Indian Leather

Industry

1
 Department of Business Administration

University of Lucknow

Business Policy & Strategic Analysis

Term Paper

Industry Profile on:

Leather Industry

In

India

Submitted to- Submitted by-

Prof J. K. Sharma PallaviBhargava

Faculty, Dept. of Business Admn. M.B.A. Sem 3 rd

University of Lucknow finance

2
 ACKNOWLEDGEMENT

I would like to take this opportunity to thank all those people who have contributed towards the
completion of this term paper.

First of all I would like to thank my teacher, Prof. J. K. Sharma for the informative and
interactive class sessions on strategic management.

I would also like to thank all my friends and family for their constant support.

-Pallavi Bhargava

3
 CONTENTS

Topic Page No.

1. INTRODUCTION 4
2. MAJOR PRODUCTION CENTERS IN INDIA 5
3. STRUCTURE OF THE INDUSTRY 6-7
4. MAJOR PLAYERS 8
5. GOVERNMENT REGULATIONS AND SUPPORT 9
6. PORTERS FIVE FORCES MODEL 10
7. SWOT ANALYSIS 11-12
8. COMPETITIVE ADVANTAGE 13-14
9. ENVIRONMENTAL ISSUES 15-16
10. CONCLUSION 17
11. REFERENCES 18

4
 INTRODUCTION
The Indian leather industry, one the most vibrant sector of the country’s economy, is
well-structured and spans various segments, such as tanning and finishing, footwear and
footwear components, leather garments, leather goods, including saddles and harness.
Wellrecognized in the international market, the Indian leather goods constitute about 7 per cent
of India’s export earnings. Besides being a significant earner of foreign exchange, the leather
industry generates employment, ensuring jobs for over 2.5 million people, with 75 per cent of the
production from small and cottage sectors. India, with an output of Rs. 186.56 billion (3.354
billionEuros) and exports of Rs. 125.46 billion (2.225 billion Euros), is placed third, while
developed markets such as the US are major consumers of leather products. It is now poised for a
big leapto double its global share from the present 3%. The industry covers a vast spectrum of
inputs,activities, skills and products i.e. livestock, hides and skins, tanning, leather products and
exports.
The Indian Leather Industry is growing by leaps and bounds. One must be wondering why India
isexporting so much of leather to western countries. Apparently because leatherwear still enjoys
agreat demand abroad and now-a-days even the domestic market is developing and
consumingthe offerings of this industry.

Indian leather sector : A profile

r sector: A Profile
India is the largest livestock holding country 21% large animals and 11% small animals
• A source for 10% global leather requirement
• Annual production value over Rs. 186.56 billion (3.354 billion Euros)
• Annual export value over Rs. 125.46 billion (2.225 billion Euros)
• Export growth CAGR (compound annual growth rate) 8.61% (5 years)
• About 2.50 million workforce (30% women)
• Promising technology inflow and Foreign Direct Investment
• Enormous potential for future growth (domestic as well as export)

5
 MAJOR PRODUCTION CENTERS IN INDIA
Major production centers in India are
 Tamil Nadu
Tamil Nadu has a dominant presence in the leather and leather based industries. The tanning
industry in India has a total installed capacity of 225 million pieces of hide and skins of which
Tamil Nadu alone contributes to an inspiring 70%. Leather industry occupies a pride of place in
the industrial map of Tamil Nadu. The major production centres in tamilnadu are
Chennai,,Ambur, Ranipet, Vaniyambadi, Trichy and Dindigul.

 West Bengal
West Bengal is one of the country's top states for export of finished leather goods.Bata India
Limited is India's largestmanufacturer and marketer of footwear products.It has 5 plants near
Kolkata. Main plant is located in Batanagar near Kolkata. Bata India secures its leather supply
from two tanneries in Mokamehghat (Bihar) and Batanagar (West Bengal).
The number of manufacturing industries engaged in leather products is 538 in West Bengal.

 Uttar Pradesh

U.P. is one of the most important states in India holding sizeable population of live stock.
Claiming a share of 22% U.P. ranks Ist in case of Buffalo and IInd in case of Cattle having a
share of 12% Thus, U.P. has a very strong raw material base and all types of main raw
material for leather industry are available.

