Relocate to perish

The smaller units in Kolkata may shut down as the proposed move to the leather centre will impact operating margins.

The Rs 600 crore, 1100-acre Calcutta Leather Complex (CLC) was expected to lead to the rejuvenation of the sector in West Bengal, instead it will lead to the demise of a large number of small units in the state.

Leather and allied operations were in the midst of relocating to new tanneries at CLC, but "as many as a 100 small units may not move as they will cease to be viable", said sources at the Indian Leather Products Association (ILPA) here.

The reason was that the small units located in the Kolkata suburbs of Tangra and Topsia were operating in a hyper low cost structure which cannot be replicated anywhere, said Animesh De of Electromech Consultants, a small firm working with such small units.

Consider the advantages: The units existed inside residential areas where they had access to low-cost quality power from Calcutta Electricity Supply Company, could employ cheap local labour for as low as Rs 60-70 a shift and could ship raw materials and finished products in micro cycle-van or head loads for Rs 40-50 at a time.

Water was virtually free from canals or local pools, and as manual labour was the norm, mechanisation was unknown.Environmental pollution was considered a non-issue with effluents being poured into drains and smoke released from vats into the air at specified times of the day.

In contrast, power at CLC would be charged at industry rates, while mechanisation was mandatory. Every input, from water to medical services, at CLC had to be paid for. There was a charge for effluents and discharged pollutants.

Most importantly, labourers had to be paid wages and benefits according to statutes and transport costs were much higher both for workers coming to work and for the shipment of finished goods. According to De, the total cost per kilo of finished leather would work out to Rs 7-10 which was more than the margin small players operated on.

CLC was expected to lead to the resurgence of the leather industry and provide a platform for growth through lower operational coats and rock-bottom infrastructure cost, defended a top bureaucrat in the state government.

Located 18kms from downtown Kolkata and linked by a dedicated 4-lane highway, CLC offered metered water and power and a central pay-and-use pollution treatment plant for the entire leather industry, from raw material handling units to tanning and units for finished leather, chemicals, leather machinery, by-products, components and leather products such as footwear, goods accessories and garments.

The CLC central environment treatment plant (CETP) and the entire complex was being run as a build-operate-transfer (BOT) project by M L Dalmiya and Co., owned by Jagmohan Dalmia, better known as the former president of the national cricket board.

A proposed special economic zone (SEZ) for leather and allied industries inside CLC, to serve as a duty-free enclave too has failed to cheer the small leather sector players, including exporters who could enjoy the status of offshore units with related financial and non-financial benefits, simplified procedures and in-house customs clearance.

Over 500 tanneries were expected to relocate there from the heart of the city along with 100-odd new leather goods units. Bengal has 19 per cent share in the domestic market and 25 per cent share in export of leather products.

Bengal has 540 tanneries and a mind-boggling 22,000 leather manufacturing units employing 200,000 people. For the past two financial years, leather exports from Bengal exceeded Rs 1600 crore.