Demonetisation on a shoestring: How UP leather industry is hit by cash crunch

Already going through a rough patch, demonetisation has hit UP’s leather industry hard. From the skinner in Malihabad to the tanneries in Kanpur and Unnao, from shoe units that run out of homes to big exporters, they are all waiting for the other shoe to drop.
SKINNERS are out of jobs, slaughter-houses are either shutting down temporarily or are laying off workers in large numbers, tanneries are running out of hide, and manufacturing units are unable to meet export orders.
As demonetisation hits the home stretch of the 50-day deadline set by the Prime Minister, the simmering discontent in the leather and shoe-making industry boiled onto the streets on December 14, when labourers from the leather sector — one of the largest export industries of Uttar Pradesh — blocked the Agra-Delhi highway for over two hours.
Radhe Shyam’s one-room brick house is among a dozen similar dwellings, mostly built of mud, at the farthest end of Amaniganj village in Malihabad area. All these houses are occupied by Dalit families. His house has no door; a cot is placed against the entrance when Radhe Shyam is out skinning animals in over 70 surrounding villages.
Cattle-skinners like him are considered “impure” even by other Dalits, and the younger generation, including his own son, doesn’t want to do this work, admits Radhe Shyam, 55. His son, who now lives in Jalandhar, has cut off ties with him.
Radhe Shyam is one of 11 people in the area who have licenses to skin dead animals. He says he paid Rs 12,000 of the Rs 80,000 that he and his partners raised as security to get the licence. He only hopes to recover his investment by the time the contract ends in March now.
Already, a fall in the number of animals available for skinning and closure of tanneries in Kanpur and Unnao had hurt their business, nearly halving the price of hides. Demonetisation has come as the last straw.
“These days, owners usually sell their old cattle to butchers. There are only a few animals which are left to die in villages. I am a Hindu and cannot kill abandoned animals. I feel lucky if I find one dead buffalo or cow in a day,” says Radhe Shyam.
At the weekly market of hides in Banthara, a lack of cash means he is never paid the full amount these days. “A hide which used to fetch Rs 500 four years back gets only Rs 200 to 250 now. Since demonetisation, we only get half the payment. The rest we get later. For hides we collect through the week for Rs 5,000, we only get Rs 2,000-Rs 3,000,” says Radhe Shyam.
Yakub Ali Qureshi, a butcher who stays in Chaudhrana locality, says the price of buffalo hide has also been dropping over the past three years. “Then it used to fetch Rs 1,000 to Rs 800. Now it goes for Rs 300 or 400. Demonetisation has delayed payments from buyers.”
While skinning dead cattle lying around villages is mostly done by Dalits, the Qureshis slaughter buffaloes they buy. They sell the meat as well as the hide.
Khilawan, who used to oversee the skinning and selling of cattle till recently, says the business does not fetch anything. “Tanneries are shutting down and the rates are very low. Two to three years ago, there used to be at least a dozen cattle skinners under me, but no one is interested in this anymore because there is less money and a lot of stigma.”
With tanneries largely looking to procure hides from slaughter-houses as these have fewer cuts, some skinners had found jobs there, earning Rs 200-300 for skinning an animal. But even they have been hit as slaughter-houses too are closing down.
“Sab kaam khatam ho gaya, majoori dhoondhte rehte hain. Ab to karkhana bhi band ho gaya. Biwi chauka bartan karke kaam chala rahi hai (All jobs are gone, I keep looking for work. Now even the slaughter-units are shut. My wife in working in other people’s homes, we are surviving on that),” says Babua Ram, a skinner in Pitambarnagar area of Unnao.
His wife says they have not been able to pay the Rs 170 monthly school fee of her elder daughter Kajal, who is studying in a private school.
Kanpur/Unnao: Tanneries
There are 402 registered tanneries in Jajmau area of Kanpur city, of which 261 are operational at present. “Notebandi” is the topic of discussion everywhere.
Shameeq Ahmed, whose tannery has a capacity to treat 130 hides a day, says, “Seventy per cent of the migrant labour force, mainly from Bihar and eastern Uttar Pradesh, has left. We pay them twice a month, 7th and 22nd, but when we failed to make payments on November 22, they began leaving one after another. We also require cash to pay for hides, coal for boilers and for loaders but banks have sometimes expressed an inability to give us even Rs 6,000. We require at least Rs 50,000 per week in cash; one small truck of coal, which comes from Chandausi near Varanasi, itself costs Rs 15,000 in cash.”
