Study of Hide and Skin Collection and

Processing




























Food and Agriculture Organization of the United Nations
UN Complex, Pulchowk, Nepal
J une 2010

2


TableofContents

I.INTRODUCTION 1

1.1 Objectives 2
1.2 Methodology 3

1.2.1 Secondary Information 3
1.2.2 Visits and Consultation with Respective Stakeholders and Entrepreneurs 3

II.FINDINGS, ANALYSIS AND INTERPRETATION 3

2.1 Hides and Skin Production Potential in Nepal 3
2.2 Production and Collection of Raw Hide and Skin 4
2.3 Constraints and Challenges of Tanning Industry and Identification of Policy Support
Needs 6

2.3.1 Constraints 6
2.3.2 Challenges 7

2.4 Identification of Policy Support Needs 7
2.5 Rapid Survey of Selected Tanning and Leather Processing Units to Collect Essential
Information and Understand the Specific Constraints 9

2.5.1 Introduction of Hides and Skin Processing Industries 9
2.5.2 Processing Quantities of Different Hide and Skin Processing Industries
10
2.5.3 Constraints/Problems Perceived by Hide and Skin Processing Industries 10
2.5.4 Comparison of The Quantity of Hide and Skin Processed by Different Industries in
2006/07 And 2008/09 13

2.6 Potential for Offering Quality Products at a Competitive Price 14
2.7 Possibilities of Involving Small Producers and Processors in the Hide And Skin
Business 16
2.8 Commercial Growth Possibilities of Hide and Skin Collection and Processing 17
2.9 Analysis of Demand and Supply Gaps in Processing Hides and Skin 17

2.9.1 Export of Hides and Skin and Trade Shift 18
2.9.2 Export of Readymade Leather Goods to Overseas Countries 22

2.10 Possibilities for Reducing Dependence on Import of Hides and Skin Related Products
with an Objective of Promoting the Industries at Domestic Level 23

2.10.1Import Of Hides And Skin From Overseas Countries 23
2.10.2Import of Raw Skin from India 23
3

2.10.3Import of Readymade Leather Goods from India and Overseas Countries 23

2.11 Hide and Skin Collection Problems Caused by Declining Prices 25

2.11.1Price of Hide in 2007/08 26
2.11.2Price Situation of Hides and Skin over the Years (Nrs/Sq. Ft.) 26
2.11.3Information Collection about the Price of Raw Hide and Skin from Different Sources
26
2.11.4Price of Wet Blue Leather and Finish Leather 27
2.11.5Reasons for Leather Price Decline 28

2.12 Existing Policies Facilitating and Hindering Processing and Marketing of Hides and
Skin 29

2.12.1Policies Facilitating the Processing and Marketing of Hide and Skin 29
2.12.2Some Hindering Factors as Perceived by the People Involved in the Tannery
Business 31

III.SWOT ANALYSIS 31

3.1 Strength 31
3.2 Weakness 32
3.3 Opportunity 32
3.4 Threats 33

IV. AREAS FOR FAO - GOVERNMENT COLLABORATION IN THE MEDIUM-TERM
PERIOD 33

4.1 POSSIBLE INVESTMENT PROJ ECT OUTLINE 33

4.1.1 Business Development 33
4.1.2 De-Hiding And De-Skinning Training 34
4.1.3 Capacity Development 34
4.1.4 Impact And Outcomes 34
4.1.5 Working Procedure 34

V.RECOMMENDATIONS 35

References
Annexes

4















1

Study of Hide and Skin Collection and Processing
1


I. INTRODUCTION

The use of leather goes back to the pre-historic times. The principal raw material is the
hide or skin of animals. Hides and skin constitute valuable material removed from the
animal carcass. Skin of cows and buffaloes is called hide and skin of goat and sheep is
called skin. Hides are 1.5-4.5 square meter in size and weigh about 15-30 kilograms
(kg). Similarly, skins are 0.4-0.5 square meter in size and around 2 kg in weight. In
Nepal, buffalo hide and sheep and goat skin are the byproducts of meat industry. But
the cattle hide is collected from naturally died animals due to ban on cow slaughter in
this country.

It is estimated that bovine hides represent 12% of the value of animal. Generally the
hide is 17% of the carcass weight and 7% of live weight. Hence this part adds the
considerable value in the animal products. The number of animals slaughtered daily
clearly indicates the significant income potentiality of hides and skin, but in many parts
of mountain and high-mountain, the hide is not collected at all or used inefficiently. Hide
is considered just as waste material in these places. The suppliers have no or little
access there due to transport difficulty. Similarly, most of the goat meat consumers
prefer the skin intact meat. Public awareness along these lines is still not adequate, and
the cash value of skin is ignored in many of the places.

The tannery operation involves converting the raw skin, a highly putrescible material,
into leather, a stable material, which can be used in the manufacturing of a wide range
of products. The whole process involves a sequence of complex chemical reactions and
mechanical processes. Various steps of pre- and post-treatment generate a final product
with specific properties: stability, appearance, water resistance, temperature resistance,
elasticity and permeability for perspiration and air, etc.

The state owned Bansbari Leather Shoes Factory was privatized in 1993 under the
privatization policy of Government of Nepal. Raw Hide and Skin Collection Corporation
was privatized in the subsequent year. Since then tannery business is completely
operating in private sector. There is little or no Government intervention for the
promotion of this component except in the policy and regulation matter.

Carpet, Pashmina and leather are the important exportable livestock commodities of
Nepal. Carpet and Pasmina, though share almost 30% and 10% of the total export

1
This report is prepared by Mr. Krishna Prasad Sankhi, FAO Consultant for NMTPF Formulation Team.

2

(TEPC 2006/07, 2007/08) wool, the major raw material is mostly imported. However the
leather industry is based on the domestic produced raw materials. Although it is major
exportable commodity and shares 1.6% of the total country's export (TEPC 2006/07,
2007/08) there is little information about this business except export import records.
Department of Livestock Service (DLS) has, now considered it as priority component.
And, in a meeting of DLS and FAORAP it was decided to study the hide and skin
collection and processing to achieve the following objectives.

1.1 Objectives

To understand major issues and challenges facing the promotion of hides and
skin collection and processing; recommend improvement priorities.
To identify areas for FAO - Government collaboration in the medium-term period.

The study covers the following:

Assessment of potential for hides and skin sector to move up the value chain
Review of challenges and constraints of tanning industry and identification of
policy support needs
Rapid survey of selected tanning and leather processing units to understand
specific constraints of the tanneries and processing units
Potential for offering quality products
Demand and supply gaps in processing hides and skin
Commercial growth possibilities of hides and skin processing
Existing policies facilitating and hindering processing and marketing of hides and
skin
Possibilities of involving small producers and processors in the hides and skin
business
Possibilities for reducing dependence on import of hides and skin related
products with an objective of promoting the industries at the domestic level.
Current volume of collection, processing and trades of raw hides and skins,
leather and leather goods in major leather industries operating in different places
Import export status of raw hides and skins, partially processed, finished products
and leather goods, preferably comparison of different years
SWOT analysis
Problems encountered and recommendations to improve the situation in tanner
business in the country

3

1.2 Methodology

1.2.1 Secondary Information

Annual progress reports of Ministry of Agriculture and Cooperative (MOAC), Department
of Livestock Service (DLS), Directorate of Livestock Market Promotion and other
concerned organizations were studied to collect the information about livestock
production including the numbers of animal slaughtered to estimate the production of
hides and skin.

