Namrata Kath Hazarika | 03 Nov, 2009
The biggest challenge SMEs in the leather industry are facing is lack of infrastructure, says Sanjay Leekha, Vice-Chairman, Council Leather Exports (CLE) in an exclusive interview to SME Times.

Excerpts of the interview...

The last couple of months have been tough for the leather industry. Is the pressure of recession still an obstacle to keep on track the growth momentum?
Sajay Leekha: Slowdown has affected the leather industry. Slowdown has been going on for the last two years. There is a lot of consolidation. Some of the larger exporters have taken this global slowdown as a challenge. They have taken the opportunity of this and have created larger production capacities.

In fact, larger marketing efforts have been devoted. Some of the larger players are witnessing substantial growth during this period. We have also witnessed a shift of business from China to India for various reasons. Some of the reasons are India's strengths and China's weaknesses. In China there has been an appreciation of R&D costs, reduction of some of the export incentives, which have made their pricing little bit higher then that of India. On the other hand, the Indian industry is very versatile and quick to respond to change primarily because of some of the smaller sizes we have. This is an advantage. Even during the period of slowdown, the Indian industry has worked positively and has shown some of signs of growth.

Is the leather industry witnessing growth currently?
Sajay Leekha: During the last year i.e 2008-09, we somehow managed the previous year's (2007-08) figure. Exports in the leather industry saw a flat growth of 1.7 percent at $3.53 billion in 2008-09 as against $3.45 billion in the previous year. The Indian leather industry is expecting that the next six months of this fiscal would bring some relief to the export-oriented sector as overseas buyers have gradually started placing orders.

Do you see the Indian leather industry possibly bringing into account big profits in the next six months?
Sajay Leekha: Actually, in the first six months of the last fiscal, we witnessed 20 percent growth and then suddenly the debt started occurring. Finally, in the end of the year the debt wiped out the positive things that had happen during the first quarter of the last fiscal thereby leaving us to the figure of 2007-08. The current year, we are witnessing a slower export figure as compared to the previous year.

We are hopeful that the second half of this year which is generally the production season for the leather industry, would show signs of improvement. We are quite hopeful that the current year would bring fruitful results.

What kind of target have you set in order to reach higher export figure?
Sajay Leekha: The industry is taking various steps in long-term now. We are trying to reach a figure of $7 billion from the current figure of $ 3.5 billion by the year 2012. The target is very ambitious.

What are the challenges in the leather industry that is hindering growth?
Sajay Leekha: The biggest challenge the industry is facing is lack of good infrastructure. Today the entrepreneurs are investing in larger factories and in increasing production capacities, etc. In fact, we are increasing our marketing efforts.

What are new ways that can boost the growth of this industry?
Sajay Leekha: Well, there is a lot of discussion going on to create new markets, but this is comparatively slow process. We are exploring the non-traditional markets such as Latin-America, Africa, Australia, CIS, etc. I feel that the market will start maturing over the next two to three years. Meanwhile, we are concentrating our efforts in Europe and US, which are our traditional markets. I feel the buyers do want more options and look at different suppliers.

How are you combating recession?
Sajay Leekha: At present we are working towards creating higher productivity and reducing our production costs, etc. We are working on these aspects very effectively. That is how we can sustain.

The leather industry is one of the most labour-oriented industry and consists of mostly SMEs. What kind of trouble are SMEs facing?
Sajay Leekha: The industry is primarily run by SMEs. There are very few large scale players in the leather industry because leather being a natural product has various variables which cannot be standardized beyond a level. SMEs are adversely hit by the economic slowdown.

Are you supporting the usage of animal skin for the manufacturing of leather products?
Sajay Leekha: You see the industry is very aware of all this issues and the Council of Leather Exports has been very supportive. We are educating at different level and carrying out education programs at different levels to ensure that the animals are humanly handled.

Also, a large extent of the skin that are used in the leather industry do come from animals which are death. Actually the industry does a positive thing by using the death animals' skins. So, everybody in this industry is very well aware of this issue. A human approach is taken for managing these issues.

The industry has been in dialogues over the years with PETA. In fact, mutual understanding have been made to improve such situations. We are taking care of situations like hygienic conditions, well-treatment of animals, etc.