A sizeable number of small and medium units in the leather industry in Tamil Nadu have closed shop.
Regulatory issues such as environmental standards and a lack of tax incentives has hit the tanning industry in the major districts of Dindigual and Tiruchy and other tanning hubs in Tamil Nadu.
According to industry sources, the number of units in Dindigual has come down by 80 per cent, while in Tiruchy it has fallen by 85 per cent. Likewise, Ambur, Vaniambadi and other clusters have also reported closure of tanneries.
Until three or four years back, Tamil Nadu accounted for 78 per cent of the pan-India tanning industry, which is estimated to be around Rs 8,000-9,000 crore in size.
This has now come down to 55 per cent, said Rafeeque Ahmed, president of the All India Skins & Hide Tanners Merchant Association (AISHTMA), a 93-year-old association that represents tanners.
“In the last three years, the number of units, mostly small and medium enterprises (SMEs), that have closed is huge,” he said.
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“There are many drawbacks in this industry — it needs to upgrade technology, it needs proper finance for high capital investment, raw material quality is poor and its supply erratic, and there are process and infrastructure problems,” he said.
According to representatives of Tamil Nadu Allied Leather Trade Industry Association (TALTIA), only 40 tanneries are now operating at Dindigual, compared to 214 three to four years earlier.
Similarly, in Tiruchy the number of tanneries has come down to nine from 63 over the same period. The other tanning hubs — Ambur, Vaniambadi, Perambur and Erode — have also reported closure of a large number of tanneries.
Currently, the 49 tanneries in Dindigual and Tiruchy employ around 2,000 people directly and 4,000 people indirectly, the TALTIA representatives added. The average capacity of the tanneries is around 8,500 sq ft a day, but they are operating at only 50 per cent of capacity.
Ahmed said the cost increase was due to increase in raw material prices, as well as the installation of effluent treatment and water recycling systems, which is required by the World Trade Organisation’s environmental standards. These, he said, have forced the SMEs to close down their units.
S Srinivasan, who runs a tanning unit, noted that the cost of tanning per sq ft of leather has increased from Rs 15 to Rs 25 in the last few months. This is mainly due to the increase in wages and introduction of stiff pollution norms.
The industry is also heavily dependent on indigenous raw hides and skins for its supply of raw materials, whose quality and quantity are both not very satisfactory.
Imports are low despite exemption from customs duties, due to high import prices (three or four times higher than local hides) and the absence of suitable machinery to process the imported hides and skins.
As international pressures to supply good quality leather products mount, leather manufacturers would have to increase the use of imported hides and skins to improve the image of Indian leather and leather products, said Ahmed.
The Indian leather industry, which is estimated to be around Rs 30,000 crore in size, is now forced to import hides from South America, Middle East and Africa, he added.
The industry is lobbying for the removal of export duties on East India leather, a type of semi-processed leather.
“Further delay in allowing duty-free export of EI leather will only lead to the closure of more tanneries,” sources in the industry added.
Although the ministry of commerce and industry permitted the resumption of exports of EI leather in January 2000, the imposition of 15 per cent export duty has crippled the industry, they added.