Similarly, annual reports (2005/06, 2007/08) of Department of Custom, Animal
Quarantine Offices, CBS's Statistical Pocket Book Nepal 2008, Nepal Overseas Trade
Statistics 2007/08 and glimpse of Nepal's foreign trade published by Trade and Export
Promotion Center and other relevant publications and study reports were reviewed to
find the information about the collection and processing of hides and skin and import
export situation of leather and leather made goods.

1.2.2 Visits and Consultation with Respective Stakeholders and Entrepreneurs

The respective stakeholders including the personnel of Nepal Leather Industry and
Trade Association, DLSO Officers and staffs working in the respective districts,
butchers, suppliers were consulted to understand the hides and skin collection and its
processing.

Similarly, slaughterhouses and major slaughter places located at different ecological
zones and raw hides and skin traders' offices were visited to collect information about
the production and sale of hides and skin.

Likewise, the tanning and leather processing industries located at Sunsari and Morang
districts were visited during J anuary 20 - 24, 2010 and those of located at Bara and
Parsa districts were visited during J anuary 28 - February 1, 2010. Discussions about the
collection and processing of hides and skin, the types and volume of products and their
marketing situation were done with the key persons of the industries.

II. FINDINGS, ANALYSIS AND INTERPRETATION

2.1 Hides and Skin Production Potential in Nepal

The Ministry of Agriculture and Cooperative is regularly reporting the annual production
of meat from different animals (MOAC, 2005, 2006, 2007, 2008, 2009). But the reports
do not include the number of animals slaughtered. However, these data have been
4

estimated on the basis of average meat production from about 0.1 million buffaloes and
0.25 million goat imported in Kathmandu valley through Thankot (DLMP 2006/07,
2007/08, 2008/09). The average meat yield of each buffalo and goat is 158.79 kg and
21.79 kg respectively. About 0.9 millions buffaloes and 2.0 million goats were
slaughtered in 2007/08 (DLMP 2007/08). Obviously, the production potentiality of hides
and skin becomes 0.9 millions and 2.0 million respectively. These numbers of pieces are
equivalent to 30 millions and 7 millions square feet. However, the annual collection of
hides and skin is less than 20 million square feet. The FAO calculated figure of 0.924
millions of buffaloes slaughtered in this year is almost equal to that of DLMP estimation.
But, the number of goats slaughtered is found higher in FAO report (Table 1).

Table 1 Producing Animals/Slaughtered

(No. of Heads)
Item 2000 2001 2002 2003 2004 2005 2006 2007 2008
Buffalo
Hide
847,000 850,000 854,000 858,000 860,000 864,000 890,000 924,000 924,000
Cattle
Hides
594,000 584,000 579,000 580,000 581,000 583,000 584,000 586,000 586,000
Goatskins 3,268,000 3,342,400 3,414,499 3,470,000 3,750,000 3,840,000 4,024,000 4,240,000 4,240,000
Sheepskins 318,000 317,500 314,000 310,500 309,000 305,000 304,000 305,000 305,000
FAOSTAT | FAO Statistics Division 2010

2.2 Production and Collection of Raw Hide and Skin

In the process of reviewing the previous studies and reports it is found that the quantity
of production and collection of raw hide and skin has not been well recorded. The FAO
has calculated production quantities of hide and skin from different animals in different
years (Table 2). But these production quantities of hide and skin are much less than the
collection quantities for processing units (Table 3). The annual production of 36,036
tonnes of buffalo hides reported in 2008 could be less than 1.5 million square feet. The
export alone was much higher than this quantity. Hence, the production quantities of
hide and skin mentioned in the report are found to be underestimated.

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Table 2 Production of Hide and Skin

(In Mt.)
item 2000 2001 2002 2003 2004 2005 2006 2007 2008
Buffalo
Hide
33,033 33,150 33,306 33,462 33,540 33,696 34,710 36,036 36,036
Cattle
Hides
4,752 4,672 4,632 4,640 4,648 4,664 4,672 4,688 4,688
Goatskins 6,536 6,684 6,829 6,940 7,500 7,680 8,048 8,480 8,480
Sheepskins 636 635 628 621 618 610 608 610 610
Source: FAOSTAT | FAO Statistics Division 2010

Based on information collected from the hide and skin traders, tannery industries and
the export import records of 2001/02 - 2007/08 indicate that the annual collection of raw
hide and skin varies from 16 millions - 20 millions square feet. It is almost half of the
maximum possible potential.

Table 3 Annual Collection of Raw Hide and Skin

Hide and Skin
Collection
2001/02 2003/04 2005/06 2007/08
Quantity (In sq. ft.) 16 million 20 million 19 million 17 million

More than 600 buffaloes are slaughtered annually. De-hiding is not usually conducted in
calves even in Kathmandu valley. These animals are locally called "polo". About 140 of
such "polos" are slaughtered daily in the valley. It is almost 25% of the total buffaloes
slaughtered. Hence 450 pieces of hide is collected daily. It means the collection of 160
thousands pieces of hides annually from Kathmandu valley alone. It is equivalent to 5
millions square feet. The hide is not collected at all or used inefficiently in many parts of
mountain and high-mountain districts. Hide is considered as waste material in these
places. The traders have no access there due to lack of transport facility.

Similarly, most of the goat meat consumers prefer the skin intact meat. Hence, large
quantity of required raw skin is fulfilled by the informal imports from northern parts of
Indian states of Bihar and West Bengal. Untrained persons involved in de-hiding and de-
skinning produce usually inferior quality of hides and skin.

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2.3 Constraints and Challenges of Tanning Industry and Identification of Policy
Support Needs

2.3.1 Constraints

Poor quality of raw hide and skin
High transport cost and poor road access to high hills and some of mid hill
districts
Unavailability of machineries and chemicals in the country and needs to be
imported
Frequent strike and road blocks by various political alliances and disturbing
groups in current unstable political situation in the country
Long load shedding due to power shortage
Consumers' preference for skin intact meat - inadequate supply of raw goat skin
Heavy incentives for hide and skin trade in other countries and lacking of these
facilities in Nepal. For example:

o China, the biggest supplier of leather products to the US and Europe is
battling the situation by offering its exporters rebate of 17% to help them
stay in the market and enable them to secure a bit more space by
squeezing other countries out.
2

o The committee of secretaries (CoS) of India has approved a Rs 290-crore
capital subsidy programme for technology upgradation in the leather
sector. The government has approved another additional Rs 110 crore for
industrial parks, capacity building, productivity improvement and training in
this sector.
3

o The concessionary finance rate in India is 9 per cent against commercial
rate of 15 per cent, 6-7 per cent in Bangladesh against 11-14 per cent and
up to 18 per cent in Sri Lanka both concessionary and commercial.
4

o In the long-term financing the cost of export borrowing for Pakistani
exporters are also lowest as compared to Bangladesh, Sri Lanka, India
and China. However, Pakistan is the lone country amongst its competitors
like Bangladesh, India, China and Sri Lank that also provides cash support
on leather footwear export and freight subsidy on eligible items to specific
destination.
3


