The Centre is planning a special package, incorporating labour reforms, subsidies and duty incentives, for the leather sector to boost investment, jobs and exports.

The Department of Industrial Policy and Promotion (DIPP) — the nodal agency for the Indian Leather Development Programme (ILDP) — is planning to make a presentation in this regard to the Finance Ministry on July 1, according to sources familiar with the development. They said meetings were held with the representatives of leather industry, which then gave its inputs to the government.

The move comes after a similar package was unveiled for the textile industry on June 23 to enable it to compete globally. About 2.5 million people are employed in the $12 billion leather industry. The sector, like textiles, predominantly employs women. To increase productivity, the leather sector package may include labour reforms similar to those introduced in the textiles package.

India accounts for about 10 per cent of the world’s leather production, and is the world’s second largest producer of leather garments and footwear. Foreign investors in India include Feng Tay Shoes and Apache Group (both from Taiwan) and Itares (Italy). Despite advantages of low cost of labour and production, India faces major competition in overseas markets from countries such as China.

When contacted, DIPP officials said there could be more such presentations. However, they added that since ILDP is a Union cabinet-approved scheme, any changes to it would need a Cabinet nod for which a Cabinet note has to be circulated for comments from other ministries. They said the current ILDP scheme would be in place till March-end 2017 and any changes to ILDP or a new package is likely to be implemented only in the next fiscal.

The ILDP, introduced in January 2014, was aimed at “augmenting raw material base through modernisation and technology upgradation of leather units, addressing environmental concerns, human resource development, supporting traditional leather artisans, addressing infrastructure constraints and establishing institutional facilities.”

The leather industry package may include higher incentives under the Duty Free Import Scheme (DFIS). Under DFIS, a manufacturer-exporter or a merchant exporter having a tie-up with a supporting manufacturer is currently allowed duty-free import of inputs up to three per cent of the value of exports realised in the previous year. In the new package, this may be raised to five per cent, the sources said.

The package may also include greater sops under the ILDP. Currently, ILDP provides up to 30 per cent subsidy on the cost of plant and machinery for Micro and small enterprises and 20 per cent subsidy to other units. The subsidy has a ceiling of Rs.2 crore for each product line. In the new package, this ceiling could either be done away with or enhanced.

M Rafeeque Ahmed, Chairman, Council for Leather Exports, said: “The (present) package had made sense at a time when we were mainly catering to clients from Europe from where orders were in small quantities. Now, there is huge interest from buyers in America and they want to give large orders, for which we need larger factories with more machinery like in China to increase output. So, it will be good if the government removes the Rs.2 crore ceiling.”

The package may include higher subsidy for setting up of mega leather clusters to create world-class infrastructure, and for upgradation or installation of Common Effluent Treatment Plants.

Source: The Hindu