Ahmed asks how could their business become “cash-less”. “Most of our labour is migrant so we cannot even open their accounts here.” Pointing to kharkharawala (horse-pulled loader)” Kamta Prasad, Ahmed says he earns around Rs 500 a day for seven to eight rides carrying hides from one tannery to another. Prasad says that of the money he earns, he spends at least Rs 200 a day on feed for his horse. “Apna to ek din na bhi khao par ghode ko to khilana hi padega (One can skip eating for a day, but the horse has to be fed).”
Qazi Naiyer Jamal, the general secretary of the Small Tanners’ Association, who runs his own tannery in Jajmau, says, “Tanneries in Jajmau alone require about 12,000 hides per day, which is close to four lakh a month. The largest supplies come from slaughter-houses, which have started closing down. Today, most tanneries are running at just 30 per cent of their capacity, with stocks they had bought about a month back.”
Other tannery owners sitting next to him are discussing a notice issued by the Uttar Pradesh Pollution Control Board, telling them about the six different snans (holy bath days) between January 12 and February 24 in Allahabad during the month-long Magh Mela. “We are yet to recover from demonetisation but we will have to close down three days before every bath as it takes three to four days for water to travel from here to Allahabad,” says Jamal.
The bigger manufacturing units are no better. About 40 km away in Unnao, processing and manufacturing units are facing similar problems due to shortage of hides. But the bigger units have another worry: a large part of their processing is done by machines and it is not feasible for the machines to be run below their capacity. Hence they haven’t been picking up small orders.
We have a captive plant where we process leather for products like saddles, shoes, belts, bags etc. Against the capacity of 200 hides a day, we are able to process just 50 hides, which is not cost-effective as there are electricity and other expenses as well,” says Taj Alam of Kings International Pvt Ltd.
Because of inability to run units, Alam adds, “Our export orders are being affected and being diverted to other countries like Indonesia, Sri Lanka, Pakistan, Bangladesh. In the past few weeks, there has already been a downfall of about 25-30 per cent in the trend of orders.”
He adds that for the past one month, since demonetisation was announced, he has been trying to open bank accounts for his 275 employees in the tanning as well as the manufacturing unit.
Those with bank accounts like Shirajuddin, a colour mixer at Alam’s factory, have other issues to contend with. “Of my monthly salary of Rs 12,000, I have been able to withdraw only Rs 4,000 as of now, some of which was given to me in Rs 10 coins. For this, I had to stand in line for two days and lost hours in labour, which comes to around Rs 800.”
A few kilometres away, there is an awkward silence at a slaughter-house-cum-processing unit. Owner Jamshed Soleja is putting in place lay-off plans. He claims that the unit has closed due to lack of cash to buy animals from farmers in local markets. “We have been shut since December 1 and have communicated this to our 1,200 employees. While we can pay for our supplies through cheques, we require cash for the auction of animals in local markets and for the labourers. With supply getting affected, there was no point holding them back.”
Soleja adds that he has had to cancel his overseas orders. “I have returned 20 per cent advance payment from companies in China, where new year is at the end of January.”
Agra: Shoe factories
It’s around 2 pm on a Thursday afternoon at Quazipada in Agra. The men sit in small groups sipping tea and munching on peanuts; the women go about their chores while children scream as they chase each other. But this, says Akram, a shoe factory worker, isn’t how it usually is.
“Yahan ek bhi aadmi kya, baccha bhi khali nahi baithta tha (You wouldn’t even find a child sitting idle here). All of us would do some work or the other — if someone made shoes, his child would put the laces in and somebody else would pack it. Now, we are all jobless. There is no money,” says Akram, who left his job a few weeks ago after his employer failed to pay him in new currency.
Quazipada, a locality with a population of about 40,000 that neighbours Agra’s Raja Ki Mandi railway station, is home to several small-scale shoe manufacturing units, all of which run out of homes. From footwear production, fitting soles to manufacturing of laces, threads and fitters, almost every household here is involved in the shoe trade. But demonetisation, they say, has hit them hard.