2
http://www.chineseleather.org/news/?id=94

3
http://www.financialexpress.com/news/mof-approves-rs-290crore-capital-subsidy-for-leather/126780/

4
http://www.dawn.com/2007/05/24/ebr4.htm
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o In Bangladesh, the exporters will receive cash subsidy on the products
against net repatriation of the FOB (free on board) prices from J uly 1, 2009
to J une 30, 2010, according to the announcement. "The rate of cash
subsidies is almost the same for this fiscal compared to the previous one,"
adding that the government has included two products - plastic pet bottle
flakes and finished leather - in the list, which will enjoy cash subsidies at
10 per cent and 7.50 per cent respectively from this fiscal.
5

Declining price of hide and skin products in the international markets

2.3.2 Challenges

Discussions with the entrepreneurs of hide and skin processing units in Birgunj
and Biratnagar revealed that this sector is operating in traditional pattern. There is
no program for technology upgradation in the leather sector. Similarly, there is no
public investment for infrastructure development and business promotion
incentives. Hence, efficient utilization of high potential hide and skin is becoming
the big challenge.
Quality assurance of hide and skin with improved de-hiding and de-skinning is
another challenge in Nepalese tannery business. Quality of raw materials affects
the quality of its processed products, which ultimately affects the domestic and
international market.
We are importing the value added goods in much higher price by exporting the
less costly raw materials or partially processed products like wet blue leather.
Promotion of the domestic leather processing industries for the production of
value added goods is also one of the big challenges.

2.4 Identification of policy support needs

Most of the countries do not allow the export of raw hides and skin, and even the
partially processed wet blue stage. India discourages the export of even finished leather,
and encourages the production of value added leather goods. This policy facilitates
more earnings of foreign currencies by utilizing the domestic resources including the
employment. Hence there are the incentive provisions to facilitate the promotion of
domestic raw material based leather industries. However, there is lacking of such
congenial environment for the promotion of leather industry in Nepal.

The traders and entrepreneurs involved in the tannery business complain that the
District Development Committee (DDC) tax of Rs 30.0/piece of hide and Rs 15.0/piece

5
http://www.thefinancialexpress-bd.com/2009/09/09/78578.html

8

of skin under the provision of Regulation no. 207 of the Local Self-Governance
Regulation 1999 (second amendment 2005), is not affordable due to current sharp
declined price of these raw materials. It was noted, during discussions with the hide and
skin traders that harassment activities like forceful collection of illegal charges are
common which further adds to their cost. It was also pointed out that there is tendency
of DDC tax collection in more than one district during the transport of raw hides and skin
from the production sites to the industries. The notice already circulated by the Ministry
of Local Development does not allow the other district to charge the DDC tax for the
same goods which is already charged by the district of origin. However, the same has
not been uniformly applied.

Unlike the facilities in other countries there is neither import tax exemption of
machineries and chemicals nor any discount in bank loan. There is no incentive for the
export of the leather products. Hence the cost of production of the value added goods
becomes higher and it makes difficult to compete with the goods produced in other
countries, which are providing the production and export incentives as stated
above.
1,2,3,4

One of the major expenditures for the raw hides and skin supply is the salt preservation.
The suppliers of this raw materials claim that it requires 8 - 10 kg of salt to preserve one
piece of hide. It is becoming difficult to continue this business, particularly during this
massive price reduction of raw hides and skin and frequent rising price of salt. Hence,
the entrepreneurs operating this business are demanding subsidies in salt supply for
hide and skin preservation, at least in such declining price situation. Otherwise they are
threatening to quit this job. Ultimately it is the threat for the leather industry.

It is necessary to promote the processing value added products like crust, finished
products or leather goods by providing possible facilities for importing machineries,
equipments and chemicals for best utilization of our domestic resources.

The Trade Policy 2065, Agribusiness Policy 2063 (2006), Slaughterhouse and Meat
Inspection Act 2055 and its subsequent regulation 2057 and the clauses for
slaughterhouse establishments under Local Governance Act 2055 are not yet been
effective. Implementation of these policies and acts could bring much improvement in
this industry.

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2.5 Rapid Survey of Selected Tanning and Leather Processing Units to Collect
Essential Information and Understand the Specific Constraints

2.5.1 Introduction of Hides and Skin Processing Industries

Currently 12 leather processing units are processing the hides and few of them have
included the processing of goat skin in their industries. These tanning and leather
processing industries in Nepal are mainly located in 4 districts - Bara, Parsa, Sunsari
and Morang districts. The names and address details are given in annexes. Narayani
Leather Manufacturing Industries, Marium Leather industries, Everest Leather
Industries, Progressive Leather Industry, Global Leather Tanning Industries, Standard
Tanning Industry and National Leather Industries are located around Parwanipur and
Barging in Bara and Parsa districts. Similarly, Asian Leather Industries, United
Tanneries, Nepal Tanning Industry and Universal Leather Industry are operating around
Duhabi and Biratnagar in Sunsari and Morang districts.

Narayani Leather Manufacturing Industry is the largest leather processing unit which
produces partially processed (wet blue) leather and finished products in its two different
factories. Towards the finished products, the industry started to manufacture the leather
gloves and some other goods since 2048 B.S. and leather jackets, wallets, bags and
other goods since 2054 B.S. The Export Promotion Board offered "the export award" to
this industry every year since 1997/98 (2054/55) to 2001/2002 (2058/59) in recognition
of the outstanding performance in the export of the processed leather. Similarly, Asian
Leather Industries located at Duhabi is the leading industry in the eastern region in
terms of processing quantity and trade.

Among the two leather industries located at Hetauda, Birat leather industry has recently
been closed. The recently established Asian Leather Arts and Tanning Industry has
started operation. The leather industries located at Bhairahawa, Chandrawota and
Nepalgunj have also been closed.

Among the four types of leather products - wet blue, crust, finish and leather goods, the
major export product is the wet blue leather. The processing of other value added
leathers is mostly limited to meet the requirement of 30% of wet blue production.

The information about collection, processing quantities, supply to domestic and
international markets and the price system were collected. Similarly, problems,
constraints and the suggestions for improvement were also noted during the discussion
with the respective personnel.

