Jalandhar leather industry in distress

Closure of US, European markets hits working capital of units.

Hit by the lockdown, the Rs 1,200-crore Jalandhar leather industry is in distress. Besides supply chain disruption, the closure of the US and European markets due to Covid has put a strain on their working capital. Due to this factor, they can neither think of diversification nor close down their operations.

Jalandhar industry

Number of units: 200
Turnover: Rs 1,200 crore
Exports: Rs 600 crore

“The manufacturing across sectors has gone through turmoil. However, the leather industry has been hit hard. The sudden lockdown has disrupted the raw material supply and exports. Amid the pandemic, 60% of export orders were cancelled by the exporters as the markets were closed globally,” said Ajay Sharma, secretary, Punjab Leather Federation.

According to manufacturers, a majority of clients from the overseas cancelled the orders they had placed before the outbreak of Covid-19.

Industrialists said the lockdown has led to a whopping financial loss in terms of exports. In addition to this, imported raw hides are also rotting in containers at ports.

In Punjab, leather industry is majorly concentrated in Jalandhar comprising tanneries and manufacturers of shoes, bags, jackets, purses and belts. Currently, the tanneries are closed on the directions of the Punjab and Haryana High Court because of non-fulfilment of environmental norms.

The industry is dominated by tiny, cottage and MSMEs. The industry size is pegged at Rs 1,200 crore with 50% turnover coming from exports.

There are around 200 units which are engaged in the manufacturing of finished leather (dry work) and stitching. According to the industry, the lockdown has hit at a time when the industry was already under the crisis.

“We have resumed partial operations. The industry was closed for almost two months. Despite no sales, we had to bear rent, staff cost and other recurring costs which put a strain on our finances. We can’t even think of diversification as we are hardly left with any capital to start afresh,” said Deepak Chawla, Director, Jay Dee Leather (P) Ltd.

As a result, the precious working capital of the tiny, cottage and MSMEs is stuck and it will take at least 6-8 months for the situation to normalise.

According to the industry, since the major leather clusters in the country are closed, they are facing raw material shortage and producing with whatever stock is lying with them.

“Though the industry has started partial operations, it is still facing issues pertaining to raw material and market for finished products,” Sharma added. According to him, the exporters are not able to commit to orders due to the freeze on industrial activities.

The exporters complained that despite negative sentiment against China, they are not able to cash in on the demand because of cheaper imports from Vietnam and Bangladesh. They are of the view that exporters need some handholding to survive this crisis.

Besides demanding interest-free loan, the industry says the government must amend the labour laws to give entrepreneurs confidence to invest more in creating larger capacities.
Source:https://www.tribuneindia.com/news/business/jalandhar-leather-industry-in-distress-88339