Cabinet nod for leather sector upgrade fund soon

The Cabinet Committee on Economic Affairs (CCEA) is expected to clear a Rs 290 crore modernisation package for the leather industry soon.

The package is a part of the Rs 400 crore Intergrated Leather Development Scheme that was meant to be disbursed during the course of the tenth five year plan (2002-2007). CCEA's approval for the Rs 290 crore package has been delayed for a while.

Leather industry representatives recently met the Finance Minister P Chidambaram and requested him take the initiative to get the funds disbursed. Industry sources said that he had assured them that the proposal would be taken by the CCEA soon.

Sources said it was necessary to have the fund released soon because entrepreneurs have begun to make investments on the heels of an increase in leather exports and upbeat forecasts.

The government assistance is required to supplement industry's own resources to make the most of the opportunities.

In 2004-05, the industry's exports stood at $2.38 billion, up by 7.35 per cent. The Commerce Ministry's Council for Leather Exports (CLE) has indicated that the aim is to almost double the turnover to $4 billion in five years.

The assistance under the modernisation package would be directed to largely the tanning and footwear sectors. The leather footwear sector now makes up 25 per cent of exports and is expected to contribute about 62 per cent of exports by 2010.

Footwear exports received a boost after Wal Mart began to pay more attention to India as a sourcing base in late 2003.

Sources said that Wal Mart's presence here acted as a catalyst for other American firms. The result is that CLE expects footwear to contribute $2.5 billion of the $4 billion target set for exports by 2010.

The Rs 290 crore package would supplement the Rs 110 crore that has already been allocated under the Integrated Leather Development Scheme to strengthen infrastructure.

The Rs 110 crore has gone in to building a leather tanning park in Andhra Pradesh, leather goods park in West Bengal, leather footwear and footwear components park in Tamil Nadu and another component park in Uttar Pradesh.