The rising rupee has started hurting the leather industry in Tamil Nadu as currencies of competing countries, especially China, made slower gains, and in some cases even declined against the dollar.
“The rupee’s strengthening in the last 15-20 days has eroded the profitability and made the industry weaker,” said industry representatives.
Tamil Nadu is one of the largest centres of the Indian leather industry. The clusters, spread across Chennai, Ranipet and Ambur, employ around 300,000 people.
According to the Council for Leather Exports (CLE), exports from the state increased to Rs 5,385.30 crore in 2007-08, from Rs 5,277.24 crore in 2006-07. The state accounted for 36.11 per cent of the country’s exports in 2007-08.
Indian Finished Leather Manufactures and Exporters Association president VP Naimur Rahman said the industry was already under “tremendous” pressure due to the economic slowdown, which has resulted in a drop in the orderbook and poor capacity utilisation. The strong rupee was only making things more difficult.
For AV Thomas Leather and Allied, which does 40-50 per cent of its business in dollar, the rising rupee in the last 3-4 days has seen the margins shrink by five per cent. “The government should lend its hand to the industry by increasing the stimulus, which is around Rs 100 crore,” said Habib Hussain its chief executive officer.
According to Rahman, the Chinese government has increased the subsidy from eight per cent to 13 per cent. This has helped China offer a competitive price. He, however, suggests that the industry should step up its creativity level in order to compete with China.
CLE chairman M Rafeeque Ahmed said the prices of the products were finalised a month ago and it was now not possible to revise them.
“At Rs 46, the exporter would lose Rs 2 against every US dollar. The rupee unexpectedly strengthened sharply against the dollar on Tuesday (October 13) to a one-year high of Rs 46.89 and on Thursday morning (October 15) it touched Rs 45.85,” he said.
