Leather units seek newer raw material sources.

The Council for Leather Exports has identified around 20 countries on the basis of quality and cattle population.

Leather units in Tamil Nadu, especially small and medium enterprises (SMEs), are looking at newer markets to source raw materials. These units are still under pressure due to the effects of the global economic slowdown and the rupee appreciation.
 
Industry representatives said that the idea is not only to expand their footprint, but also to source quality raw material to convert it into better-quality products.

The Council for Leather Exports (CLE) has identified around 20 new countries on the basis of their cattle population and the quality of their raw materials. A delegation of about 10 exporters from India is likely to visit countries such as Uzbekistan and Kazakhstan in the next few months.

Industry representatives have said the recent rupee appreciation against the US dollar and the euro has pushed up prices of raw material by around 70 per cent. As a major manufacturing country, India has to look at newer markets and non-traditional countries, they said.

Earlier, middlemen used to source raw material from such markets and move it to countries like Italy and sell it to leather manufacturers. “With this ‘sourcing delegation’, we are trying to get directly involved with raw material suppliers,” said Habib Hussain, chairman of the CLE.

This will result in cost benefits for manufacturers and end-consumers. Though these markets have been largely unexplored by Indian companies, industry representatives think prices of the final products could be cheaper by around 10 per cent, since the brokerage commission would be eliminated.

The council had identified Uzbekistan and Kazakhstan as potential sources of raw hides and skins, semi-processed leather and leather. It will help Indian manufacturers to approach suppliers in Central America, South America, Africa and the Middle East.

The delegation is expected to gather information on the Uzbek and Kazakh markets, meet local suppliers of hides and skins, and explore possibilities of entering into joint ventures and technical collaborations with Uzbek and Kazakh tanneries, according to the CLE.

The other markets which the CLE is looking at include Turkestan, Nigeria and the North African countries.

“There is a shortage of raw material in India. We have a shortage of sheep skin and these countries offer a better quality and different types of raw materials. Also, the markets are expanding and we need to buy from other countries, so that we can control our costs,” said M Rafeeque Ahmed, chairman and managing director of the Farida Group and president of the All-India Skin and Hide Tanners and Merchants.

He noted that exporters had booked orders when the dollar was at Rs 48-49, but it had since dropped to Rs 45. “Three to four months back when we signed contracts, one euro was worth around Rs 67-68, but it has now fallen to Rs 59. We have lost 10 per cent in margins due to this.”

Tamil Nadu accounts for 45 per cent of the country’s leather industry, estimated in size at some Rs 10,000 crore. The industry is already facing problems due to an increase in raw material (leather) prices, which have risen by around 10-15 per cent.

Source : Business Standard