billion in the corresponding quarter of last year. At 47.54 per cent, footwear (leather and non-leather) and footwear components accounted for the lion’s share of leather exports in April-June 2017, followed by leather goods and accessories with 23.34 per cent share, finished leather with 16.77 per cent share, leather garments with 9.79 per cent share and saddlery & harness with 2.56 per cent share.

Exports of Leather & related Products in India decreased to 27.43 INR Billion in February from 29.09 INR Billion in January of 2017. Exports of Leather & Products in India averaged 11.90 INR Billion from the year 1991 up to 2017.

Commodity Apr-Feb 2017 Apr-Feb 2018(P) %Growth %Share
LEATHER & LEATHER MANUFACTURES 4,871.92 4,989.67 2.42 1.82
RAW HIDES AND SKINS 0.32 0.22 -32.30 0.00
FINISHED LEATHER 805.61 795.56 -1.25 0.29
LEATHER GOODS 1,206.56 1,247.54 3.40 0.46
LEATHER GARMENTS 501.03 490.49 -2.10 0.18
FOOTWEAR OF LEATHER 1,956.22 2,006.10 2.55 0.73
LEATHER FOOTWEAR COMPONENT 272.20 307.52 12.97 0.11
SADDLERY AND HARNESS 129.99 142.25 9.43 0.05

Source – Dept. of commerce (Values in US$ Millions)

The entire leather product sector is de-licensed, facilitating expansion on modern lines with state-of-the-art machinery and equipment. 100% FDI is allowed under the direct route. FDI in leather, leather goods and pickers from the period April 2000 to December 2017 estimated to $188 million, which accounted for 0.05% of total FDI inflows.

Leather sector has been included as one of the focus sectors under the ‘Make in India’ program. 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.

Exports of leather and leather products dipped by about 9 per cent to $369.24 million in October 2017. Challenges to develop and expand exports of the leather industry will become more imperil, since leather is being replaced in many markets with other synthetic materials. With the growth of these technical and synthetic materials, leather exports might see a dip.

Despite all these concerns, positive growth is projected in the next five years. The government, armed with incentives, focus initiatives, industrial development programmes and export promotional activities, has deployed full support to promote exports of the leather sector.


 

SELECT GOVERNMENT INCENTIVES

The following steps have been taken by the government to enhance the growth of exports in this sector –

  • The Foreign Trade Policy promises to ease trading for exporters in the country and highlights leather sector as one of the ‘Focus Areas.’
  • MEIS (Merchandise Export from India scheme) incentives have been raised by 2% to 4%, which will largely benefit the leather industry.
  • Additional annual incentives of INR 749 crores have been sanctioned for the leather sector.
  • The Integrated Development of Leather Sector (IDLS) sub-scheme has been implemented as part of the ILDP, which has significantly contributed to capacity modernization and technological up-gradation of the leather sector.
  • Central Excise duty and import duty on raw hides and skins, semi-processed leathers like wet blue, crust leather or finished leather has been deposed.
  • Excise duty on footwear with leather uppers and having retail price more than $15.38 has been 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.

 

SELECT EXPORT MARKET REGULATIONS

To maintain the quality of leather imports, certain standards have been mentioned through the technical body CEN TC 289 of the European Committee for Standardization. There are currently 143 standards with relevance to leather products. These standards cover a number of fields.

Some additional EU regulations -

  • Regulation (EC) No 1907/2006 on the Registration, Evaluation, Authorisation and restriction of Chemical substances (REACH), as the industry is an important downstream user of a wide variety of chemical preparations.
  • Directive 2010/75/EU on industrial emissions according to which permit conditions, including emission limit values, must be based on the Best Available Techniques (BAT). The BAT reference document (BREF) for tanning of hides and skins was adopted in 2013.
  • Regulation (EC) 1069/2009 and Commission Regulation (EU) 142/2011 on animal by-products and derived products not intended for human consumption, as hides and skins are materials of animal origin that are used outside the food chain.

As of 1 September 2015, a new set of standards – Technical Specification for Export Footwear in leather (SN/T 1309-2015) – has been applicable to the inspection of China’s footwear imports and exports, replacing the previous SN/T 1309.1 – SN/T 1309.7 series of standards.

For more information on regulations and policies, link to ‘China leather industry association’ http://en.chinaleather.org/Expand/Share/Page/NSCMoreList.aspx?NSCID=977

The government of UK has provided certain regulations and checks for importing leather and leather products. The relevant link has been provided below.https://www.gov.uk/guidance/classifying-leather