10 percent fall in leather good’s exports likely
March 30, 2012
Exports of leather goods are likely to decline by 10 percent during the current fiscal year, as compared to the preceding year, due to severe energy shortage.
Leather goods worth $1 billion were exported last year. However, a massive decline is expected this year, said SM Naseem, Chairman of Pakistan Tanners Association (PTA).
He said that due to increase in input cost and growing energy shortage, leather goods exporters are now unable to compete with the international prices of finished leather after value-addition offered by other regional leather manufacturing countries. Exporters fear a massive decline in orders, he added.
China, Korea, Italy and Spain are the main importers of finished leather, leather garments and shoes.
However, export orders of leather goods to the tune of billions of rupees are likely to be cancelled for failure to meet supply deadlines due to energy shortage. Due to gas load shedding, PTA members would have no choice but to shut down their factories, especially in Punjab where gas is being curtailed for 2-3 days a week.
Similarly, now one day gas load shedding has in Sindh would further decrease leather goods exports, Nasem said, adding that they would also join the agitation and demonstrations announced by other business communities against gas and electricity load shedding in the country.
He said if smooth supply of gas was not ensured to the leather sector, the second biggest export-oriented value-added industry of the country, most of the units of the industry would be forced to move to other countries.
Other leather goods exporters said that gas suspension, frequent power load shedding, high production cost and unavailability of raw materials would badly affect the leather industry.
The sector is losing valuable export orders from foreign buyers and customers, which is hurting the sector's precious foreign exchange, they added.
Apart from earning huge amount of foreign exchange for the country, leather industries provide employment opportunities to about 0.3 million persons.
Chairman PTA also said that the export quota of live animals fixed by the government for calendar year 2012 will cripple the leather industry.
Last year the export of live animals to Iran and Afghanistan through a quota resulted in enormous scarcity of basic raw materials - hides and skins - to the leather sector.
Because of this the prices of skin and other raw materials increased to a higher level and members of the PTA would be unable to get export orders from their regular foreign buyers and customers. The sector faced high production cost and production of leather sector also shrank further from the existing level, which is at the moment ranging from 50 percent to 60 percent, having only 4 working days for production.
Naseem has expressed deep concern over the announcement by the government of allowing quota for export of live animals under CY12 from Pakistan to Iran and Afghanistan.
Naseem reiterated that the permission to allow export of live animals under CY12 quota would also have drastic affect on meat and milk prices in local market, which were already at an exorbitant extent beyond the purchasing capacity of the masses.
The permission of CY12 quota could be the encouragement aspect to accelerate the smuggling of live animals from Pakistan to the neighboring countries.
PTA’s members were meeting their dire needs of basic raw materials by importing from different countries specially African countries, but after putting ban on such export in these countries PTA member manufacturers and exporters are completely compelled to depend on domestic raw material, which is already short for meeting the export demands.
The leather manufacturing units in the country suffered an estimated loss of hide and skin to the tune of Rs 550 million during the post Eidul Azha period.
Former PTA chairmen Khursheed Alam said according to a survey of the industry it was revealed due to 10 to 12 hours long power and gas load shedding, more than 1.10 million skins and hides in tannery zones in Karachi, Lahore and Sialkot have rotten.
“The tannery sector requires 24 hours power and gas supply as it is a sector of continuous process,” Khursheed said. “The power outage of over 10 to 12 hours per day has ruined the raw material lying at the tanneries that would dent leather exports as PTA members would not be able to fulfill their commitment in the international market.”
He said an estimated collection of hides of sacrificial animals, cows, sheep and goats, was around 5.3 to 5.9 million in the Eidul Azha season as compared to the last year’s figure, which stood at around 7.3 million.
Besides, due to current damage to hides and skins, a marked decrease in collection of goatskins of up to 50 percent and cows by 10-15 percent has negatively impacted the leather industry.
Ministry of Livestock and Dairy Development failed to take any immediate action to stop export and smuggling despite assurance to PTA in a meeting on June 27, 2011.
According to Federal Bureau of Statistics, in July to February 2012, export of live animals stood at more than 110,680 amounting to Rs 1.75 billion and in 2010-11, the export of 194,250 live animals fetched Rs 2.50 billion.
The smuggling of more than 500,000 live animals a month is inflicting a loss of more than Rs 7.7 billion to the national exchequer, besides causing huge raw material shortage to the second value-added export sector of the country. This smuggling is being facilitated by the fact that the regulated export of live animals is allowed and smuggling also takes place under the guise of ‘regulated export’.
The leather sector is paying an average of $2.584 million as Export Development Fund, which is solely for promotion of exports.
For promotion of leather exports our government has no other incentive for the sector. On the other hand India announced 10th and 11th Leather Development Plan with an outlay of Rs 13.14 billion for development of leather sector including subsidized leather fairs. Similarly, Bangladesh allows 70 percent subsidy on stand cost, sample transportation and others.