Re rise tans leather units

After the textiles sector, the leather sector is now feeling the pinch of the appreciating rupee. Leather exporters are worried over the continuing rupee appreciation as it is impacting their export margins.

Addressing a press conference here, Jairam Ramesh, Union minister of state for commerce, said the appreciating rupee has put the Indian leather industry at a disadvantage in comparison with competitors like Vietnam and China.

The appreciation of the rupee has led to the erosion of India's strengths in the leather and textiles sectors as the competition in these two sectors was largely on the basis of price. "However, this is something that has to be absorbed by the industry," Ramesh added.

Noting that he would take up the issue with the Union finance minister, Ramesh stressed the need to reduce the transaction costs of Indian leather exporters to compete effectively with Vietnam and China. The leather industry has made a plea to increase the drawback rates to bring down the transaction cost and reduce the burden, he added.

However, he also pointed out that the anti-dumping duty by the European Union of 16 per cent on China and 10 per cent on Vietnam opened new opportunities for Indian leather exporters .

Mukhtarul Amin, chairman, Council for Leather Exports (CLE), said that while exact details on the impact of rupee appreciation on export margins were still not available, the leather exporters, many of whom were operating on thin margins, are now witnessing margin erosions which could render them uncompetitive.

Habib Hussain, chairman - southern region, CLE, said no industry could sustain an eight per cent currency shift in just six weeks. While exports have begun to feel the pinch, the major impact will be seen in the coming months, he said.

Though Europe accounts for over 60 per cent of India's leather exports, Indian leather exporters are now increasingly focussing on the US market as it is considered a large market for male footwear, accounting for a major chunk of the country's leather exports.

Hussain said that a price increase on leather products would not be acceptable to the major buyers or brands as they were expected to hold the price of their products in the US for at least a year. China is also trying to take advantage of the situation and Chinese companies are in the process of offering lower prices to woo major buyers looking at India.

The Indian leather industry has been sustaining an annual growth rate of about 15 per cent over the past few years and the total leather and leather product exports stood at $3.1 billion for 2006-07, slightly missing the target of $3.3 billion. The leather industry is targeting total exports of $7 billion by 2010-11 and hoping to generate about half a million new jobs during the same period.