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2.5.2 Processing Quantities of Different Hide and Skin Processing Industries

The hide and skin processed by different leather processing industries is summarized
bellow (table 4)

Table 4 Hide and Skin Processed by Different Leather Processing Industries

S.N. Name of the processing
industries
Quantity processed (2006/07) Remarks
1 Narayani Leather
Manufacturing Industries
3,000,000 sq. ft. of hides &
520,000 sq. ft. of skin
Assumption:
1 piece of
hide =30
sq. ft. and 1
piece of
skin =3.5
sq. ft.
2 Marium Leather industries 1,069,260 sq. ft. of hides &
30,012 sq. ft. of skin
3 Everest Leather Industries 650,000 sq. ft.
4 Progressive Leather
Industry
900,000 sq. ft. of hides
5 Global Leather Tanning
Industries
600,000 sq. ft.
6 Standard Tanning Industry 1,612,087 sq. ft.
7 Universal Leather Industry 1,500,000 sq. ft. of hides
8 Nepal Tanning Industry
Pvt. Ltd
Equivalent to
NRs112,200,000.00

9 Asian Leather Industries 410,000 sq. ft.
10 United Tanneries 245,000 sq. ft. of goat skin and
200,5000 sq. ft. of hides

11 National Leather Data not collected Both of
similar
names
12 National Leather ,, ,, ,,

2.5.3 Constraints/Problems Perceived by Hide and Skin Processing Industries

The entrepreneurs of almost all the leather industries expressed the similar problems
and constraints. The problems and suggestions given by the respective industries are
given below (Table 5):

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Table 5 Problems and Suggestions Given by Leather Industries

Processing
Industries
Problems Suggestions
Narayani
Leather
Manufacturing
Industries
Declining trend of leather export -
the export was equivalent to NRs
350 million in 2054/55, 270 million in
2063/64 and dropped down to less
than half in 2008/09, and still been
dropped in last six months (J uly -
December 2009).

Promotional packages
De-hiding and de-
skinning training
Tax reduction
Marium
Leather Ind.
Price fall, declining demand Support in such situation
Everest
Leather
Industries
Income tax (20% of profit), 13%
VAT.
Long back traditional technology.
There is no Government support for
modern technology development in
the tannery business.
Scarce electricity supply is one of
the most detrimental factors to cause
the industries constantly
deteriorating.
Training for quality de-
hiding and de-skinning.
It is necessary to
generate alternative
technology of pre-curing
by salt.

Progressive
Leather
Industry
Leather market is much reduced in
2008/09 as compared to 2007/08.
Very low direct demand from abroad
and our export is mostly through
Indian traders

Training for the butchers
or de-hiding workers
Buffalo fattening farming
Establishment of
machinery and
processing facilities for
finish products that can
be used by a
entrepreneur or group
Establishment of 'leather
zone' Minimize the taxes
and illegal charges for
hide and skin
transportation.
Provide promotional
incentives for finish
12

Processing
Industries
Problems Suggestions
products and leather
goods.

Global
Leather
Tanning
Industries
Poor de-hiding - poor hide quality
Traditional technology,
No Government support to bring
change. Unnecessary VAT, taxes
and charges

De-hiding training
Promotional support
Tax reduction
Nepal
Tanning
Industry Pvt.
Ltd
DDC taxes and illegal charges
during transport of the raw hides.
Nepalese leather with higher cost of
production can not compete with the
goods of other countries in the
international markets due to facilities
and subsidies in India - 6% export
cash grant, 35% grant for
machineries import, duty free
chemical imports and 80% grant for
the stall payment in the above stated
international fairs
Government sector to
provide similar facilities
here in Nepal also.
Asian Leather
Industries
Quality of raw hide produced in
Kathmandu is unsatisfactory -
several knife scratches and flaycuts
on the surface of hide. The careless
de-hiding on the ground and flesh
cutting on the hides cause the cuts
on the hides.
DDC taxes and illegal charges
during transportation
Other countries which provide
adequate incentives for the
production and export. Hence it is
difficult to fulfill the Government's
rule of at least 30 % production of
crust or finished leather to export the
wet blue leather.
Department of Livestock
Service for extensive de-
hiding and de-skinning
training, particularly in
Kathmandu. Provide
similar facilities here in
Nepal also.
United Facilities received by Indian leather There should be import
13

Processing
Industries
Problems Suggestions
Tanneries industries like 6% export cash grant,
50% grant for machineries import,
duty free chemical imports and 90%
subsidies for generator purchase
during load shading cause the Indian
leather cheaper
Bangladesh also provides 28 - 30%
subsidies for leather export. Nepal
Government avoided the facilities of
10% cash grant for the export of wet
blue leather, 15% for crust, 20% for
finished leather and 25% cash grant
for leather goods some 25 years
back.
provision for goat skin
from India also as there is
custom system for goat
skin import from other
countries.
Provide similar facilities
here in Nepal also to
make Nepalese leather
competitive in the
international markets.

The declining demand and price of hide and skin in the international markets is the
major problem.

2.5.4 Comparison of the Quantity of Hide and Skin Processed by Different
Industries in 2006/07 and 2008/09

Table 6 Hide and Skin Processed by Different Industries in 2006/07 and 2008/09

Name of the Processing
Industries
Quantities Processed
2006/07 2008/09
Narayani Leather Manufacturing
Industries
80,000 - 100,000 pieces
of hides & 150,000
pieces of skin
Almost 1/2 of the
previous year
Marium Leather industries 35642 pieces of hides
& 8575 pieces of skin
42252 pieces of hides
& 40900 pieces of skin
Everest Leather Industries 650,000 sq. ft. 300,000 sq. ft.

Exceptionally, the collection and processing in Marium Leather industries is found to be
higher in 2008/09 than in 2 years back. However, the demand has abruptly dropped
down this year as compared to the last year. The industry further reported that third
country export is almost nil since last 1.5 years. And the total export is limited to India.

14

Price: The price fall is well cited by the following table noted from Marium Leather
industries. The current price reported by many other industries is still lower.

Table 7 Price Comparison of Hide and Skin

Particulars 2006/07 2008/09 Remarks
Raw hides (Rs/pc) 1,219 617 transport cost and taxes extra
Wet blue(Rs/pc) 1,670 1,272
Finish leather 1,115 +split
Raw goat
skin(Rs/pc)
150 98 the raw skin was purchased in
higher price in 2006/07 but
later the price dropped down
and the wet blue price
became lower than that of
raw skin
Wet blue goat
skin(INR/pc)
144 173

2.6 Potential for Offering Quality Products at a Competitive Price

Given the potential of massive production of hides and skin, there appears to be ample
opportunity to produce quality hides and skins in Nepal. However, this would require
investment in training of butchers and entrepreneurs in hygiene and sanitation in the
slaughterhouse and some government support for technology up-gradation such as
animal-up-hanging electric device, driving device, pulling machine, de-hiding and de-
skinning knives etc.

The price of raw hide is fluctuating and mostly depends on quality. Improvement in
quality brings the change in price. Mr. Khursi Dhabi Iraki of Nepal Tanning Industry
informed that the hide produced in the slaughterhouse gets higher price, usually Rs 500
- 550.00 per piece because of good quality with no flaycut. It gets 5 cents/sq. ft. more
price or $ 2.00/pc than that of produced in other places. Similarly, Mr. Sanjay Agrawal of
the Global Tanning Leather Industries also said that the hide produced in Kanpur is
getting Rs 5.0/sqft more or Rs 200.0/pc more than that of domestic hide simply because
of the quality. The hide of a larger sized buffalo de-hided in Kathmandu cost Rs 400.0,
but the hide of the same animal if de-hided in Kanpur costs Rs 1000.00. Likewise, de-
hiding and de-skinning is better in Terai in Kathmandu. However, the size and thickness
of Kathmandu produced hide is better than that of Terai. The thickness of Terai hide is
of 3 mm while that of Kathmandu hide is 4 mm, hence is better. The leather, usually
greater than 30 sq. ft., is required for sofa set and car seat cover, and 2 sq. ft. is enough
for shoe. Mr. Hasan Ansari of Asian Leather Industries also expressed the similar
experience about the quality difference between the hides produced in Terai and
15

Kathmandu. The knife scratches and several flaycuts as indicated by the following
pictures due to unskilled de-hiding can easily be improved by the de-hiding training for
the butchers or for the workers involved in this job.



