Frayed and Tattered

A round a 30-minute drive from Kanpur’s railway station, Jajmau houses a large agglomeration of small, mid and large sized tanneries. Inside the cluster, the smell of rawhide is overpowering. On the other side of the towering iron gates, animal skins and hides are processed in large quantities every day. These hides are then bought by major leather manufacturers in India and abroad and are converted into finished products. 

Not too long ago, Jajmau, a suburb of Kanpur, was buzzing. Once renowned as a leather export powerhouse, this cluster is now struggling to survive. Rising compliance cost and stringent environment norms have brought business activity to a grinding halt. “We are struggling to stay afloat due to unprecedented shutdowns by authorities and rising environment compliance cost,” says Naiyer Jamal, who owns a mid-sized tannery Makdoom Tanning Industries, which processes 25 hides and saddles each day.

In a compound half the size of a cricket field, Jamal’s tannery wears a deserted look. In this tired bareness, five to six workers are soaking, liming and tanning the hides. “Since we are being asked by officials to run at 50% of our capacity, I had to let workers go. The business has been hit badly, and I am losing clients,” claims Jamal. 

Woes are similar across the cluster. Moghis Ahmed, whose tannery is right opposite Jamal’s, also complains about repeated interference by the government. “We are not able to concentrate on work since we are in constant fear of being shut down or harassed. The demand is stable, but we are not able to manufacture anything because of these crackdowns,” laments Ahmed.     

The Unmaking

Before tough times arrived, Kanpur’s leather industry had been booming, even under the British Raj. The cluster was established by the British around 150 years ago after they took charge of the city. In 1798, they set up a military camp in Kanpur and, as the camp turned into an important military centre, British Army’s requirement for saddles, boots and belts increased. With the demand for leather and leather products rising, the cluster started to grow and since then tanneries have continued to mushroom. From seven tanneries in 1947, the industry in Kanpur grew to 175 organised tanneries by 1992 and today the cluster has close to 700 tanneries.

As the number of tanneries in the cluster spiked, water pollution became a major bone of contention. The genesis of problems faced by this cluster today lies in the mismanagement of the common effluent treatment plant (CEPT) established in 1994. The plant was set up after lawyer MC Mehta filed a public interest litigation in the Supreme Court in 1985, alleging that the tanneries were releasing toxic waste into the Ganga. 

The CEPT, which is run by local body Jal Nigam, has a capacity of treating of 36 MLD waste — 9 MLD of tannery waste and 27 MLD of sewage. The plant was installed for treating waste of 175 tanneries two decades ago with tanneries being asked to contribute 17% of the cost. 

“After we gave our contribution, we were assured by Jal Nigam that we won’t have to pay anything more for maintenance and operation of the plant,” recounts Jamal. Jal Nigam told the tanneries that the plant would be able to generate biogas, bio-manure and provide water to farms thus making it self-sustainable. However, the plan didn’t quite work out that way, and the local body slapped notices on tanneries, asking them to pay 50% of the operational and maintenance charge. “We have been paying these charges since 1996,” says Jamal. 

The trouble, according to Jamal, started in 2002, when UP Pollution Board and Jal Nigam initiated the process of giving more licences, taking the total number of tanneries to 402. He says, “Despite the Supreme Court’s restriction on opening of new tanneries in the area, more licenses were doled out. They even asked these tanneries to contribute money for maintaining the plant. So why didn’t they use that money to upgrade the plant?” 

The leather industry’s run-ins with the pollution board, which began in 1985, have continued unabated. The establishment of National Green Tribunal (NGT) in 2010 has also escalated matters. There are at least 500 cases against leather units in the principal bench of the tribunal. Even in 2015, NGT pulled up the leather industry, saying that tanneries in Kanpur were responsible for almost all the industrial pollution in this region. 

Following NGT’s scathing observations, a team of officials from the Central Pollution Control Board (CPCB), the Uttar Pradesh Pollution Control Board, and the State and Union Environment Ministries visited the clusters and submitted a report to the tribunal. Acting on the report, around 90 tanneries were shuttered in 2015. 

Pollution Woes

The matter has now again come to a head. On November 19, the UP Pollution Control Board ordered the closure of 259 tanneries in Jajmau. In the past two years, around 150 tanneries have been closed down in the district, according to Javed Iqbal, president, Council for Leather Exports. 

The impact of crippling environment compliance cost is clearly visible in Jajmau, which manufactures leather worth Rs.2.4 billion for domestic players and exports leather worth Rs.600 million each month. Iqbal, who is also the owner of Naaz Tanneries and has a joint venture with Bata India, says that environmental regulations imposed on tanneries have crimped industry’s finances. “They are now asking the industry to foot 25% of the maintenance and operational cost of the plant. Only 10 to 15 major players will be able to pay. If smaller tanneries are asked to pay such a large amount, how will they have working capital,” asks Iqbal. 

Feroz Alam, who owns a mid-sized tannery, which is located at a 10-minute drive away from Naaz Tanneries, says that despite having the capacity to process 110 hides each day, he is able to process half that because of the official diktat. “If we give a major part of our revenue for maintenance of plant, then there will be a capital crunch. Due to these unprecedented crackdowns and stringent norms, smaller tanneries are on the verge of shutting shop,” says Alam.

