As we reported one year ago, the Indian Council for Leather Exports (CLE), which groups 2,500 companies involved in the production of hides, skins, leather, footwear and other leather products from all over the country, has set an ambitious goal for India’s leather exports of leather and leather products to hit $7 billion by 2010/11. It’s not going to be that easy, however, in spite of several governmental incentives, because of some structural and cultural problems which, according to some observers, may take longer to overcome.
As already outlined in a previous issue of Shoe Intelligence (#9-4 of March 8), the Indian government is dangling in front of potential investors in the country’s shoe industry the prospect of a 100 percent repatriation of profits and duty-free imports of materials and components. In addition, the government has promised to subsidize all necessary training for fresh workers. Foreign investors can write off unrealized export bills by up to 5 percent, will have full freedom to subcontract a part of the production within or outside the country.
Labor is cheap and plentiful, but infrastructures and the related logistics continue to be an issue. For example, there are no regular direct shipments to major ports in Europe or the USA from Chennai, a major hub for India’s leather and footwear industry. Products leaving Chennai go out once a week, and they never go direct, having to stop first in Colombo, Sri Lanka or in Singapore.
This problem was echoed by companies doing business in India as well as by the minister of state for commerce, Jairam Ramesh, who spoke at the inauguration ceremony of the India International Leather Fair (IILF) in Chennai last January. It was underscored by the appointment two years ago of a new executive director for CLE, Kamalakannen Elangovan, who was previously deputy chairman of the Chennai Port Authority.
A European shoe manufacturer who has been operating in India expressed his disgust with the difficulty of getting products from the South to the North of the country. Even simple airline travel can be a nightmare in this regard, but it all seems related to a different perception in India of the notion of time. An official of Texon International, which has been doing business in India since 1983, says it doesn’t have any problems moving goods from the South to the North, although it does take a while to get product moved from any point of the country to another.
The Indian government is trying to persuade foreign shoe manufacturers with good know-how to make investments in the country in view of its cheap labor. The main pillar of its investment promotion program has been a plan to establish 237 Special Economic Zones (SEZ) in the country, and while they provide several tax and other financial incentives it remains unclear how investment for infrastructure and facilities will be provided. Some SEZs are vacant plots of land while others contain already established buildings and roads.
Several plans are in the pipeline for attracting international investment on prospective land plots. A footwear component park is planned on a 1,843-acre chunk of land 34 kilometers from Chennai at the SIPCOT Industrial Estate at Irungattukottai. Located within 25 kilometers of the local airport and shipping port, the estate is said to be fully functional.
The park itself would take up about 51.56 acres, housing the facilities for the production of a variety of footwear components. The Indian government is currently setting up a design complex within the park. Including this complex, as well as general infrastructure, the total amount of government aid for the project is $2.13 million.
At the same industrial estate, a footwear park is being developed on a prospective 153.65 acres of land as part of the same SEZ, with the government supplying aid of $2.19 million. It will have 25 production modules with a combined capacity to produce 200,000 pairs of shoes per day. Fitted with energy-saving features, the park will also house a design studio as well as on-site training facilities, a display center and a warehouse.
To the north, near Kolkata, a leather goods export park is being set up. Like the parks near Chennai, it will have a design center, a fashion center and warehousing. The government is chipping in $1.06 million for this project. Sixty-one plots of industrial space will be available for individual investors.
A bigger challenge is finding capable managers, laborers and technical experts to make these and other industrial parks work efficiently throughout the country. The CLE boasts that many skilled workers are available at very low salaries, by international standards, and that the industry’s technological level is top-notch. In India, unskilled workers in the shoe industry earn $60-80 per month, while skilled ones make only $90-120, plus an additional 15-17 percent worth of social security charges.
Wage rates are higher in China, but the productivity of labor is lower in India. To help overcome this largely cultural problem, the CLE has started a program, funded by the central government, involving experienced Taiwanese technicians who are training Indian workers. Some 15 Indian companies are currently participating in this program.
About 300 skilled workers have been graduating annually from each of the two schools operated by the Central Footwear Training Institute in Chennai, but a representative of the school said the number of enrollments has doubled to about 600 at each facility for the next few sessions, adding that most of its graduates get management-level jobs at export-oriented companies in India as well as in Kenya, Malaysia and other countries. The institute’s brochure boasts that it has a 100 percent placement record to date. State-of-the-art machinery is donated to the center by the government.
Short-term courses of between one and three months at the Central Footwear Training Institute are offered for pattern cutting, shoe upper clicking, shoe upper closing, the manufacture and finishing of lasts, computer aided design (CAD) of footwear, leather goods making and footwear machine maintenance. Long-term courses are offered, too, including a 1-year course in post-graduate footwear technology, post-diploma and certificate courses in footwear technology, as well as a 2-year course for a diploma in footwear design and production. The latter is accredited with the Textile Institute in London.
India’s Ministry of Commerce has agreed to provide funding to the Bantala Calcutta Leather Complex, a new leather design and development institute that will cost $2.5 million to set up. Other projects of this kind are afoot as the country tries to upgrade the quality of its footwear products, but apart from a few important exceptions, most of India’s shoe production remains based on contract work.
It is yet unclear where all of the raw materials will come from to aid the leather sector’s planned growth. In contrast with China, the supply of leather is not currently a problem, as India currently has 20 percent of the cattle population in the world. But members of the CLE indicate that new sources for raw materials will need to be found after production capacities have grown to certain levels. It remains uncertain what the industry will do to remedy this problem, but heightened imports in this respect look inevitable.