The increasing consumers' awareness to the hygienic meat adds pressure for
slaughterhouse establishment and operation. The slaughterhouse system is intimately
connected to the quality de-hiding and de-skinning process. If butchers and the workers
involved in slaughterhouse and slaughter places are trained for quality de-hiding and de-
skinning, it will be instrumental for quality raw hide and skin production and preservation.
Proper storage and transport management help keep the quality of these raw materials.

The workers in the factories informed that the hides and skin collected during winter
season is of better quality as compared to that in rainy season. This difference occurred
most probably due to insect-bites and skin affections in rainy season. These defects can
easily be reduced by the animal husbandry practices. The initiatives for commercial
livestock farms development and buffalo fattening will yield the better quality hides.

Similarly, it is the tendency to slaughter the larger size of animals in most of the
slaughter places, particularly in Kathmandu where 500 - 600 buffaloes are slaughtered
daily. There is high demand of large size hide, usually larger than 30 sq. ft. for making
seat cover of sofa-sets, vehicles and aeroplanes and so and so. Good quality of raw
hides and skin with desirable sizes yields good quality leather products - wet blue, crust,
finish or leather goods.

The foreign currencies income from leather export is encouraging public and private
sectors for this business promotion. The quality is the greatest price determining factor
for either raw hide or semi-processed and processed leather. Hence, Nepalese hide and
skin collection and processing business and leather industries possess good potential
for offering quality products at a competitive price.
16


2.7 Possibilities of Involving Small Producers and Processors in the Hide and
Skin Business

Currently, the hide and skin is collected mainly from commercial city areas like
Kathmandu, Pokhara, Butwal and some other markets located to nearby leather
processing industries. This raw material is not collected at all in many districts and
discarded as waste materials. The inadequate collection even incomplete load for a
truck and poor road access to some of the mountain districts may be the major causes
for this loss. Huge quantity of hides will be collected if the collection centers with
preservation facility are established in all potential places and if transportation from
these centers to larger collection center or the processing units is supported. In my field
visit in Sankhuwasawa, one of the high mountain districts of Nepal the concerned
stakeholders informed me the slaughters of about 200 buffaloes daily in that district
alone. Similarly, 15 buffaloes are slaughtered daily in Salleri of Solokhumbu district.
However, collection of hides is nil in these districts. Mr. Damodar Subedi, the proprietor
of Nepal raw hides and skin traders and the proprietor of National Leather Industry (pvt.)
ltd. Barging informed that there is a stock of 6000 - 7000 pcs. in Mudha Dhangadhi since
long back, and about 2000 pcs stock in Banepa. Balkishna Khadki, proprietor of
Aadhunik Badhshala Indrasawa, Kankeswory KTM 19 said that two years ago he used
to collect hides from Dhading, Damauli, J iri, Solokhumbu, Charikot. But now he collects
the hides only from Kathmandu. The hides and skin production are facing great problem
because of nominal price. And these materials are piling up for a long time. About 30
pieces of hides is produced daily in the slaughter place located at the compound of live
animal market and agricultural products center Tribhuwanbasti Kanchanpur. Mr. Harka
Bahadur Thapa, the president of Livestock Market, reported that unlike in previous years
the leather traders are not taking the collected hides and skin since last six months.
There are so many places with such examples of wasting these cash products in this
country. Some supportive inputs for the improvement of the storage and transportation
facilities can provide the enormous opportunity for income and employment generation.


The increasing public awareness for hygienic meat process will gradually reduce the
tendency of consuming skin intact meat; and a huge quantity of goat and sheep skin will
be produced in future. And it will accommodate many unemployed people in collection,
supply and processing activities.

It is necessary to manage the collection of scattered resources in suitable collection
centers until the materials become adequate for the delivery to their destination. Some
incentive packages are necessary, in the beginning at least, to motivate the unemployed
17

youths to operate these activities. With these promotional packages there are enormous
possibilities of involving small producers and processors in the hide and skin business.

2.8 Commercial Growth Possibilities of Hide and Skin Collection and Processing

There was high demand of hide and skin in the international market in the past. Single
leather processing industry could export huge quantity of leather to abroad. Narayani
Leather Manufacturing Industries exported partially processed 'wet blue", crust or finish
leather equivalent to NRs 350 millions in 1998/99. The encouraging demand and price in
the international market facilitated the commercial growth of hide and skin processing
industries. Some 15 leather industries were well operating; and collection and supply
business of raw hide and skin also grew well.

The import export trend and the information obtained from almost all the hide and skin
processing industries report this unwanted situation in tannery business. The slow
world economy and mass production of synthesis goods are probably the major reasons
to reduce the leather demand.

The leather export directly to abroad in the past has now been channelized through
Indian traders. The domestic industries could not produce the demand based quality
products in the competitive price due to higher cost of production here. Promotional
facilities for machineries and chemical import, export incentives and capability
development of the stakeholders involved in tannery business and processing industries
will be instrumental for the situation improvement.

Considering environmental management and commercial utilization of industrial
byproducts it is not wise to scatter the leather processing industries. These should be
localized in a defined area - may be named 'leather zone'. Additional establishment of
hide and skin processing industries are not recommended unless the production of raw
hide and skin is abundantly increased and domestic or international markets for the
processed or semi-processed products are ensured.

However, there is high potential for commercial growth in finished products and leather
goods, particularly leather shoes, bags, belts, jackets, gloves, suitcases, briefcases in
this country. Every year these goods and finished leather for manufacturing of these
goods are being heavily imported from India and abroad.

2.9 Analysis of Demand and Supply Gaps in Processing Hides and Skin

There is high potential of raw hide and skin collection in Nepal. More than one million of
buffaloes and two millions of goats are slaughtered annually. Slaughters of two million
18

goats yields about 6 million square feet of skin. However the processing is about 1/3 of
the total potential. This quantity also is fulfilled from the illegal imports of raw skin from
India. The consumers' preference of skin intact meat is still sustaining. The
slaughterhouse and meat inspection act has banned the sale of skin intact meat; but the
act has not yet been implemented. The export potential of skin to abroad is higher than
that of hides. The leather industries are performing the job by processing mostly the
imported skin. There is deficiency in abundance in this commodity.

The following export and import tables clearly indicate that the country is selling the raw
and partially processed hide and skin in nominal price and buying the value added
manufactured goods made of the same cheap raw materials. This is one of the causes
of trade deficit of this country.

