Special Rs 26-bn package to boost export of leather products, footwear

Industry insiders believe the package will help increase exports by 4-5%

The leather and footwear industry is expecting that the Rs 26-billion special package announced by the governed recently, will help the stagnant sector grow by easing the pricing pressure.

However, they feel the time duration of the package is short and say around Rs 5 billion from the previous scheme is yet to be released by the government.

The package involves the implementation of the central sector scheme ‘Indian Footwear, Leather & Accessories Development Programme (IFLADP)’ with an approved expenditure of Rs 26 billion over the three financial years from 2017-18 to 2019-20.

The government has approved a special package for employment generation in the leather and footwear sector, announced Minister of State of Commerce and Industry, C R Chaudhary in the Rajya Sabha on Thursday.

It may be noted, originally it was expected the package would be over Rs 40 billion. Industry representatives opine that the outlay was also brought down as the duration has been reduced.

The scheme would help address two major problems including that of raw materials, says Israr Mecca, regional chairman (South), Council for Leather Exports. It supports backend investment through a grant/subsidy at 30 per cent of the cost of new plant and machinery to Micro, Small & Medium Enterprises (MSMEs) and of 20 per cent to other units for modernisation /technology upgradation in existing units and also for setting up of new units.

The other assistance is provided for upgradation/installation of Common Effluent Treatment Plants (CETPs) at 70 per cent of the project cost.

Firstly, these two schemes would help address the raw material challenges.

The second major challenge which will be addressed is shortage of human resource. The scheme envisage to train around 200,000-300,000 people.

Farida Group Chairman M Rafeeque Ahmed agrees adding that one major challenge is that people need to be trained at the factories. Since many of the MSMEs could not invest in capacities following the capital crunch owing to delay in the reimbursement of GST, around Rs 5 billion has been stuck from the previous scheme.

Both agree that the scheme will increase leather and footwear exports, currently at $6 billion, by around 4-5 per cent compared to mostly flat or around one per cent growth presently.

“We will be more price competitive now since most of the cost including raw material and labour, which are important components, will be helped by this scheme,” said Mecca.