Power cuts and euro crisis hit Tamil Nadu leather industry
9 March 2012It is a double blow for the leather industry in Tamil Nadu. First the crisis in Europe affecting demand and now acute power shortage is hampering production. Net results and orders have dropped by 10 -15% while margins have eroded by nearly 50%.
Sishir Majumdar, is the owner of a medium sized leather export unit called Sri Shakti Leather Enterprises in Chennai. Shishir's business has clearly seen better days. For now, faced with power cuts for about four hours a day, he is forced to use a generator to keep production going.
Majumdar laments that the situation is absolutely horrible. ‘We are going into the summer months and I expect we are going to have huge problems resulting in production delays. Trying to run a generator per day for an eight hour shift will add a minimum of Rs 3,000 ($60) to our cost per day.’
Moreover, with Tamil Nadu falling short of around 4,000 mw of power, the government has announced a further 40% power cut for industry which means for SMEs like Majumdar's, the cost of production will increase by nearly 8-10%.
For leather units outside Chennai, the situation is worse with power cuts stretching for up to 10 hours a day. In this scenario, small units that cannot afford generators may be forced to shut down.
Adding to the woes of the industry is the economic situation in the eurozone. Europe is the largest export market for the Tamil Nadu leather industry, accounting for over 50% of the state's exports. But now the lack of orders is beginning to show.
M Rafeeque Ahmed, Chairman of the Council for Leather Exports said, ‘In the last six months, the European Union crisis has begun to show on order positions. And there is a gap in orders of about 15%. We expect about 10-16% in shortage of orders.’
