Curbs expected on semi-finished exports

18 September 2001

The Union Commerce Ministry is contemplating a package of measures to check what is being described as 'clandestine' exports of semi-finished leather. Sources indicated that the Ministry would 'draw from the suggestions' made in this regard by the Council for Leather Exports. At a meeting on July 31 the CLE highlighted the raw material shortage that leathergoods exporters were facing due to exports of semi-finished leather masquerading as finished leather. The CLE's package is said to include action against errant leather exporters, a duty on finished leather and monitoring exports through certain sea ports and airports. The CLE argued that, at a time when the international leather market had become extremely price-sensitive amid fierce competition from China and Taiwan, Indian leather exporters were facing a sudden spurt in the price of finished leather. The policy regarding exports of various types of leather was revised in October 2000, replacing the earlier restrictive regime with one based on export duty so as to make India's export policy WTO compatible. The new export policy allows certain categories of exports, hitherto banned, such as EI tanned leather and untanned hides. While a high rate of export duty (60%) was imposed on hides, skins and untanned leathers, a 15% duty was fixed on exports of EI tanned leather, and restrictions were imposed on the export of finished leather. Since the change in policy, a battle royal seems to have broken out between tanners and leathergoods exporters with the latter alleging that many leather exporters were actually exporting various categories of semi-processed leather under the guise of finished leather. 'While they are, on the one hand, evading duty in this manner, on the other the tanners are causing a shortage of raw material in the country, passing on the benefit to overseas leathergoods exporters', a CLE source said. Figures from the Directorate-General of Commercial Intelligence and Statistics (DGCIS) show that, in 2000-01, there was a 67.87% jump in exports of finished leather over the previous year. Exports of the entire sector (including footwear, garments, components and leathergoods) increased by 29.52% during 2000-01. The DGCIS figures show that, between November 2000 and March 2001, finished leather exports registered a near 100% increase against a 56% increase in the first seven months of 2000-01. Between April and May 2001, finished leather exports increased by 62.31% at a time when all the other sectors either recorded a drop or could manage only single-digit growth rates. While denying the charges of irregular exports, tannery associations said that only small and medium tanners were engaged in the manufacture of EI tanned leather and they had no capacity to manufacture finished leather. As such they were totally dependent on leather product manufacturers for product offtake.

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