Indian leather trade angered by duty drawback cuts
India’s leather trade is reported to be ‘up in arms’ at the government’s halving of the duty drawback (export tax refund) at the beginning of this month, from 12.5% to 6%.
The industry had been lobbying the for the duty level to be increased to 25%, so as to partly offset the 50% rise in hide prices that has taken place in parts of the country in recent months. Such an increase would also have helped counter the effects of a weakened Euro – the currency in which an estimated 70% of the country’s leather exports are traded. So the decrease has been especially badly received.
According to Mr S Kumar, chairman of the West Bengal region of the Council for Leather Exports, the livelihoods of more than 200,000 people working the leather goods industry in Kolkata may now be at stake. Many businesses were already struggling with the higher costs brought on having to relocate to a new leather complex, he said, plus a scarcity of raw materials caused by the smuggling of hides ‘over the border’ into Bangladesh. The ‘illogical revision" of the drawback rates would only make the trading environment more difficult, said Kumar, while rendering businesses more vulnerable to foreign competition, especially China.
Kumar estimated that orders worth Rs 100,000 ($2 million) have already been lost through the introduction of the new rates, which were introduced on June 1.
