The State of Business 2013

Tightly stitched

The Ambur cluster is weathering power cuts and strict pollution control norms

Vaanga (please come), Vaanga!” an encouraging pedestrian hollers our car past thickets of shops selling rice, spices, plastic pots and freshly dressed chicken. This can’t be a two-way street, surely? Oh, but it is, as an auto-rickshaw adroitly demonstrates without a pause. We arrive at the imposing gate of the Farida Shoes’ guest house several near-scrapes and two testy turns later. A study in tranquil and immaculate luxury, global clients of Ambur’s biggest company retreat to its silky rooms and state-of-the-art gym after hectic parlays and rigorous inspections of big-ticket orders. It’s this easy dichotomy that defines Ambur (pronounced ‘aa-mb-oo-r’), a deceptively unremarkable town off the NH46, 188-km and four hours out of Chennai, often better known for its mutton biryani than the 31.54% annual growth rate attributed to its leather industry over the past decade. 

The region encompassing Ambur, and its neighbouring Vaniyambadi, Pernambut, Vellore, Ranipet and Gudhiyatam, are thriving leather clusters, though they are now struggling to remain glorious despite massive power cuts and stringent pollution control norms. Besides finished leather (from raw hide and skin), they exported footwear, garments, gloves and goods worth ₹4,767 crore in FY12 (up from ₹4,048 crore the previous fiscal) — that’s 20.5% of India’s total leather exports during that time.  

Big label play 

International brands such as Clarks, Geox, Deichmann, Timberland, Florsheim, Premegi, Lumberjack and Rockport have their shoes or shoe parts (uppers, soles, components or finished leather) custom-delivered from here under contracts bound by strict confidentiality and international norms. The Ambur cluster alone, notified a ‘Town of Export Excellence’ in the 2009-14 Foreign Trade Policy, contributes more than half, and more than all the other clusters put together, of the exports from the region (see chart: Cluster king). 

“We have been well-established in the international markets from the 1940s and 1950s, and we export mainly to Europe, chiefly UK, as well as North America and the Asia Pacific,” says Rafeeque Ahmed, managing director of the ₹800-crore Farida Group, which is headquartered in Chennai but has a dozen plants in Ambur that source finished leather, shoe components and sub-assemblies, and employ 7,000 people directly and several times over indirectly, to manufacture 5 million shoes and 1 million uppers every year. “Shoe uppers were the first value-added products to which we diversified. We have been making complete shoes for the last 10 years.”

Ahmed is a towering legend in Ambur, and his group is at the forefront of progressive labour policies, providing canteens, free medical care, loans and ATM cards for direct credit of wages, plus maternity care, crèches and family interactions for its women workers, among other appreciated schemes. “Sometimes, the family does not support a woman who works, so we try to help,” says a proud 25-year-old S Devi, who started as a cutter five years ago and is now a labour welfare officer who has already been to China for training in working on assembly lines. Farida’s massive, well-lit and high-ceiling shop floors thrum with organised energy as workers stamp, split, mark, paste, stitch, wax, buff and brush pink velvet and brown suede shoes over three spacious assembly lines fed by slow-moving conveyors. That Hugo Boss, Gabor or Lumberjack that won its wearer envious glances at a swanky New Year soiree in Delhi’s bitter winter probably came from these sweltering flatlands, crafted by R Rajamani, 38, who has been working in Ambur’s leather industry for 19 years now and says, with a shy grin, “I started as a temporary helper and now I am a supervisor and I also train new recruits. A woman can do anything.” In fact, 80% of the Ambur workforce today comprises women. 

Originally a backward region, the leather industry has donated land, established schools and provided so many jobs to Ambur that industries now lament the scarcity of local labour. A Sivakumar, the 40-year-old general manager of Delta Shoes, says, “We keep hiring and training but we have unfilled vacancies all the time. If power was not the bigger problem, labour would top the list of challenges in this industry.” Migrant labour has not yet arrived in significant numbers to this remote location. 

Leather has been instrumental in transforming the local economy. “I used to work in the tanneries while I grew up, to make ends meet for my family, but our children don’t have to do that,” says 59-year-old Syed Naeem, owner of Shaadmani Networks, a one-man software services proprietorship he started in 2010, and also employer of 50 workers at his small, ₹6-lakh shoe uppers unit in Valathoor, 19 km away on the road to Gudhiyatam.  

