By Prerna Mishra: In an exclusive interview with SME News, D Saalai Maraan, executive director of Council of Leather Exports (CLE), elaborated on the present status of leather industry, available government policies in the sector, challenges and opportunities for SME sector. CLE is an apex trade promotion organization functioning under the aegis of Ministry of Commerce & Industry, Government of India.
Here are the excerpts from the interview...
What is the role that your organisation aims to play for the upliftment of the SME sector?
D Saalai Maraan: Council for Leather Exports has around 2800 manufacturer-exporters of leather and leather products as its members. More than 80% of the members constitute the SME sector. Thus, CLE’s export promotional activities are being extensively catered to the SME sector. In fact, CLE is implementing the Duty Free Import Scheme of the Government of India wherein manufacturer-exporters of leather products & footwear and manufacturer as well as merchant exporters of leather garments tied-up with a manufacturer are allowed to import essential inputs used in product manufacture to the extent of 3% of FOB value of their export realization in the previous year. CLE was also engaged as the Facilitating Agency for the Integrated Development of Leather Sector (IDLS) Scheme implemented in the XI plan by the Ministry of Commerce and Industry, Govt. of India which facilitated technological upgradation of the leather industry. IDLS Scheme is expected to be continued in XII plan also. CLE has also been implementing various infrastructure projects across the country with the Government support which includes establishment of testing centres, trade centres etc. CLE has also been assisting the SME exporters to gain exposure in the global market by enabling their participation in events like international fairs, India Leather Shows/Buyer Seller Meets etc., carried out under marketing programmes namely Marketing Development Assistance (MDA) and Market Access Initiative Scheme (MAIS) of the Government of India. Thus, CLE has been playing an active role in the overall development of SME units, whether it is in the area of production, marketing, technological upgradation or infrastructure.
India's leather export revenues were up by 26.7% during Apr 2011-Feb 2012. Do you think the growth will be substantial for this fiscal (2012-13) as well?
D Saalai Maraan: According to the latest data, the export of Leather and Leather products for the financial year April-March 2011-12 touched US$ 4868.71 million as against the performance of US$ 3968.54 million in the corresponding period of last year, recording a positive growth of 22.68%. Thus, exports during 2011-12 have crossed the target of US $ 4725 million. Though the leather industry has the potential to enhance its growth in the long run, with the prevailing Eurozone crisis and other challenges like price hike of raw materials etc., there are concerns about maintaining the same growth levels during 2012-13 also.
Could you highlight what benefits SMEs can avail with the 2% Interest Subvention Scheme announced in the Foreign Trade Policy 2009-14?
D Saalai Maraan: The 2% interest subvention scheme provides reduced interest rates for the leather sector on pre-shipment and post-shipment rupee export credit. Though the 2% interest subvention scheme was initially extended to the entire leather sector, from the year 2010-11, this is extended only for the SMEs in the leather sector. The Annual Supplement 2012-13 to the Foreign Trade Policy 2009-14 announced on June 05, 2012 extended the continuation of the 2% interest subvention scheme on rupee export credit for the year 2012-13 for the SMEs. The Reserve Bank of India has also issued a Circular No.RBI/2011-12/608 dated June 19, 2012 informing about extension of interest subvention of 2% on rupee export credit with effect from April 1, 2012 to March 31, 2013 which includes the SME. The aforesaid RBI circular mentions that banks may reduce the interest rate chargeable to the exporters as per Base Rate system by the amount of subvention available subject to a floor rate of 7% and also states that Banks may ensure to pass on the benefit of 2% interest subvention completely to the eligible exporters.
Recently, a study by CRISIL said that SMEs exporters earn higher operating profit margins (OPM) than domestic peers. What is your take on this?
D Saalai Maraan: It is a well known fact that though there are greater risks involved in export trade and there is intense competition too, the returns are quite higher than in the domestic market. However, as far as leather sector is concerned, the returns for high branded items is higher even in the domestic market.
How can the Eurozone crisis take its toll on the revenues of Indian leather industry during current fiscal (2012-13)?
D Saalai Maraan: As mentioned above, there are concerns about maintaining the export growth levels during 2012-13 on account of the Euro Zone crisis, as Europe is the major market for the Indian leather industry accounting for 66% of the exports. However, we hope that with the assistance of Government, there will be resurgence in exports in the second half of the year.
