Budget-2022: Leather gets mentioned, but enough to sustain the industry?

Nirmala Sitharaman
Union Finance Minister Nirmala Sitharaman presents the Union Budget 2022-23 in the Lok Sabha. Photo: PTI

Specified products used as raw materials in the leather and footwear industry are exempted from import duties.

Sai Charan Natarajan

Chennai, Feb 01: Union Finance Minister Nirmala Sitharaman may have said import duty cut for specific leather products, on Tuesday, but leather products manufacturers expected a more concrete solution for their raw material shortage problem.

In her budget speech in Lok Sabha, Sitharaman said that a comprehensive review of customs duties with tariff simplifications has been carried out and called it, a step forward in achieving the Government’s objective of  ‘Make in India’ and ‘Atmanirbhar Bharat’.

She also said that in order to incentivise exports, exemptions are being provided on certain items including specified leather, buttons, zipper, lining material which are important products used by the leather industry. Bonafide exporters of handicrafts, textiles and leather garments, leather footwear and other goods will get benefitted from this exemption.

The Leather Industry in India is known for its high export earnings and it is among the top ten foreign exchange earners for the country. India is the second-largest producer and exporter of footwear and leather garments in the world. Its contribution is crucial for the Indian economy both in terms of GDP and Employment.

According to the Council of Leather Exports, the export of footwear, leather and leather products from India reached a value of US$ 5.07 billion during 2019-20. India is home to 20% of world cattle and buffalo and 11% of the world goat and sheep population which forms the raw material source for the industry.

Tanning process inside the Leather Industry. Representational Video. Source: National Geographic

The leather industry is an employment intensive sector, providing jobs to about 4.42 million people, according to data from the Ministry of Commerce and Industry. Nearly 30% of the workforce in the leather sector is women.

Sanjay Leekha, Chairman, Council for Leather Exports wrote in an email response “The budget has announced major support measures which will provide a fillip to the growth of exports from leather and footwear industry.”

Further, he added “The budget has announced import duty exemption for notified inputs and also for import of wet blue chrome tanned leather by bonafide exporters for the manufacture of leather garments, footwear and leather products. This is major support which will reduce the cost of import of critical inputs which are imported as per requirements of overseas buyers, and will promote export of value-added products from the country”.

Impact in Tamil Nadu:

“This exemption in import duty for certain products will benefit the leather industry which faced a lot of problems during the lockdown because earlier it attracted 10% duty on imports,” said Shamshudeen (who goes by his first name), Secretary, Tamil Nadu Leather Tanners Exporters and Importers Association, Ambur “Finished leather products and classical leather attract zero percentage customs duty on exports.” 

Tamil Nadu is one of the major producers of leather in the country. The production centres are located in Chennai, Ambur, Ranipet, Vaniyambadi, Vellore, Dindigul, Tiruchirappalli and Erode. According to a study conducted by EVR Periyar College, Tiruchirapalli, nearly 2.5 million people are employed in this sector across the state either directly or indirectly. 

“If lockdown is lifted here there will be curfew’s in the countries which we export, so we got trapped in this vicious cycle of Lockdown and got it huge,” said Shamshudeen. He also said, “We started importing raw materials from countries like Brazil, Russia because few states in India have imposed a blanket ban on cow slaughter in the past few years”. Last year, the Bharatiya Janata Party-led government in Karnataka passed the anti-cow slaughter law – violation which attracts both monetary punishment and imprisonment.

Tamil Nadu doesn’t have a blanket ban on cow slaughter. According to the Tamil Nadu Animal Preservation Act, 1958 animals such as bulls, bullocks, cows, calves may be slaughtered upon obtaining a “fit-for-slaughter” certificate. The certificate is issued when an animal is over 10 years of age, unfit for labour, breeding or had become permanently incapacitated for work and breeding due to injury deformity or any incurable disease.