Major production centers and Number of leather and leather products industries in U.P. are to the
tune of approx. 11500 of which Kanpur and Agra are the two famous production centres in the
world.Kanpur is a prominent centre for leather processing. About 200 tanneries are located in
Kanpur.Kanpur tanneries specialize in processing hides into heavy leather (Sole, harness and
Industrial leather). This is the only centre in India where saddlery products are manufactured.
Agra has been the biggest centre for shoe-manufacturing in the country.

6
 STRUCTURE OF THE INDUSTRY
The leather industry is spread in four broad sectors, these are
Tanning and finishing
Footwear and footwear components
Leather goods
Leather garments

Footwear and footwear components sector

India is the world's second largest producer of footwear; its production estimated over 700
million pairs per annum. At about US $ 300 million per year, footwear accounts for 18 percent
share of total exports of leather exports.

Various types of shoes produced and exported from India include dress shoes, casuals,
moccasins, sports shoes, horacchis, sandals, ballerinas, and booties. Major production centres are
Chennai (Madras), Delhi, Agra, Kanpur, Mumbai (Bombay), Calcutta and Jalandhar.

Most of the modern footwear manufacturers in India are already supplying to well established
brands in Europe and USA

Leather garments sector

The Leather Garment Industry occupies a place of prominence in the Indian leather sector. The
product classification of leather garments comprise of jackets, long coats, waist coats, shirts,
pant/short, children garments, motorbike jackets, aprons and industrial leather garments.The
second most important product made out of leather is leather garments. Modern factories
have been established in the small-scale during the last decade, mostly in the vicinity of urban
areas of Chennai, Bangalore, Delhi and Hyderabad. Due toincreased export demand, the capacity
for the leather garment industry has been rising and ispresently 18 million pieces per annum.

Indian Leather Goods Industry

Items produced by this sector include, in addition to bags, handbags, handgloves and industrial
gloves, wallets, ruck sacks, folios, brief cases, travelware, belts,sports goods, upholstery and
saddlerygoods.

A surfeit of modern units in Chennai, Kanpur and Calcutta employing skilled human resources
and equipped with modern and sophisticated machinery account for a diversified range of
superlative small leather goods including bags, purses, wallets, industrial gloves etc.

7
The major market for Indian leather goods is Germany, with an offtake of about 25 per cent of
the leather goods produced in India followed by USA, UK, France and Italy. With products
ranging from designer collections to personal leather accessories, this sector has a share of 20.53
per cent in the leather industry, while maintaining an average growth rate of 11 per cent in the
last year.

Indian Saddlery Industry

India is one of the largest producers of saddlery and harness goods in the world. The saddlery
industry was established in the 19th century primarily to cater to the needs of military and police.
From then on initiatives were taken to develop, the industry and today there are over 150 units in
the organised sector, out of which approximately 105 are 100% export oriented units.

Kanpur, in the state of Uttar Pradesh, is a major production centre for saddlery goods in India
accounting for more than 95% of the total exports of saddlery items from India. Kanpur, because
of its specialisation in tanning and finishing of buffalo hides is the only centre in the country
where harness leather, which is major input for saddlery industry, is manufactured.

The major importers of Indian saddlery are Germany, USA, UK, France, Scandinavia,
Netherlands, Japan, Australia and New Zealand.

Tanning and Finishing sector

The Indian market has been fragmented with about 2200 tanneries of which 2100 are small scale
units and over 8000 leather product manufacturing units. The tanning industry is concentrated in
three states viz. Tamil Nadu, West Bengal and Uttar Pradesh. Of the total number of tanneries in
India, Tamil Nadu accounts for 52%, West Bengal 23% and U.P 12%. The other important states
are Maharashtra, Andhra Pradesh and Punjab. Looking from the angle of scale of operations, the
tanning industry largely exists in the small-scale sector with a share of 93% in the total number
oftanneries in the organized sector.

8
 MAJOR PLAYERS

Tata International Ltd. :It was established in 1962,one of the largest export house in India

Farida Shoes Ltd. : Based in Chennai, Farida shoes ltd.is the leading leather and leather
footwear exporters in India with a turnover of approximately 170 million USD.

Mirza Tanners Ltd. :Mirza International Limited (formerly known as Mirza Tanners Limited)
was incorporated on 5th September 1979. The company has its headquarters in Delhi and
production unit at Kanpur.Today, the company has emerged as a frontrunner in the
manufacturing and marketing of leather and leather footwear.

