20140405

Mumbai's Dharavi’s once-booming leather industry losing its edge

A busy street in Asia’s largest slum Dharavi leads to a quiet lane where Anita Leathers operates its coloring unit. As children play near shops that sell everything from mobile phones and garments to raw meat and sweets, the mood at the leather unit is sombre.

The leather business is one of the biggest contributors to the Mumbai slum’s informal economy, estimated to have an annual turnover of more than $500 million. About 15,000 small-scale industries, spread over an area of 500 acres, deal in businesses such as pottery, plastic recycling and garment manufacturing.
But the leather trade has been hit hard by increasing competition, an influx of cheap Chinese goods, rising raw material costs and labour shortages in recent years, leading to a decline in demand and dimming prospects of the once-flourishing business.
At Anita Leathers, which has been colouring and supplying leather sheets to merchants in Mumbai for more than three decades, annual sales fell from 5 million rupees ($83,000) in 2007 to 500,000 rupees ($8,300) last year. This has forced its owner Babu Rao to put some workers on paid leave.
“In every season our sales are falling, there is no business,” said Rao as he chewed tobacco in his Dharavi office where samples of coloured leather were displayed on the wall. “Even retailers are suffering. If customers come, they will buy bags; if bags are not sold, who will buy leather from us?”
Dharavi has earned its distinction among slums because of the entrepreneurial skills of its estimated 1 million residents. While no official statistics are available for the slum, census data shows India’s slum population grew by a quarter to 65 million between 2001 and 2011. Critics have disputed these numbers.
Leather production was one of the first industries to be established in Dharavi when Muslim tanners migrated from Tamil Nadu to Mumbai in the 19thcentury. But they had to move to the outskirts because the manufacturing process was considered unsuitable for the growing business centre in south Mumbai, according to a 2010 bookRE-Interpreting, Imagining, Developing Dharavi.
Leather manufacturing, polishing, colouring and retail became dominant after tanneries were banned in 1996 because of pollution concerns. Still, most of these businesses are struggling.
Also affecting trade is India’s slowing economic growth, rising interest rates and high inflation, which have weakened consumer sentiment in Asia’s third-largest economy.
While Rao’s unit in Dharavi supplies coloured leather sheets on a larger scale, there are thousands of small-scale manufacturers around. In nearby shanties, workers cut, stitch and fashion leather sheets into finished products, while some in shops craft and polish sandals by hand using wooden moulds.
Mohammed Raja runs a manufacturing unit in a five-foot-wide lane adjacent to the so-called “90-feet Road” in Dharavi. A risky climb up a rusted iron ladder leads to a first-floor packaging unit, while workers cut leather sheets into wallets on the floor above.
“Shortage of labour is one of the main problems. We now get 15 rupees in profit, but the labourer still takes 25 rupees per wallet. Our margins have fallen,” said Raja, sitting in his five-foot-high packaging unit and home, where one must crouch to move around.
At its peak, Raja’s firm manufactured 6,000 wallets each month. Output has fallen to 2,000 wallets, which is about 30,000 rupees ($500) in monthly earnings. But rent and electricity bills of around 11,000 rupees ($184), coupled with family expenses, are cutting into Raja’s profits.
Global luxury brands such as Louis Vuitton and Burberry fight for a slice of the leather goods pie in luxe Indian malls. Merchants such as Raja, however, manufacture goods that are cheaper and have mass appeal – a leather wallet costs about $4.
India’s leather goods retail market by volume grew 6.3 percent each year between 2008 and 2012, but is expected to slow to an annual growth of 5.9 percent in the five years to 2017, according to research firm Mintel.
The availability of Chinese goods in the Indian market is a major concern for Dharavi’s retailers, who showcase leather bags, jackets and belts on wall shelves and doors to woo customers. Harish Jaiswal manages one of over 100 such stores on a street near Mumbai’s sprawling Bandra Kurla Complex, a commercial centre that houses corporate giants such as Citibank and ICICI Bank.
“Today I have not sold anything. There are shops here which don’t sell anything for 20 of 30 days in a month,” said Jaiswal, sitting in a small showroom without any customers. “(Chinese) goods are cheaper and look more beautiful than leather; that is the main thing.”
An official at the Council of Leather Exports — that functions under the aegis of India’s trade ministry — said they were willing to assist Dharavi traders under the recently formed domestic sales unit, but agreed it is tough for the council to reach out to all traders in the slum.
“If they will form a consortium it will be very helpful for them, like the Amul success story. They should come to us,” the official said, declining to be identified as he was not authorised to speak to media.
Most craftsmen in the slum said they cannot start another business because leather manufacturing is their only area of expertise. Still, some like Raja dream of a better future for their children.
“We also want our children to become doctors and engineers. We’ll educate them as much as possible but not bring them into this business,” said Raja, who has five children back home in his state of Bihar.
(Editing by Robert MacMillan. Follow Aditya on Twitter @adityayk and Robert @bobbymacreports | This article is website-exclusive and cannot be reproduced without permission)
at