Export oriented units likely to target the domestic market as slowdown hits home.
Agra’s export-oriented footwear units are feeling the pinch of the financial meltdown. Orders from Europe and the US have dropped almost 30 per cent over the last year.
The industry is accruing small losses in the form of lost business due to cancellation of export orders. Last-ditch efforts like raising deadlines for order completion and cutting down on operational expenses have failed to offer any significant relief. This has forced the units to consider entering the domestic market.
Sources in the Agra Footwear Manufacturers and Exporters Chamber said some small-scale units had already tied-up with retail chain stores like Max and Reliance to push their stock into the domestic market. Others were pushing their ready stock into the domestic retail market through local departmental stores.
“Footwear exporters are certainly facing tough times with a drop in international demand for footwear, but the industry can survive. It has the domestic market to fall back on, which is still robust,” says Puran Dawar, Convenor, Council for Leather Exports.
Agra’s 75-odd footwear export units generate an aggregate revenue of over Rs 1,700 crore a year. This is nearly 60 per cent of India’s annual footwear exports.
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Dawar added that margins had gone down and large importers were delayed their purchase decisions.
He claimed that since none of the footwear export units in Agra was certified as a 100 per cent Export-Oriented Unit, entry into the domestic market was a viable option.
The ancillary suppliers of mid-scale footwear units had started floating their unsold stock into the local market and the market response to the superior quality footwear locally was encouraging, Dawar added.
The positive response has encouraged some of the larger export units to consider tapping the domestic market.
The exporters’ foray into domestic market is worrying local cottage units. The owners of most cottage units are fearful of losing business to the export units. Their fear is based on the technological superiority of export units compared to the cottage footwear units.
Javed Alam, owner of a cottage-scale unit, said export-oriented units had a better network for sourcing leather and footwear accessories as compared to the domestic cottage units. This provided the export oriented units with an advantage over domestic units on price as well as quality.
Alam’s unit provides gainful employment to just ten daily-wagers. Six months back, he employed almost 30 people daily.
Javed claimed that till now, only the larger export units had targeted the domestic market. If mid-scale export units also decided to follow suit, cottage and small-scale domestic footwear units could be forced to shut down.
“The government does provide financial aid for technological upgrade of footwear units in the form of a “Unified Leather Development Scheme”. The aid is currently limited to a subsidy of 20 -30 per cent on machinery import,” claimed DR Gautam, general manager, District Industrial Centre, Agra.
Gautam added the local units had not shown any interest in availing the benefits offered by this scheme despite awareness campaigns by the Small Industries Development Bank of India. He added the District Industrial Centre was planning to introduce this scheme afresh among the local units.