T. Abdul Wahid &Company :the company is based in Chennai, tamilnadu

Hindustan Lever Ltd.:subsidy of Hindustan Unilever Ltd. situated in Chennai.

Super House Leather Ltd.: Situated in Unnao near Kanpur

RSL Industries Ltd.: the company has its production unit in Chennai

Presidency Kid Leather Ltd.: the company has its production unit in Chennai

9
 GOVERNMENT REGULATION & SUPPORT
With an eye on the potential of the sector, the Indian Government has placed an emphasis on the
utilization of the available raw materials to maximize returns. It has introduced a number of
initiatives, with the special emphasis on integrated development of the tanning sector.

These includes raw material augmentation, technology upgrade, and promotion of

environmental cleaner processing options, quality standardization and human skills development.
To encourage training of unorganized artisan workers, the Government has given support to
wellequippedtraining institutions to encourage training programmes to be given jointly with
reputedforeign enterprises and experts.the various measures taken by the government are as
follows-
 De-licensing of integrated tanneries that convert raw hides and skins into finished leather.
 Several leather goods have been de-reserved from the small Scale Sector.
 Free import of raw hides & skins, semi-finished and finished leather.
 Concessional duty on imported machinery and chemicals.
 Free export of raw hides & skins, semi-finished and finished leather and leather products.
 Policies to facilitate modernization / up gradation: In June 2005 the government initiated
aRs. 2788.45 million (50.82 Million Euros) ‘modernizing scheme’ called the ‘Integrated
Leather Development Programme’, whereby all leather tanning and product units will be
eligible for modernization assistance. The assistance will be to the extent of 30% of
project cost for Small scale industry (SSI) units and 20% for non-SSI units.
 Establishment of ‘design centres’ at individual manufacturing units, to facilitate
improvement in design capabilities: Under this scheme, 25 % of the project cost is
provided to the units under the market access initiative scheme of the Ministry Of
Commerce and Industry.
The regulatory body for this industry is
Council for Leather Exports (CLE)
The Council for Leather Exports was set up in July 1984. A non-profit company registered under
the Indian Companies Act, 1956, the Council functions under the Ministry of Commerce,
Government of India. The Council is entrusted with export promotion activities and overall
development of the Indian leather industry.
The Council's activities also include promoting Foreign Direct Investments and Joint Ventures in
the Indian leather industry. The CLE serves as a bridge between Indian leather exporters
andbuyers all over the world.

10
 PORTER’S FIVE FORCES MODEL

Threat of substitutes :In this industry the threat of substitute is moderate, due to presence of
various leather substitutes.leather substitutes like rexine and canvas.Leather products cater to
countries like Germany, US, UK, etc., hence the threat of substitute is not very high since the
product is considered as a niche product in these countries.In footwear sector and leather goods
sector there is a moderate threat from rexine and canvas shoes, handbags, gloves, valets etc.

Bargaining power of buyers :Indian leather industry basically is a export based industry
catering to US and European countries. The bargaining power of these countries has increased
due to stiff competition from other exporter countries like China and Italy.China is the biggest
threat to indian leather industry due to its cheap labour.

Bargaining power of suppliers : India is the largest livestock holding country with 21 percent
of the large animals and 11percent of small animals in the world. The large population of cattle,
buffaloes, goat andsheep that the country possesses ensures that India has ten percent of the
world’s raw material base. In addition, some of the leather available in India is premium quality
andmuch sought after. These factors increase bargaining power of suppliers.

Competition :the competition has increased due to entry of multinationals in domestic market.
Multinationals like Irving shoes and Liberty have entered in the domestic market.Fast changing
fashion trends are difficult to adapt by the small scale sector hence the competition has increased
in the domestic market as well as international market.

Barriers to entry:India’s advantage as a source of low cost, skilled labour is quite relevant to
industriessuch as manufacturing of leather goods and footwear that are manufacturing of
leathergoods and footwear which are relatively labour intensive.
India has among the lowest cost of labour among key footwear producing countries. Barriers to
entry in this industry is not high due to cheap labour cost, and low capital investment.

11
 SWOT ANALYSIS
STRENGTHS

• Existence of more than sufficient productive capacity in tanning.

• Easy availability of low cost of labour.