2.9.1 Export of Hides and Skin and Trade Shift

Hide and skin is the major exportable livestock commodity, earning approx 500 - 600
millions rupees annually through its export. The export of hide and skin was increasingly
progressing. But it was reduced by 16% in 2008/09. The export share of 1.6% in
2007/08 was dropped to 0.80% only. The export of hides, goat skins and pig bristles is
much higher as compared to the imports of these commodities (annex). However, the
import of skins of pigs and other animals is higher than the export. Among the overseas
countries Italy is the major customer country of Nepalese hides and skin. It has been
importing significant volumes of skin, usually in million square feet since long back.
Previously, the major international market of Nepalese leather was Italy, where the
export was 5,446,366 square feet in 2001/02. It was dropped down as low as 710,678
sq. ft. and 686,120 sq. ft. in 2003/04 and 2004/05 respectively. The incidence of
September 11 is blamed as one of the causes of the trade reduction. The export was
then gradually progressed and it was 2,937,126 square feet in 2007/08 and 3,010,142
sq. ft. in 2008/09. Now, India is the major market for this business. The export was
equivalent to about NRs 158 millions to India and about NRs 298 millions to Italy in
2001/02, in contrast to the export equivalent to about 346 millions in India and 180
millions to Italy in 2007/08. The export was 3,010,142 sq. ft. in Italy and 8,062,777 sq. ft.
in India; equivalent to NRs 200,832,000.00 and 181,777,000.00 respectively. It is found
from these figures that the price of hide in India is much lower as compared to that of
Italy. The total export of these leather commodities was 13,550,297 sq. ft. - equivalent to
NRs 549.8 millions in 2008/09 and it was equivalent to 556 millions in the previous year.
These figures do not include the export of readymade leather goods. The export quantity
in Bangaldesh and China P.R. is almost equal in 2007/08 followed then by Switzerland
Hong Kong, U.K. and U.S.A. respectively. The report also reveals that skin is mainly
exported to abroad, while major market of hide is India.

19




Table 8 Comparison of Hide and Skin Export to Major Countries in Different Years

(Quantity in square feet and value in NRs '000)

Table 9 Summery of Trade Shift between India and 3rd Countries

(In Value (NRs '000)
Particulars 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
3rd country 450,797 239,853 286,117 225,420 292,338 274,616 310211 368,013
India 157,800 248,500 332,300 338,600 334,800 363,100 346,000 181,778

Year Unit Italy China Bangladesh Hongkong Thailand Total India
2001/02 Qty 5,446,366 323,000 - 433,308 131,030 8,429,008
Value 297,902 16,457 - 19,476 5,716 450,797 157,800
2002/03 Qty 2,304,791 82,000 - 511,598 1,019,602 5,000,333
Value 111,325 3,413 - 21,126 46,553 239,853 248,500
2003/04 Qty 710,678 2,611,344 - 773,108 1,662,250 6,627,864
Value 36,753 103,199 - 32,518 67,847 286,117 332,300
2004/05 Qty 686,120 908,172 -- 1,695,749 598,832 4,821,324
Value 49,587 37,382 - 70,846 24,195 225,420 338,600
2005/06 Qty 1,523,636 1,718,614 - 356,722 80,000 6,493,273 NA
Value 114,218 89,298 - 15,765 3,358 292,338 334,800
2006/07 Qty 1,921,420 459,146 58,500 196,916 NA 4,709,026 NA
Value 96,071 27,214 5,964 8,286 NA 274,616 363,100
2007/08 Qty 2,937,126 413,485 513,100 246,267 NA 5,168,632 NA
Value 180,381 24,122 32,881 11,871 NA 310,211 346,000
2008/09 Qty 3,010,142 108,000 226,977 170,750 NA 5,488,115 8,082,162
Value 200,832 6,125 14,468 8,193 NA 368,013 181,778
20

0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
3rd country India




Table 10 Key Export of Hides and Skin in the Destinations Other Than India
in 2007/08

Overseas
Countries
Goat and
Sheep Skin
Bovine and
Equine
Hides
Total Quantity
(Sq. ft.)
Amount (NRs)
Italy 2,937,126 - 2,937,126 180,380,799
Bangladesh - 513,100 513,100 32,380,900
China P.R. 123,465 290,020 413,685 24,122,146
Switzerland 250,000 - 250,000 16,835,247
Hong Kong 102,045 144,222 246,267 11,871,419
U.K. 165,000 - 165,000 8,044,201
U.S.A. 115,000 - 115,000 7,782,913
Total 4,178,378 281,417625
Others
Overseas
1,009,254 28,793,828
Grand Total 5,187,632 310,211,453
Source: TEPC 2007/08, TEPC 2009

It is found that there is good demand of goat skin in European countries, particularly
in Italy, while the hide of bovine species is mostly exported to India and remaining
some quantity to Bangladesh and People's Republic of China.

21

Table 11 Export of Hides and Skin to Abroad in Different Years

(NRs '000')
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
450,797 239,853 286,117 225,420 292,338 274,616 310,211 368,014
Source: TEPC 2009, TEPC 2007/08, TEPC 2006,

0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09


The sudden export drop in 2002/03 as compared to the previous year was probably due
to the lower quality than those of other exporting countries. And the leather trade was
shifted to India in that year (Table 6). There was good demand and buying competition
between the USSR and European countries particularly Italy. The USSR used to buy all
sizes of hides and skin in negotiable price and there was almost no rejection from this
party. But Italy always rejects the low quality leather. And the hide processed in Nepal is
of lower quality than that of other south Asian countries. After the USSR divided this
buying competition was finished. Now there is very low direct demand from abroad and
our export is mostly through Indian traders.

Table 12 Principal Indicators of Manufacturing Establishments

NSIC NSIC Name No. of
Estbs.
No. of
Persons
Engaged
No. of
Emps.
Wages
Salaries and
Facilities
In number In Rs '000
1911 Tanning & Dressing of
Leather
10 514 492 21,238
Source: CBS 2008, CBS 2009

22

Table 13 Exports of Hides and Skin to India

(In NRs. '000)
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
157,800 248,500 332,300 338,600 334,800 363,100 346,000 181,777
Source : Nepal Rastra Bank.

0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09


2.9.2 Export of Readymade Leather Goods to Overseas Countries

Table 14 Export of articles of leather, saddlery and harness; travel goods, handbags
and similar containers; articles of animal gut (other than silk-worm gut) to overseas
countries in 2007/08

Country Export in Amounts (NRs)
Sweden 8,798,080
U.K. 5,252,814
Total 14,050,894
Other 15 countries 18,186,336
Grand total 32,237,230

23

2.10 Possibilities for Reducing Dependence on Import of Hides and Skin Related
Products with an Objective of Promoting the Industries at the Domestic Level

2.10.1 Import of Hides and Skin from Overseas Countries

Import of raw hides and skin from overseas countries is much less as compared to the
quantity of the export. The total import of this commodity was equivalent to Rs 1,715,466
only in 2007/08 (TEPC 2007/08). More than half of the goods are imported from China.

2.10.2 Import of Raw Skin from India

It is known after the discussion with the responsible persons of hide and skin processing
industries and raw hide and skin suppliers and traders that 75 - 90% of raw skin is
imported somehow from India. Describing the problem of domestic goat skin scarcity the
respective entrepreneurs and traders suggested that there should be import provision
for goat skin from India also as there is custom system for its import from other
countries. As there is no raw skin processing industries near to border in India it is easily
available for the industries located to this side.

