Leather goods manufacturers, who have experienced a slump in raw material supply from domestic sources, fear that the Bharatiya Janata Party (BJP)-led Uttar Pradesh government’s action against illegal slaughterhouses could hit supplies and raise prices….writes Bappaditya Chatterjee
They also say a “blanket ban” on slaughterhouses could defeat the purpose of the Make in India programme for the $12 billion Indian leather industry, which is among the top five in the world’s leather market.
In case of short supply of raw materials from the indigenous market, manufacturers need to look for costly imports of raw materials instead of cheap domestic sourcing which would make Indian leather exports less competitive in the world market.
“The crackdown on illegal slaughterhouses by the Uttar Pradesh government cannot be questioned, but a blanket ban will affect the domestic supply of raw material. Since illegal units were in the supply chain, some amount of short supply is expected,” Tapan Nandi, Convenor Chairman for German Investment in India of the Council of Leather Export, said.
According to industry sources, Uttar Pradesh being a large state contributes a majority of raw material supply along with Punjab, Bihar and West Bengal.
“A blanket ban on slaughterhouses would nudge manufacturers to depend more on imported raw materials, which are costly. If the imports go up, that will add to the cost of Indian leather products and we will lose our competitiveness in the world market. Thus, the Make in India programme could be impacted,” he said.
According to the Council of Leather Export, India produces about three billion sq ft of raw leather annually. The country’s leather industry is bestowed with an affluence of raw materials as India is endowed with 21 per cent of the world’s cattle and buffaloes and 11 per cent of the world’s goat and sheep population.
“The domestic raw material supplies have been showing a declining trend mainly because our exports were hurt. About 2,000 tanneries in India have been facing a crunch in supplies. About seven per cent of fallen animals are not being sourced for value addition,” Nandi said.
India’s export of leather and leather products for the financial year 2015-16 recorded a negative growth of 9.86 per cent, touching $5.85 billion as against $6.49 billion in previous year.
“It is too early to say whether the illegal slaughterhouse ban in Uttar Pradesh will impact the supply. But some apprehension prevails if a large-scale ban is executed,” Adhar Sahni, Vice President, Indian Leather Products Association, said.
However, imports of finished leather have been increasing at a rate of 15-20 per cent year-on-year.
“Imports are rising according the need of the products. If orders of leather products require imported raw materials, imports will accordingly rise,” Sahni said.
Nandi, however, asked, “If the ban on slaughterhouses, mainly cow slaughter houses, is a political decision, the imports of raw materials, particularly cow hide and skin, should be a sensitive matter for the political parties. Isn’t it?”