The shoe pinches

With neighbouring Himachal Pradesh giving tax breaks to leather units, Punjab's footwear industry is feeling the heat.

Punjab's Rs 300-crore leather industry, plagued by the lack of manpower, high taxes and rising raw material costs, is seeking a helping hand from the state government.

The industry has demanded a footwear park or a sector-specific special economic zone to attract foreign buyers and promote joint ventures.

The leather industry in Punjab has been alleging that tax sops offered by the neighbouring Himachal Pradesh is making life difficult for them as units in these states are expanding. This in turn is leading to greater cost efficiencies for the Himachal units, which makes the products from Punjab more expensive.

At present, there are 20 medium units and 60 small units, including tanneries and dry units engaged in footwear manufacturing. The current turnover of Rs 300 crore is expected to rise to Rs 1,000 crore, if the footwear park or SEZ comes into being.

In 1986, a leather complex was established in Jalandhar but was operationalised only in 1990. It can accommodate 117 units, given the lack of infrastructure, only 62 units have moved in so far. The leather industry has now spread to Phillaur, Mohali and Malerkotla.

Ajoy Sharma, executive member of Council of leather Exports said, "In the last one year, raw material costs has risen by 40 per cent, while the prices of finished products have risen only 10 per cent. If we raise prices, our products cannot be competitive."

Apart from the rise in raw material costs, the units are also facing an excise pinch. Excise duty on footwear is 16 per cent items above Rs 750, and 8 per cent on those below Rs 750, in addition to four per cent VAT. Sharma said that VAT and excise made products 20 per cent dearer.

As a result the industry is forced to shift to hill state like Himachal Pradesh. The expansion of Liberty, M & V shoes, Sarup Tanneries (owners of the Lotus Bawa brand) in Himachal Pradesh clearly proves the point, Sharma said.

To overcome its current stagnation, the industry has demanded reforms in labour laws and tax rates. It has also asked for an institute on the lines of Footwear Design & Development Institute (FDDI) in Noida, for managerial staff and courses related to footwear industry by Industrial Training Institutes (ITI) for lower level workers.

Said J P Singh, Director Oscar Leathers, said, "The industry is facing a lack of quality manpower and we have only one training institute in Jalandhar but even that is not up to the mark. We need an institute on the pattern of the FDDI, Noida," he said.