2.10.3 Import of Readymade Leather Goods from India and Overseas Countries

The import of readymade leather goods, however is much higher than that of the export
and is equivalent to Rs 497,770,964.00 (Department of Custom 2008/09, TEPC
2007/08). And these goods are mostly imported from India and People's Republic of
China - equivalent to Rs 255,940,000.00 and 216,850,395.00 respectively, followed by
USA - equivalent to Rs 11,746,530.00. The import from other overseas countries is
equivalent to Rs 14,234,039.00. Leather shoes are the major import from India. It is
equivalent to 154,655,000.00 rupees. The imports of belts and kartus belt is also quite
high and is equivalent to 90,456,000.00 rupees. The major imported goods are bags,
handbags, suitcases, briefcases and gloves from other countries and is equivalent to
242,830,964.00 rupees.

Table 15 Total Value of Readymade Leather Goods Imported from India and
Overseas Countries in 2007/08

Country Amount (NRs)
India 255,940,000
People's Republic of China 216,850,395.00
USA 11,746,530.00
Other Overseas Countries 14,234,039.00
Total Imports 497,770,964.00
24


Table 16 Import Export Comparison of Leather Shoes and Other Leather Made
Goods in 2005/06
(Value in '000 NRs)
Particulars Country Shoes Leather
Gloves
Leather Belts
and Kartus Belts
Leather
Clothes
Import (including the imports
under business purpose,
diplomatic facilities and other
custom facilities)
India 36,796 3,075 21,483 1,466
Overseas 317,220 715 28,131 1,090
Tibet 196,659 97 18,080
Total 550,675 3,887 67,694 2,556
Export India
Overseas 669 219 305 2,832
Tibet
Total 669 219 305 2,832
Source: Customs Department Annual Report 2005/06

The export of leather made goods, in comparison with the import volume is non-
significant. Hence, in contrast to import/export ratio of raw and partially processed hides
and skin, the import/export ratio of leather made goods is almost reverse. The imports of
leather shoes, leather gloves, leather belts and kartus belts and leather clothes from
India, abroad and Tibet were equivalent to NRs 550.675 millions, 3.887 millions, 67.694
millions and 2.556 millions respectively in 2005/06. The import of these goods under
different types of facilities like diplomatic facility and other custom exemption facilities is
higher than that of the imports for business purpose. For instance, the import of shoes
from India, abroad and Tibet together was equivalent to NRs 224.8 millions. But the
import under the facilities was equivalent to NRs 325.9 millions.

It is estimated that about 4 5 millions pairs of leather footwear are produced from the
domestic industries, and about 65 percent of raw materials required for these industries
are supplied from domestic productions (Leather goods and footwear Expo 2008). But it
is also estimated that 12.5 millions of these goods are annually used in Nepal. Hence
the domestic production covers only 35 45 % of Nepalese footwear market. The
remaining demand is supplied by the huge imports, mostly from India.

The Association conducted a study of domestic leather footwear and other leather
goods industries in different places including Kathmandu Valley with the objectives of
promoting and improving their qualities and prepared a report about the status of this
business (Shrestha, 2005). According to the report, about 50 % of 154 registered leather
goods related industries are normally operating the production activities. It also reports
that out of about 1.8 million leather shoes demand the association member industries
and craftsmen supply 0.26 and 0.677 millions of shoes.

25

The information mentioned above clearly reveal that we are importing the value added
goods in much higher price by exporting the less costly raw materials or partially
processed products like wet blue leather. It is also losing the opportunities of
employment generation in such processing industries. Hence it is necessary to promote
the processing value added products like crust, finished products or leather goods even
by providing possible necessary facilities for importing machineries, equipments and
chemicals for best utilization of our domestic resources.

2.11 Hide and Skin Collection Problems Caused by Declining Prices

Price of hides and skin has tremendously been dropped down in 2008/09 and this year
as compared to the previous years. The current price of raw hide varies from NRs
600/piece to less than 300/piece and NRs50 - 100/piece is that of goat skin. It was
NRs1000.00 - 1700.00 and NRs200.0 - 300.00 per piece of hide and skin respectively
just two years ago. The wide variation is mainly due to the quality difference. Similarly,
the export price of partially processed and finish products reduced due to declining
demand of these materials in the international market. The price of wet blue was INR 28
- 37.0/sqft in 2006/07, 29.00 per pc in 2008, as low as INR 14.0/sqft in 2008/09. The
price of hide exported in India was average NRs 22.5/sqft in 2008/09, while it was 3
times higher for the export in Italy. However, almost 60% sale in India is much more
influencing. The current export price of wet blue buff is INR 17-20.00/sqft and that of wet
blue goat skin is 38 - 40/sqft. The 'finished' product was sold at NRs 70.00 75.00 per
sq. ft. up to 2008. Now the price of this product is also declining.

The global recession is posing a big question mark over export prospects for all value
added ranges of leather products in the second half of 2008 fiscal year. Our buyers of
leather garments in Europe are asking for a drastic price slash, booking a much reduced
volume of business for next spring in March/April 2009, said Fawad Ejaz, chairman of
the Pakistan Leather Garments Manufacturers and Exporters Association.
6
A drop in
demand for leather suggests fall in demand of leather products in the world market. The
leather garment manufacturers are being asked to lower the prices of their products.
Importers are placing orders for lower volumes of business. We are servicing winter
orders given in J uly and August, he said. But the deepening of recession in Europe and
US since September has started to hit suppliers of textiles and leather products in Asia.


6
http://www.chineseleather.org/news/?id=94

26

2.11.1 Price of Hide in 2007/08

Table 17 presents the price of hide in 'Quality Meat Products P. Ltd. Thankot' as an
example of the value of raw hide at the collection site in 2007/08.

Variable No. Rate NRs Amount NRs
No. of animals slaughtered daily 25 buffaloes 1100.00/pc of
hide
27500.00
Salt required for preservation
(kg)
250 5.0/kg 1250.00
Sale 25 pieces of hide 1250.00/pc 31250
Daily profit (NRs ) 31250.0 - 27500.0 - 1250.0 =2500.00

Moreover, the supplier has already paid Rs 100000.00 advance for hides to the
Slaughterhouse and every hide trader pays advance for hides.

This was the scenario of previous price and facility of raw hide sale at the collection site.

2.11.2 Price Situation of Hides and Skin over the Years (NRs/Sq. ft.)

These figures are the average price rate calculated on the basis of quantity (square feet)
exported and the amount received.

2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
53.5 48.0 43.2 46.7 45.0 135.0 60.0

40.6

Source: TEPC 2009, TEPC 2007/08, TEPC 2006


About 8 millions out of 13.6 million sq. ft. of hide and skin was exported to India in
2008/09; equivalent to NRs about 182 millions. Hence the average price becomes NRs
22.5/sqft. The export price for Italy is almost 3 times higher The wide price difference
could be due to higher quality of sheep and goat skin supply to Italy and buffalo hides of
various quality supply to India.

