Namrata Kath Hazarika | 07 Feb, 2012

The Indian leather sector has demanded to expand the 2 percent interest subvention on rupee export credit to cover non-SME firms in the sector, considering the series of rate hikes since early 2010 by the Reserve Bank of India, resulting in high cost of credit.

"The interest rates hike have affected the leather sector tremendously. We have already requested the government for providing the whole sector with the 2 percent interest subvention. Interest subvention is only given to the SMEs and we want it to be given to the non-SME leather firms as well," Council of Leather Exports (CLE) Chairman M Rafeeque Ahmed told SME Times.

At present, the interest subvention scheme only covers four sectors: they are handicrafts, handloom, carpet and micro, small and medium enterprise (MSME).

Commenting on the leather sector's export growth prospects in the current fiscal (2011-12), Ahmed expressed concern that growth may fall to 15 percent (totalling USD 4.3 billion) for the current fiscal from 20 percent (totalling USD 4.10 billion) in the April-January period.  

He said that the constant currency fluctuation is also making things worse.

The rupee depreciation recently has made import of hides and skins and other raw materials used to produce value-added leather products more expensive. This is also affecting our growth and profit margins, he pointed out.

"In terms of orders as well, it is slow," he said, adding that order flow is slowing down in the last four to five months.