UP leather industry staring at another stumbling block, gets a 'raw' deal

The Yogi government has ordered tanneries in Kanpur for total shutdown for three months between December 15 and March 15 to arrest the flow of effluents in river Ganga during Kumbh Mela 2019

The beleaguered Uttar Pradesh leather industry, which had started to take baby steps after recovering from severe raw hide shortage last year following closure of illegal abattoirs, is staring at another stumbling block that threatens to shake its very foundation.

The Yogi Adityanath government has ordered tanneries in Kanpur, a major leather processing hub generating annual economy of about Rs 120 billion, for total shutdown for three months between December 15 and March 15 to arrest the flow of effluents in river Ganga during Kumbh Mela 2019 in Prayag, Allahabad.

The closure also means that the leather exporters would also be deprived of benefitting from higher earnings owing to the devaluating Indian currency.

Earlier, a good number of tanneries had been closed down following the National Green Tribunal (NGT) order to check pollution. The remaining tanneries have been asked to shift from their current leather belt of Jajmau to Ramipur, where a big treatment plant has been proposed to be set up at an investment of Rs 5.54 billion.

The closure order has come as a bolt from the blue for leather industry, units operating in Kanpur, which clocks leather exports worth almost Rs 60 billion per annum mainly to the Gulf countries, Europe, China, Iran etc.

Recently, seers had threatened to boycott the ceremonial Kumbh snan (bathing) if Ganga was not clean. In this backdrop, Adityanath recently issued directives for ensuring no effluent was discharged in the Ganga from Garhmukteshwar to Kashi during the Prayag Kumbh Mela, which is expected to witness the congregation of almost 150 million pilgrims next year.

At Jajmau industrial belt in Kanpur, 264 tanneries are currently operational, while 136 units had either been shut or dismantled. The 264 tanneries discharge about 6.7 million litres per day (MLD) of effluents, for which the government operates a 36 MLD chemically enhanced primary treatment (CEPT) plant by incurring an annual expenditure of Rs 170 million. The CM has now asked leather industry to bear 50% of the expenses amongst themselves.

Council for Leather Exports (CLE) regional chairman Javed Iqbal lamented the closure order would effectively kill the local leather industry and the tanneries would permanently lose its foreign customers, who always have the ready option to source processed leather from Pakistan, Bangladesh and Vietnam.

Airing similar concerns, former CLE regional chair R K Jalan said the state government should reconsider its decision to close tanneries. “If this order is implemented, the tanneries would effectively remain closed for four straight months, since they would have to be shut 15 days in advance to ensure there is no unprocessed leather, while they would attain full operational only 2 weeks after they reopen,” he explained.

Jalan underlined if the tanneries are shut for such a long duration of 4 months, most units would become sick and it would be very difficult for them to revive. The closure would also deprive tannery units to benefit from the devalued Indian currency through favourable exchange rates.

Kanpur leather industry also includes the nearby Unnao district and it employs over 100,000 people while supporting the livelihood of almost a million people.

UP Leather Industries Association member Taj Alam said the decision would result in mass layoffs and disruption in the economic activity to the tune of almost Rs 40 billion and impact the whole leather value chain spanning buckles, chemicals, transportation etc.

“This would also dent our image as a dependable trading partner due to intermittent policy flip flops and politically motivated decisions.” He said the Kanpur industry already had invitations from other states, such as West Bengal to set up units in their states, who were also offering a host of incentives.

He said the domestic industry was already facing the slowdown owing to various factors apart from working capital squeeze. “We will soon submit a representation to the government in this regard.”

Alam claimed the blanket ban decision had been taken for the first time since during previous Kumbh Melas, the tanneries were asked to suspend ‘wet operations’ 4-5 days prior to each ‘Shahi Snan’ (royal bath). However, a complete shutdown would not only halt production but dent the export market for once and good.

Last year, acting on the standing NGT directive to close down illegal slaughterhouses in UP and regularising their functioning, thousands of such unregulated and unregistered units, mainly manually operated, functioning across the state in thickly populated areas have since been closed.

Although the organised slaughterhouses, that export meat, are operating, yet they are fewer in number and stand at roughly 45. As such, they are not in a position to cater to the humongous demand of rawhide to the state leather units. This had virtually squeezed supply of rawhide to industries based in Kanpur and Unnao districts.

UP comprises three major leather industry hubs viz. Kanpur-Unnao, Agra and Noida. Of the Rs 200 billion worth of annual UP leather industry, about 50% is accounted for by the export market. The state accounts for almost a third of India’s annual leather trade and exports.
http://www.business-standard.com/article/companies/up-leather-industry-staring-at-another-stumbling-block-gets-a-raw-deal-118052400733_1.html

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