He also adds that the cluster is not only facing a capital crunch, but also shortage of labour due to frequent shutdown. “Since they had shut us down between November 18 and December 15, labourers went back home. And now when the industry has re-opened, there is an acute shortage of labour,” complains Alam.  Lack of availability of labour and restriction of utilisation of capacity means inventory keeps piling up. “The rawhides, which have been sourced, are deteriorating,” says Alam.

Repeated disruption in business activity leaves tanneries unable to fulfil their orders. And unhappy customers have already started turning to other supplier countries for sourcing leather. “Due to this proposed ban for four months in Unnao and Jajmau, our clients are now looking to source leather from Bangladesh and Pakistan. Fewer customers are placing orders with us,” says Iqbal.  

Losing Shine

Not just tanneries but even big footwear and leather manufacturers are feeling the pinch of the crackdown on tanneries. Rising leather prices on account of closure of tanneries, coupled with the increasing cost of imports due to rupee devaluation, are hurting the margins of shoemakers. According to industry sources, leather prices have increased by 15% in the past six months. 

Terming the crackdown on tanneries as ‘unfortunate’ and ‘devastating’, UP Leather Industries Association vice-chairman, Taj Alam, claims that Jajmau and Unnao clusters would suffer losses worth Rs.40 billion each month in the event of complete closure. “These clusters are the backbone of the leather industry. If they are unable to process rawhides and skins, how will exporters get finished leather to make value-added leather goods,” asks Alam, who is also the owner of a leather goods unit, which exports saddles, pet accessories, gun covers, holsters and hunting accessories.

Alam adds that, for the first time, a blanket ban on operation of tanneries for three months (December 15 to March 15) could be imposed during the Kumbh Mela. “Earlier the tanneries were asked to suspend operations for three days prior to each snan. Considering the religious sentiments of our Hindu brothers we used to close down operations voluntarily for three days before each snan. There has never been such a severe crackdown from any authority before,” rues Alam.  

Pointing fingers at distillery, paper, sugar and textile mills, Alam says that these industries are also known to be grossly polluting industries (GPIs), yet they are not asked to shut down during the Kumbh Mela season. “The pollution control board will merely monitor them, but we are being told to shut down. Why is step-motherly treatment meted out to us,” quizzes Alam.

Completely Cornered

Despite these challenges, Kanpur is still the leading producer of leather and leather goods with around a quarter of India’s footwear factories. Footwear makes up around 40% of India’s leather exports, and a third of India’s leather and leather-product exports originate from Kanpur. Ambur in Tamil Nadu and Kolkata are other important centres.

But footwear exporters are also not optimistic about the leather industry’s prospects on the global as well as the domestic front. “The impact of the closure on tanneries is severe, and the industry has seen revenue de-growth of 4-5% annually for the past three years,” says Rakesh Suri, owner of Suri Shoes, which manufactures private labels for big footwear brands. 

Along with local woes, global headwinds are putting the exporters on the back foot. As the uncertainty over Brexit continues to intensify, leather exporters’ global woes are also expected to deepen. “No one knows what’s happening with the issue of Brexit and, for us, England is a very important market. There is a lot of uncertainty. Even the UK Prime Minister doesn’t know what’s going to happen,” says Suri, adding that the demand in the UK and Europe hasn’t rebounded yet. 

The numbers reveal that the growth in FY18 was only because of a low base. The demand for leather and leather products from Europe (which accounted for 35-40% of the exports market) had dived towards the end of 2016-17 following the Brexit referendum. And in the year 2017-18, growth revived marginally with leather exports going up by just 3-4% on a low base of the previous fiscal year. According to data from the Council for Leather Exports, the domestic production of exports in terms of value fell by Rs.50 billion in FY18 compared to the previous financial year.

Adding to the industry’s woes, leather’s popularity is fast waning. Suri believes that the rise of vegetarianism and increase in demand for non-leather products is hurting the business. “In fashion, leather is slowly being pushed out. A lot of synthetic materials have been developed which are easier to handle and more fashion friendly,” says Suri. “Synthetic products are getting cheaper, so it’s also putting a lot of cost pressure on us.”  

Innovating To Survive 

With the leather industry facing multiple snags, the only solution is to innovate and adapt to new trends. “We have to become more versatile and fashion oriented. But the flexibility in fabrics is not the same as in leather. So it’s a big challenge for the industry,” says Suri. 

Apart from embracing a fashion-friendly approach, the industry needs to bring in the latest technology to become more environment-compliant, according to leather manufacturers. And Suri believes that the current crisis has pushed the industry to take necessary steps. “After a lull, now the industry is developing eco-friendly technology to fight the negative image. We are sourcing leather only from tanneries which are Leather Working Group (LWG) certified. The LWG certificate ensures that the whole process is ethical and clean,” says Suri. He adds that as customers become more aware of the LWG certification, they can be confident that the product is environment-friendly. 

The industry is also adopting new technology to reduce the cost of production. Suri says that they have implemented technology, which has drastically reduced the use of water and the time to make leather. “If fewer resources are used and lesser time is needed to make a product, you end up reducing your cost. Also, since you are using less of natural resources like water, the cost of that resource and its treatment also reduces,” explains Suri. Earlier, the production cycle for leather was three-weeks long, but now Suri says that the industry players are developing technology to make leather in just 10 to 12 days. 

And while the leather sector takes steps to tide over the tough times, Suri has called for a joint effort to sort out the issue of water pollution and closure of tanneries. “What is more important to us, Ganga River or employment? We have to strike the right balance. The industry is willing play its part, but the government must also take up responsibility and fix the issue,” asserts Suri.