Indian leather exports may remain flat this fiscal

KOCHI: Reduction in duty drawback incentive and delay in GST refund may take the sheen of Indian leather exports that have been witnessing a downward trend in the last couple of years.

Exporters expect the shipments this fiscal to remain around $5.6 billion attained last year.

The duty drawback rate which refunds the tax paid on imports for exports has been brought down by 7% to 2.6% ,which may prompt the exporters to raise prices of products. "But we are not getting new orders as the buyers are not willing to pay higher price. We are sending the consignments as per the orders taken in the previous months," said Mukhtarul Amin, chairman of Council for Leather Exports.

The delay in refund of GST paid by some exporters for imports has also hampered the shipments as it has resulted in shortage of working capital.
India's loss has been the gain of Bangladesh which enjoys zero duty advantage with Europe and Japan. "Bangladesh has emerged as a big competitor of India with duty advantage and cheap labour," Amin said.

Leather exports for six months from April to September 2017-18 showed a marginal increase of 2.41% at $3.01 billion from a year ago. In 2016-17, the leather exports had dropped by 3.2% from previous year to $5.6 billion. After peaking to $ 6.5 billion in 2014-15, leather exports have been on a gradual decline.

"Buying is sluggish from major importing countries like Europe and the UK. Purchases from the latter have been hit after Brexit. There is still price pressure from these countries. However, the US is doing better," said Rafeeque Ahmed, president of All India Skin &Hide Tanners &Merchants Association (AISHTMA).

Leather footwear accounts for largest share of leather exports. "The finished leather products used to dominate exports. But their share has plunged 30% in the last three years," said N Shafeeq Ahmed, chairman of Indian Finished Leather Manufacturers and Exporters Association.

Other Asian countries like China, Vietnam and Bangladesh seem to be stealing India’s thunder in leather exports. ``Unlike India, these countries have a good export manufacturing policy in place which facilitates doing business. Such a policy can take care of issues like labour and single window clearances," Shafeeq Ahmed added.

Raw material availability which was hit temporarily due to the Central government ban on sale of cattle in public markets early this year, has stabilised now with the Supreme Court staying the order, exporters said.