Rising rupee hurts leather cluster

The fast-rising rupee, vis-a-vis the US dollar, had hurt the $4 billion Indian leather industry, as currencies of competing countries, especially China, that made slower gains against the dollar, and in some cases have even declined.

A cross section of industry representatives from the two major leather clusters — Tamil Nadu and Lucknow — told Business Standard, “The strength of the rupee has eroded profitability and has weakened the industry.”

V P Naimur Rahman, president, Indian Finished Leather Manufactures and Exporters Association (IFLMEA) said the industry had been under “tremendous” pressure due to the economic slowdown in Europe and the US which resulted in a drop in the order book and poor capacity utilisation. Adding to this, the appreciation of the Rupee hurt.

“There is no certainty of further strengthening of the rupee. If the RBI intervenes, it will stabilise. We are unable to take a call,” he added.

Agrees, D C Pandey, general manager - finance, Mirza International, adding profit margins were squeezed and the industry had not recovered. “It is impractical to reduce the profit margins further and we would prefer to pass on the cost to customers.

Companies like A V Thomas Leather and Allied said there is no question of passing on the burden to customers who are already asking for a reduction in the price, said Habib Hussain, the company’s CEO. Under this situation the government should lend its hand to the industry by increasing the stimulus, which presently around Rs 100 crore and is not enough, said Hussain.