Grim imposition

A 2012 industry profile of the Vellore district by the ministry of micro, small and medium enterprises (MSME) notes there are 1,226 leather units spread over the district, mainly in the Alangayam, Madhanur and Wallajah blocks. Handlooms, ceramic, coir, chemical, safety matches and sugar mills are also scattered about, as are corporates such as Brakes India, Malladi Drugs and Pharmaceuticals, Bhel’s boiler unit, and Kramski Stamping and Molding, a privately-held precision-engineering multinational, but it’s the Ambur-Vaniyambadi-Pallar Valley leather cluster that rules the region with 1,620 MSMEs (as opposed to 125 coir and 50 engineering units) and 18 large enterprises, which together employ about 140,000 workers. 

Ambur is a historical cluster, which relied on the once-perennial and now-dry Pallar river for the water-intensive processes of early industry. The 1973 ban on the export of raw and pickled hides and skins drove the shift to chrome tanning, or the making of ‘wet blue’, the powder-blue tinted, cold and wet basic raw material that results from cleaned hide, and value-added job work. It was in 1995 that the state government stopped issuing ‘wet licences’, that is, licences for any enterprise involving contamination of surface or ground water. The Tamil Nadu Pollution Control Board enforces some of the most stringent pollution control norms in the country, and in this case forced the cluster into a pronouncedly new direction, which was to focus on value-added leather products and components. 

Nevertheless, competing with other leather clusters, whether from emerging centres in Bangladesh, Pakistan, China, Cambodia and Indonesia, or Kolkata, Pune, Ludhiana and Kanpur, Ambur pays a price for protecting its environment, a cost that may remain on paper elsewhere, either because of lenient laws or lackadaisical enforcement. “Foreign buyers are very particular that the local environmental laws be followed but what if other local laws are not as tough as they are here?” asks Raza ur Rehman, 36-year-old team leader at Arcot Soles, which makes and supplies PVC and rubber soles. 


Ambur’s present, though, is defined by the same darkness that creeps around all industry in Tamil Nadu: the shortage of power, with 14-16 hour unscheduled cuts every day, in all the districts other than Chennai, a cause for considerable anger and demands for equitable distribution. “My monthly diesel bill alone comes to ₹1.25 crore,” says a distraught Farooq Ahmed, partner, NM Hashim & Co, which, like Farida, offers end-to-end products, from ‘wet blue’ to finished leather to components like soles and uppers, to shoes. Ahmed reads out from the eloquent appeals he has been issuing to his workers in Tamil on a weekly basis, urging them to deliver without distraction, avoid absenteeism and improve productivity to enable the business to survive. “I have been doing business for many years and I have never seen, nor do I want to see again, a time as terrible as this.” 

The Tamil Nadu Electricity Board charges ₹5.50 per unit for commercial use of power, whereas diesel-powered captive supply costs ₹16-18 per unit. Diesel shortages are another headache. There is a long political history of neglect of the power sector in the state, whose coffers are emptied after every election to deliver the freebies promised to win: rice for ₹1 a kg, TVs and laptops. The exponential growth in industry post-liberalisation, with no power infrastructure in place for it, has worsened the problem. The last 15 months of energy deficiency are widely seen as the worst in the state’s history. 

Ironically, Ahmed has an 800,000-unit surplus power credit from the Suzlon windmill he owns in Udumalpet in the Tirupur district, as part of an innovative scheme in which industrial units fund power for the state grid and get free electricity in exchange. Not that Ahmed has seen any of it. “Instead, we are taxed 10 paise on every unit of diesel power we generate,” he says with bitterness.  

“Factories have huge wooden drums that rotate raw and salted hide and skin in chemicals for four to five hours, for which uninterrupted power supply is a must,” says Naveed Akber, secretary, South India Shoe Manufacturers Association, who also manages the Ambur Trade Centre, a three-storey convention centre co-funded by the government and industry that hosts the annual Ambur Open exposition, now in its fourth edition. Industry appeals to the state government asking for at least some fixed hours of uninterrupted supply have been paid no heed. 

Meanwhile, “All we can do is try to minimise losses,” feels S Rajini, leather technologist, Muneeba Tanning, one of the few remaining wet tanneries of the cluster. “Government incentives for industry stay on paper,” says NM Hashim’s Ahmed. What good are benefits if there is no power?”  

It’s a valid question but it’s not the government to which industry looks for answers. “We are accustomed to challenges,” says Firdaus Ahmed, general manager, administration, of Shafeeq Shameel & Co, which has an ₹80-crore finished goatskin factory catering primarily to the European fashion industry, and two shoe factories with a current turnover of ₹20 crore each. “We already have the edge in quality, innovation and pollution control standards. Good brands are willing to do business with us. We would have been growing steadily if the power problem were solved, but we remain optimistic about the long-term.”