Leather ends '04 with $2bn export tally

The leather industry overcame its problems to report export growth in 2004 after four years of flat sales.

Exports in dollar terms crossed the $ 2 billion mark while domestic sales grew 10 per cent.

The star performer in domestic and overseas markets was footwear, with sales rising over 30 per cent.

Export of leather garments also reversed its fall.

Exporters managed to move up the value chain and export of mere finished leather declined.

"Footwear will be the engine of export growth for the next 4-5 years while in the domestic sector, footwear is already the most important segment," S S Kumar, chairman of Council for Leather Export (CLE), said.

Buoyed by the turnaround in 2004, CLE is aiming to double export by 2010.

"Segment-specific cluster development is the best way to do this, with focus on eco-friendly tanning and production processes," he added.

A tanning cluster is being developed at Nellore, a footwear component park at Ambur (Tamil Nadu), a footwear park at Agra and a leather goods park in Kolkata.

However, some areas of concern remain.

Supply of raw leather is becoming increasingly tight as more and more states are banning slaughter of cows.

Indian producers may have to import raw leather from Africa and South America.

This could erode the competitive advantage enjoyed by India over China, Thailand and Vietnam.

At present, 1.8 million square metre of leather is processed in the country annually.

Doubling of export will require more raw leather, while leather goods like bags, wallets and belts may help in realising greater value.

Clearly, huge investments are needed but foreign investors have mostly stayed away and few joint ventures have come up.

Few Indian companies have tried to access the capital market to raise resources.

Most industry players have a poor corporate governance record because of their family rather than manager oriented ownership and and operational structure.

"Access to capital may restrict growth of the Indian leather industry in next five years," admitted a source.