We hardly get any work. The big manufacturers can still manage as they work on credits or on credit cards, but small traders like us are the ones who struggle as we have to source everything — from raw material to labourers — from the local market,” says Mohammad Illiyas, who owns a small unit on the ground floor of his 50 square-foot double-storey house.
With annual manufacturing revenues exceeding Rs 12,000 crore, the footwear industry in Agra is the among the largest in the country. At present, Agra accounts for almost 35 per cent of the total footwear exports from India and caters to 65 per cent of the domestic footwear market. There are around 10,000 footwear manufacturing units in Agra – both in the organised and unorganised sectors. Around 150 of these big units focus on the export market. About 30-35 per cent of Agra’s population depends on the leather footwear manufacturing industry that provides employment to nearly 500,000 people.
Wakeel Ahmed Ashrafi, who owns a sole manufacturing unit in Syedpada of Agra, says his factory has been shut since Diwali. “Earlier, the labourers went on leave for Diwali and then after demonetisation, no one returned. I had around 35 men working for me but only three of them returned sometime in late November. But I have no money to pay them and now my factory is shut,” says Wakeel, who buys his raw material from the city’s Hing ki Mandi. The stockists at this market import Chinese threads, foam, rexine, shoe fitters and other things that go into shoe production.
In Quazipada, whose home-based units together produce over 10,00,000 pairs of shoes every day, a shoe passes through at least five to six hands before finally reaching the stores. “A fitter gets Rs 20 per shoe while the one who fixes the sole gets paid Rs 15 per pair. The one who puts the lace gets Rs 4-5 and the man who does the pasting and stitching gets Rs 10-15 for every pair. This is the price for a pair of rexine shoes while this gets doubled in the case of leather shoes,” says Taj Ahmed, a small-scale shoe manufacturer in Agra, nine of whose 20 workers have left the job since November 8. The others, he says, simply sit around as he hasn’t been able to source raw material with the limited money he has.
A few metres from Agra Fort is Chakki Paat, a densely populated Dalit settlement which produces tens of thousands of shoes every day. Of the 20-odd employees at one of the units here, there are only three workers at 1 pm. Ordinarily, they would produce 200 pairs of shoes a day, but it’s now down to a few pairs; most days even less.
Sharvan, a Dalit worker in a lace factory in Bijlighar, says, “The government should have thought about the poor. Hum soch mein hi aadhe huain jaa rahe hain (we are worrying ourselves to death).”
Upendra Singh of the Agra Shoe Manufacturing Association, who claims to represent the domestic and unorganised shoe manufacturing units of Agra, says, “There is no one in Agra who is not dependent on the shoe manufacturing industry for their survival. If they remain out of work for a longer period of time, the crisis will worsen,” he says.
Daljeet Singh of Agra’s TSF Shoes, whose employees staged the protest on the highway last week, says that without cash, entrepreneurs like him have their hands tied. “We have asked banks to open accounts for our workers but they are too slow. On November 12, we had asked for 1,500 accounts to be opened, but so far the bank has only opened some 450. The workers think we are exploiting them but we ourselves don’t have money to pay them,” he says.
Pooran Dawar, president of the Agra Footwear Manufacturers and Exporters Chamber (AFMEC), which deals with bigger footwear manufacturing industries in the city, however, terms the push for cashless transactions as a “good move”.
“The crisis is temporary. The government wants payments to go digital and we want it too because it will ensure that workers get their minimum wages as well as provident funds. But the government should give us some time so that we can get all the workers to have bank accounts,” he says.
Dawar says it will take at least six months for all the factory workers to get bank accounts. For now, AFMEC has decided that factory owners will tie up with supermarkets such as Vishal Mega Marts and Big Bazaar for coupons to be given to the labourers.
“Bade aadmi ko kya. Mar to gareeb raha hai (It’s the poor who get crushed),” says Abdul Aigaz, a shoe factory worker who left his first job after the owner failed to pay him. He soon found another but the owner paid him Rs 1,500, in three old Rs 500 denomination notes, and sent him home. “My son has his exams coming up, he is asking for a guide book, and all I can think of is how I can feed him,” he says.

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