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Sitting in a small office filled with footwear samples, S Ahmed and his friends are busy discussing the latest talk in their town – an upcoming opportunity for larger supply, with increasing buyer interest. The effects of the finance minister’s announcement of customs duty increase on imported footwear and components is perceived to be slowly trickling down to the town of Ambur, a leather manufacturing hub almost 190 km from Chennai. Farida Group Chairman Rafeeque Ahmed says, “We expect to see 10-15 per cent more order inflow due to the hike in customs duty.” Israr Mecca, regional chairman (south), Council for Leather Exports, says procurement for the domestic market is expected to increase 20-25 per cent in the high value added and medium segment. In the mass segment, though, domestic manufacturers will still not be able to compete with Chinese goods. Union Budget 2018-19 has proposed an increase in customs duty on a range of products. On footwear, a doubling to 20 per cent, from 10 per cent. On components, to 15 per cent, from 10 per cent. This also opens new opportunities for local component suppliers, says Mecca. While this has brought some cheer to the industry, it also raised debate over India's capacity, in the backdrop of problems with the Goods and Services Tax, where delays in refunds have hit working capital, among other problems. Source: www. worldfootwear. com To give boost to the sector, which employs around 2.5 million, the Centre also relaxed the employment days criteria to avail of tax deduction from 240 days to 150 days in a year. With additional 30 per cent income tax deduction in the leather and footwear sector for new employees. Also, extension of the 25 per cent reduced corporate tax to units having annual turnover up to Rs 2.5 billion will benefit the leather and footwear industry, as 90 per cent if it is in this segment. The domestic footwear market is estimated to be around $5 billion; footwear production is estimated to be around 2.06 billion pairs a year. Per capita footwear consumption is 2.3 pairs per person and this will grow up — the domestic footwear market is projected to grow at a compounded annual rate (CAGR) of 15 per cent. Export of leather footwear from India rose from Rs 139.3 billion in 2014-15 to Rs 143.3 bn in 2016-17. Of non-leather footwear from Rs 18.7 bn in 2014-15 to Rs 22.8 bn in 2016-17. The segment saw a CAGR of nearly 10.3 per cent.
Slated to rise, with companies expected to look at sourcing from India to cater for other markets. Also Read: Import duty hike impact: Assembly firms to have an edge over markets Mecca says the industry has the capacity to meet the expected growth in order flow. India is competitive in the high value and medium segments. In the mass segment, due to its high scale of production and variety, China continues to dominate. The mass segment is around half of the overall market. Harkirat Singh, managing director of the Aero Group that owns the Woods and Woodlands brands, welcomes the Customs duty hike, which he says would curtail cheaper Chinese import. However, he says, companies like his would be hit by the additional five per cent duty on components. Around 25 per cent of the components are being imported for Aero. N Mohan, director-footwear at Future Group, says if the industry does not gear up with large-scale factories and focus on upgrading of systems and processes, import will increase. Most of the import is non-leather, he adds, with the average import price at $2-3 per pair. So, additional duty will not make a big impact. “We cannot ignore this space. We need to improve efficiency and productivity,” he observed. Skill development, emphasis on design and work methods, and availability of raw material all need to be addressed, he says. The industry should focus on the emerging domestic market. Export organisations need to lead from the front and form a strong base for the home market. “We should encourage the non-leather segment and create support industries," said Mohan. There is, he says, over-dependence of export to Europe; the industry needs to switch some attention to the market in America. From the government side, improvement in 'ease of doing business', investor-friendly schemes and easing of labour laws are required to attract foreign companies to invest.