We want withdrawal limit to be 10% of turnover: Leather Industry

Aamir H Kaki & Ahmad Shariq Khan

The labour-intensive sectors are majorly affected by the demonetisation move of the government. Leather and footwear sector is among the labour-intensive sectors which is also feeling the heat of the government’s move aimed at curbing black money. Added to that, the cash withdrawal limit of Rs.50,000 a week is not seen by many as a suitable threshold that could facilitate their day-to-day operations, including the worker’s payments.

Rajiv Wasan, General Secretary, Agra Footwear Manufacturers and Exporters Chambers (AFMEC) spoke to The Dollar Business on the concerns about the demonetisation and their association’s demand for increasing the cash withdrawal limit for leather products exporters as well as manufacturers.

He informed that the AFMEC has sent a letter to the Prime Minister’s office (PMO) and suggested the government should raise the withdrawal limit not just upto Rs. 2 lakh or Rs.5 lakh a week but in proportion to the wages of their [industry players]  turnover.

“The government has set a withdrawal limit of Rs.50,000 in our current account which is not at all sufficient for us to meet our day to day expenses. What we are demanding is the wages of the workers. Since workers are of the lower strata, most of them are floating, i.e., they move to different factories wherever they find work. And now they are facing a liquidity crunch,” said Wasan.

When asked what suggestions did they give to the PM, Wasan said, “We have suggested a standard formula. We seek relaxation in the withdrawal limit, according to the turnover of a company. Generally, the component of the wages in the overall turnover of a company is around 10-13%. Supposing, there is a Rs.3600 crore turnover at the AFMEC and we take into account only 10% as wage component, that becomes Rs.360 crore a year. If we divide it on monthly and weekly basis then it becomes Rs.30 crore a month and Rs.7.5-8 crore a week. On this basis we have decided to demand a weekly withdrawal based on 10% of the turnover of a factory.”

Calling AFMEC’s proposed formula ‘very scientific and sensible’, he added, “If a factory has a low turnover of Rs.50 crore then it will be allowed to withdraw 10-12% as payment of wages to workers.”

When asked how the cash crunch is impacting the industry, Wasan said, “If the workers spend long hours in bank queues to withdraw cash, significant man hours are wasted; thereby, hampering productivity at the factories. Being exporters, our orders are time-bound. If we are not able to meet our orders on time, we will lose the foreign exchange and this will also hurt the image of not just the leather exports of India but also of Brand India globally. Global buyers are never going to understand such type of issues; they only want their shipments on time.”

However, he said he is hopeful that the government would meet AFMEC's demands and informed that the PMO has already reacted to their letter.

India’s leather industry is worth around $17.85 billion, which includes $5.85 million from exports alone.