In your opinion, what kind of initiative the government should take to promote India's exports aggressively?
D Saalai Maraan: As far as leather sector is concerned, the Government of India is already implementing major schemes for promotion of exports. Further, Leather Sector has been recognised as a Focus Sector in the Foreign Trade Policy 2009-14 too. However, we have sought additional support measures from the Government so as to help the product and market diversification efforts of the exporters and to enhance our market share in USA which is currently about 1.31% only.
In the 12th Five Year Plan (2012-2017), the government has approved Rs 600-crore mega leather cluster development scheme. Do you think the concept of mega leather clusters will address the constraint of large infrastructure with integrated production chains in the country?
D Saalai Maraan: The Government of India has already notified the Mega Leather Cluster Scheme as part of the Indian Leather Development Programme (ILDP) for implementation during the 12th Five Year Plan Period. As per the scheme, it is proposed to develop Greenfield Mega Leather Clusters in the States having large concentration of leather units and also in states having potential for growth of the leather sector. These Mega Leather Clusters, which will have world class infrastructure and support services, will play a crucial role in enhancing capacity of the Indian leather industry in the next 5 years.
Trade fairs are considered as an excellent platform for fruitful and business-oriented interactions with domestic and global buyers. How, according to you, SME/MSMEs can enhance their businesses with the active trade fair participation?
D Saalai Maraan: CLE is undertaking aggressive marketing campaign by organizing India Pavilions in major leather & leather product fairs/exhibitions held across the world and also by conducting India Leather Shows/ Buyer Seller Meets in major importing countries as well as potential markets. Exporters who participate in CLE organized events under Marketing Development Assistance (MDA) can get reimbursement of part of their expenditure. The reimbursement is available to Individual Exporter/ Companies with FOB value of export from Rs.3 lakhs and upto Rs.15 crore per annum who are participating in CLE led trade delegations / BSMs / Fairs / Exhibitions abroad to explore new markets for export of their specific product(s) and commodities from India. Besides, several cluster based exhibitions are now held in India were SMEs of raw materials and inputs can participate and find buyers. CLE has entered into an agreement with Riva Del Garda Fiere Congressi, the organizer of the most popular Expo Riva Schuch Fair in Italy and organised the first edition of Expo Riva Schuh India exhibition successfully during July 2011. Thereafter, the second edition of the fair was also organised in July 2012 and this fair has become a regular event for value added leather products and footwear. This is yet another example of Indo - Italian collaboration. The India Trade Promotion Organisation (ITPO) is also organising international fairs in the country namely India International Leather Fair (held in Chennai from Jan. 31 - Feb. 3 every year) , IILF Delhi (held during July 2012) and International Leather Goods Fair (held in Kolkata during Feb. every year) wherein SME companies can participate.
What are the key priorities of your Council?
D Saalai Maraan: The Council's objective is to ensure substantial development of the leather industry in all core areas namely capacity modernization, upgradation and enhancement, human resources development, market expansion and diversification, product diversification, infrastructure development and environment management, in order to double the exports in the next 5 years.
Please share your roadmap for the current fiscal (2012-13).
D Saalai Maraan: As far as our traditional market of Europe is concerned, the leather industry needs to undertake aggressive marketing campaign and also maintain a very high level of price competitiveness so as to tackle the adverse impact of recession as well as the intense competition. As far as USA is concerned, even while enhancing our exports of leather goods and leather footwear, we must concentrate on enhancing our export of non-leather/synthetic footwear to this market, as there is a very huge market for this item in the US market. During 2011-12, exports to countries like Russia and Japan have shown considerable growth. Hence, the exporters must focus more on these markets and further enhance their share in these potential markets. On CLE's part, we have planned a number of marketing activities in Europe which includes participation in fairs like Expo Riva Schuh (Garda, Italy), Mipel (Milan, Italy) and organisation of India Leather Shows in Spain, Germany, France etc., Besides, we will be organising fair participation/Buyer Seller Meets in countries like Canada, Turkey, South Africa , China, UAE, Australia, New Zealand etc., CLE has also organised Reverse Buyer Seller Meet in Delhi during July 2012 by inviting overseas buyers and similar such reverse BSMs are planned in Chennai and Kolkata also.