• Exposure to export markets.

• Managements with business background become quality and environment conscious.

• Presence of qualified leather technologists in the field.

• Comfortable availability of raw materials and other inputs.

• Massive institutional support for technical services, designing, manpower development

and marketing.

• Exporter-friendly government policies.

• Tax incentives on machinery by Government.

• Well-established linkages with buyers in EU and USA.

WEAKNESSES

• Low level of modernisation and upgradation of technology, and the integration of

developed technology is very slow.

• Low level of labour productivity due to inadequate formal training / unskilled labour.

• Horizontal growth of tanneries.

• Less number of organised product manufacturers.

• Lack of modern finishing facilities for leather.

• Unawareness of international standards by many players as maximum number of leather

industries are SMEs.

• Difficulties in accessing to testing, designing and technical services.

• Environmental problems.

12
OPPORTUNITIES

• Abundant scope to supply finished leather to multinationals setting up shop in India.

• Growing fashion consciousness globally.

• Use of information technology and decision support software to help eliminate the length
of the production cycle for different products

• Product diversification - There is lot of scope for diversification into other products,
namely, leather garments, goods etc.

• Growing international and domestic markets.

THREATS

• Entry of multinationals in domestic market.

• Stiff competition from other countries.(The performance of global competitors in leather

and leather products indicates that there are at least 5 countries viz, China, Indonesia,
Thailand, Vietnam and Brazil, which are more competitive than India.)

• Non- tariff barriers - Developing countries are resorting to more and more non – tariff
barriers indirectly.

• Improving quality to adapt the stricter international standards.

• Fast changing fashion trends are difficult to adapt for the Indian leather industries.

• Limited scope for mobilising funds through private placements and public issues, as
many businesses are family-owned.

13
 COMPETITIVE ADVANTAGE

Competitive Advantages of Leather Industry

The leather industry can benefit from several characteristics of the Indian Market and the
corresponding advantages they offer.
Some of these advantages are:

1. Supply side advantages

Availability of low cost skilled labour :India’s advantage as a source of low cost, skilled labour
is quite relevant to industries
such as manufacturing of leather goods and footwear that are manufacturing of leather
goods and footwear which are relatively labour intensive.
India has among the lowest cost of labour among key footwear producing countries.
In India to low costs, India also has the world’s largest technically trained manpower in
leather craft. The twin advantages of low cost and technical skills offer India distinct
competitive advantages of low cost and technical skills offer India a distinct competitive
advantage in this industry.

Abundance of raw material : Availability of supporting institutionsIndia is the largest livestock

holding country with 21 percent of the large animals and 11
percent of small animals in the world. The large population of cattle, buffaloes, goat and
sheep that the country possesses ensures that India has ten percent of the world’s raw
material base. IN addition, some of the leather available in India is premium quality and
much sought after.

Availability of supporting institutions :

2. Demand side advantages :

_ Large and growing domestic market

3. Regulatory / policy related advantages

_ Government Regulation
_ Government Support
_ Licensing Policy

14
Supply Side Advantages

Availability of low cost skilled labour

India’s advantage as a source of low cost, skilled labour is quite relevant to industries
such as manufacturing of leather goods and footwear that are manufacturing of leather
goods and footwear which are relatively labour intensive.
India has among the lowest cost of labour among key footwear producing countries.
Labour costs in le
Korea 297.1 7.01

Taiwan 243.4 5.75

Hong Kong 222.85 5.26

Portugal 218.73 5.16

Brazil 61.90 1.46

Indonesia 28.88 0.68

Romania 28.88 0.68

China 24.76 0.58

Vietnam 24.76 0.58

Thailand 20.63 0.48

Pakistan 8.254 0.19
India 8.254 0.19

15
 ENVIRONMENTAL ISSUES
The leather industry has been traditionally considered as a heavy polluting industry in the
tanning
and finishing stages of the chain. Pesticides, chemicals and organic materials are the main
sources of pollution. Chrome is the most dangerous and long-lasting chemical pollutant. Others
are sulphides and solvents.

• Odour
The tropical climate of our country enhances the process of degeneration of any tissue material
remaining as a waste in the premises of the slaughter houses. Therefore, the slaughter house
premises always give a particular stink. In order to avoid this stinking odour proper ventilation of
slaughtering halls, washing of the floors with non-poisonous disinfectants and if need be use of
aerobic deodorants must be provided at each slaughter house.

