Govt approves Rs 2,600 cr package for leather sector, to boost jobs

The government on Friday announced a Rs 2,600-crore package for the leather industry in a move aimed at increasing employment and investment in the sector.


After being pushed back twice earlier, the proposal was approved by the Cabinet on Friday and aims to provide, through tax and non-tax incentives, jobs to 324,000 people in the industry over the next three years. The incentives include enhanced funding for skill development and technological upgradation apart from introduction of fixed-term employment and government contribution to employees provident funds in the footwear and accessories segments.


As a result, the government will burden the employers’ contribution of 3.67 per cent to Employees’ Provident Fund for all new employees with salaries up to Rs 15,000 in the sectors, enrolling them into the Employees Provident Fund Organisation for first three years of their employment.


The government hopes the proposed outlay of Rs 100 crore will assist in formalisation of approximately 200,000 jobs in these sectors.


Also, in line with a similar package for the textile industry, the government has decided to introduce fixed-term employment in the industry under the Industrial Employment (Standing Orders) Act, 1946. The package also includes measures for simplification of labour laws.


India is the second-largest manufacturer of leather footwear and garments in the world and is facing stagnant exports. Successive Economic Surveys have pointed out the need to increase manufacturing in the labour-intensive leather industry. However, the goods and services tax (GST) and demonetisation have knocked the wind out of the industry, with many units being small and medium enterprises.


“We have been talking to the government for a long time over the issue. It is the need of the hour given the state of the industry,” said Mukhtarul Amin, chairman and managing director of the Superhouse group and chairman of the Council for Leather Exports.


In terms of financial allocation, the largest chunk has been reserved for technology upgradation. “Leather manufacturing units classified as highly polluting will be provided 70 per  cent of the project cost of setting up common effluent treatment plants,” an official said. He added the Rs 782 crore set aside for this purpose over the next three years was expected to upgrade almost 70 per cent of all polluting units in major industrial clusters.


For skilling, Rs 700 crore has been set aside for placement-linked skill development training for almost 432,000 people over the next three years. This includes Rs 15,000 per person for skill upgradation of an unemployed person. Employees and trainers will receive Rs 5,000 and Rs 2 lakh each, respectively.


The package was mooted by the commerce ministry last year after representations from the industry for relief along the lines of the textile package announced by the government in June 2016. It has been approved by the expenditure finance committee and a draft Cabinet note has been circulated to different ministries for their views.


The leather industry has suffered disruptions in the supply chain after demonetisation and introduction of the GST. There are reports of steep declines in production in leather units in clusters such as Kanpur, Noida, Kolkata and Tirupur. The largest among these is Kanpur, accounting for more than 16 per cent of India’s leather exports.


According to the Council for Leather Exports, revenues are expected to be hit by up to 20 per cent. Exports of leather goods have declined from $2.38 billion in 2015-16 to $2.34 billion in 2016-17.


Minister of State for Commerce and Industry C R Chaudhary said last month leather exports and production were expected to rise 10 per cent by 2019. The recent decline in leather exports was due to sluggish demand in the EU and not because of the ban on sale of cattle for slaughter and cases of cow vigilantism in the country, he said.

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