Leather, footwear to be cheaper

The prices of leather and footwear products are likely to decrease marginally by about 3-5 per cent following the cut in customs duty on seven specified machinery used in the industry from 20 to 5 per cent and the reduction of duty on ethyl vinyl acetate, used as an input, from 20 to 10 per cent.

The overall duty reductions have come a positive signal for the industry, though the impact will be limited, industry experts said.

However, specific demands of the industry have been ignored. These included a reduction in customs duty on 25 machinery items, a cut in the countervailing duty on machinery and a reduction in local excise duties on leather products.

Ethyl venyl acetate is used for the production of lightweight soles and sandals and shoes. "This might make this segment marginally cheaper,'' M Rafeeque Ahmed, president, Federation of Indian Export Organisations, said.

The total Indian leather industry's turnover is estimated to be Rs 20,000 crore (Rs 200 billion). Of this, exports account for Rs 10,000 crore (Rs 100 billion). The footwear industry is worth Rs 4,000 crore (Rs 40 billion) and is growing at the rate of 20-22 per cent.

"It was important for the government to reduce the countervailing duty to increase exports. Besides, the excise duty varies from 16 to 25 per cent on the minimum retail price, depending on the value of products. This should be brought down," said Bawa Atamjit Singh, joint managing director, Sarup Tanneries Ltd, which owns the Lotus Bawa brand.

According to Ahmed, the peak rate of customs duty on non-agricultural products has already been reduced from 20 to 15 per cent. Hence the effective reduction in duty on machinery is only 10 per cent.