 Tanneries
Tanneries harbour the greatest risk potential for the environment. This is due on the one hand to
the considerable odour nuisance and on the other to the dyes and other chemicals (particularly
chromium compounds) used in the tanning process which complicate the wastewater treatment
operation.

• Effect on Groundwater

Most parts of India are facing anthropogenic groundwater pollution. Such types of pollution are
mainly enrichments of various chemical parameters such as nitrate, hardness, metallic trace
elements and microbiological organisms. The overexploitation of groundwater in some parts of
the country induces water quality degradation. Untreated industrial effluents discharged on the
surface cause severe groundwater pollution in the industrial belt of the country. This poses a
problem of supply of hazard-free drinking water in the rural parts of the country.

Pollution of water resources, both surface and underground, by indiscriminate discharge of spent
wastes of chromium-based industries has become a serious global concern, for it has created an
acute scarcity of safe drinking water in many countries.
Wastes and chemicals released to water system are the main pollution concerns for the leather
industry. They are produced during washing, dehairing and tanning of the leather. The Indian
government has numerous laws in place that effect the leather industry. Although
compliance is effective achieving the required norms of total dissolved solid from the tannery
effluent is a problem. The common effluent plants have been established in all areas of where
tanneries are clustered.

• Bio-accumulation of Chrome

The presence of chromium in the effluent is a major concern for the tanning industry. Currently,
chemical precipitation methods are practiced for the removal of chromium from the effluent, but
that leads to the formation of chrome-bearing solid wastes. The other membrane separation and
ion exchange methods available are unfeasible due to their cost.

16
• People for Ethical Treatment of Animals (PETA)

PETA has more than 800,000 members and with offices in the United States, England, Italy,
Germany and Mumbai, is the largest animal rights organization in the world.. PETA India, based
in Mumbai, was launched in January 2000.
PETA India operates under the simple principle that animals are not ours to eat, wear,
experiment
on or use for entertainment, educating policymakers and the public about animal abuse and
promoting an understanding of the right of all animals to be treated with respect.

• Indian Leather Industry Foundation (ILIFO)

Another Association promoted by the industry with the basic objective of providing pollution
related services to the industry. It trains people in skills of running effluent treatment plants put
up
by tanneries. It conducts awareness programme in for workers’ safety and
occupational health hazards.

17
 CONCLUSION
The leather industry occupies a prominent place in the Indian economy in view of its substantial
export earnings, employment potential and growth. The Indian leather industry, one the most
vibrant sector of the country’s economy, is well-structured and spans various segments, such as
tanning and finishing, footwear and footwear components, leather garments, leather goods,
including saddles and harness.

Well recognized in the international market, the Indian leather goods constitute about 7 per cent
of
India’s export earnings. Besides being a significant earner of foreign exchange, the leather
Industry generates employment, ensuring jobs for over 2.5 million people, with 75 per cent of
the
production from small and cottage sectors. India, with an output of Rs. 186.56 billion (3.354
billion
Euros) and exports of Rs. 125.46 billion (2.225 billion Euros), is placed third, while developed
markets such as the US are major consumers of leather products. It is now poised for a big leap
to double its global share from the present 3%. The industry covers a vast spectrum of inputs,
activities, skills and products i.e. livestock, hides and skins, tanning, leather products and
exports.

The Indian Leather Industry is growing by leaps and bounds. One must be wondering why India
is
exporting so much of leather to western countries. Apparently because leatherwear still enjoys a
great demand abroad and now-a-days even the domestic market is developing and consuming
the offerings of this industry.

18
 References

 National Labour Institute

 National Institute Of Occupational Health (http://www.ijoem.com)
 Exime Bank: Research Brief (http://www.eximebankindia.com)
 International Council of Tanners
 Indian Investment Centre
 India Brand Equity Foundation (http://www.ibef.org)
 All India Association of Industries
 Science Tech Entrepreneur E-Zine (DST & FICCI)
 http://www.thehindubusinessline.com/2006/12/01/stories/2006120101341100.htm
 United Nations Development Programme (NLDP)
 BIOONE Online Journals Access Control (http://www.bioone.org)
 Council for Leather Exports (http://www.fibre2fashion.com)

19