2.11.3 Information Collection about the Price of Raw Hide and Skin from
Different Sources

Mr. Thaneswore Singh, the owner of Badahari slaughter place stopped the
collection of hides from other places because of unpleasant drop of hide price.
Similarly, Mr. Bal Krishna Khadki, one of the hide suppliers collected huge quantity
27

of hides @ Rs1300.00/pc, then price dropped down, hence stored for 1 year with
salt preservation and lastly sold @ Rs 400.00/pc. He does not collect hides now
from his previous collection sites of Dhading, Damauli, J iri, Solokhumbu, Charikot
etc; he collects the hides only from Kathmandu. The hides and skin producers are
facing problem because of nominal price and piling up of their produces for long
time. Likewise, Mr. Damodar Subedi, Nepal raw hides and skin traders and National
Leather Industry expressed pain for the declining situation of tannery business. The
hide he sold @ Rs 1700/pc two years back has now dropped down to Rs 400/pc
and that of goat skin at Rs 60/pc from its previous rate of more than Rs 300/pc.
There is a stock of 6000 - 7000 pcs in Mudha Dhangadhi since long back, and
about 2000 pcs stock in Banepa.

Mr. Narayan Rajthala, President of Makwanpur Meat and Fish business committee,
and Mr. Krishna Poudel proprietor of Quality Meat Product Butwal and member of
Meat business committee Rupandehi similarly pointed the price fall of goat skin
from Rs 300 - 400.00/pc in 2007/08 to Rs 40 - 50.00/pc now. Sale also is not so
easy now as it was earlier. Sometimes it needs to burry in pits. Mr. Deepak Acharya
hides and skin trader of Dhangadhi, Mahendranagar sector informed that the price
of hide there is Rs 200/pc.

Similar information about the declining demand and prices was received from all the
hides and skin processing industries.

The Progressive Leather Industries reported that the price of hide was Rs 1000 - 1700.0
/pc in 2007/08. Because of the high demand in the international market this industry
collected huge quantity of raw hides mostly @ Rs 1700.00/pc in 2007. Unfortunately,
then the price was dropped down as low as Rs 400.00/pc for raw hide and INR
14.00/sqft for wet blue product. Hence there was no sale at all in that year. The
company fell into big loss. Marium Leather Industries also has similar bitter experience.


Everest leather reports that in 2006 the price of raw hide was Rs 1500.00 per piece,
while it was only Rs 900.00 per pc in 2007. It was Rs 1200.00 per pc in 2008, and now
Rs 400.0/pc only. There is about Rs 1000.00 /pc of good quality hide of 40 sq ft in
Kanpur (India) now.

2.11.4 Price of Wet Blue Leather and Finish Leather

The price of wet blue leather is much fluctuating. The price of this product was INR 28 -
37.0/sqft in 2006/07. There was high demand, particularly for sofa set seat cover in
China in 2006/07 because of Olympic game organized there. Export price of wet blue
28

leather came down to INR 23.00 per sq. ft. in 2007, it was INR 29.00 per pc in 2008. It
came down to as low as INR 14.0/sqft in 2008/09. The price of hide exported in India
was average NRs 22.5/sqft in 2008/09, while it was 3 times higher for the export in Italy.
However, almost 60% sale in India is much more influencing. The current export price
of wet blue buff is INR 17-20.00/sqft and that of wet blue goat skin is 38 - 40/sqft. The
'finished' product was sold at NRs 70.00 75.00 per sq. ft. up to 2008. Now the price of
this product is also declining.

The price is determined by international market - China Fair, Italy Fair, Hong Kong Fair
and the most important one the Paris Fair. The Paris Fair is scheduled at September 7 -
9 every year. The leather supply agreements are signed in these fairs.

2.11.5 Reasons for Leather Price Decline

There is very good relationship between the demand and the price. The declining
demand of hide and skin products is the cause of their price downfall. Narayani Leather
Industry exported the leather products equivalent to NRs 350 million in 1998/99, 270
million in 2006/07 and dropped down to less than half in 2008/09, and still been dropped
in last six months (J uly - December 2009). The export was 1455306 sq. ft. of hide to
India and 614731 sq. ft. to abroad particularly America, Menjiloport (Mexico), Labodo
(Texas), Hong Kong, Italy, Brazil and China in 2008/09. It was equivalent to NRs
85,000000 and US$ 516,942.00 respectively. Similarly, hide collection in Everest
Leather Industry was 650,000 sq. ft. in 2006/07, while it was 800000 sq. ft. in the
previous year. Now (2009) the collection and processing is only 25000 sq. ft./month or
300,000sqft per year. The export was mostly 4 containers per month two years back,
now it is only 1 container per month. The products were mostly exported to European
countries and J apan, now it is exported to India only. Wet blue leather is the major
product, which is almost all exported. The finish product is supplied to domestic
industries. Now there is no skin collection and processing in this industry.

Similarly other processing industries have reported the sharp export reduction in the
recent years as compared to the past.

The massive production of synthetic goods of similar outlook in cheaper price in many
countries, particularly in China and probably reduced purchasing capacity of the
consumers due to world economic recession could be the major reasons for overall
declining demand of leather and leather goods. There was the tendency of using leather
seat covers in automobiles, aeroplanes, furniture etc in the past. The leather made
products are more comfortable and good for health. However these valuable materials
are being replaced by synthetic products. The federal commerce secretary of Pakistan,
29

Syed Asif Shah also sees hard days ahead for exporters as recession in the western
markets is eroding purchasing powers of consumers.
7


Similarly, there is also well established relationship between the quality and the demand.
One of the reasons for declined demand of Nepalese leather is the poor quality of raw
hide due to faulty de-hiding. One of the industries demonstrated the heaps of wet blue
leather to our study team as shown in the following left picture rejected by the importing
country due to several scratches and flaycuts on the hides as shown on the right picture.

Buyers, sometimes even cancel the consignments due to poor hide quality. But there
are not such damages in goat skin, and hence the quality is usually better than that of
hides.
Another major reason of demand fall is higher cost of production. The export and import
subsidies or incentives of other south Asian countries, particularly India; and lacking of
these facilities in Nepal are the constraints for the Nepalese produces to compete the
international markets.

2.12 Existing Policies Facilitating and Hindering Processing and Marketing of
Hides and Skin

2.12.1 Policies Facilitating the Processing and Marketing of Hide And Skin

The Trade Policy 2065, the Slaughterhouse and Meat Inspection Act 1998, Local
Governance Act 1998, Animal Slaughterhouse and Meat Inspection Regulation 2000
can facilitate the value chain development of leather industry if these could be effectively
implemented.

Major features of the Trade Policy, 2065 are:

Easy procedure will be followed for the import of raw materials and machineries
necessary for export oriented industries.
Necessary programs will be conducted to produce the goods within the country,
for which the raw materials are available within the country
The prioritized goods, which are being exported without processing will be
encouraged to export after value addition
Tariff, tax and vat except export service charge will be exempted for the export
Export credit guarantee scheme will be enforced to increase the financial
resource flow

7
http://www.chineseleather.org/news/?id=94

30

With the consent of concerned group special steps will be followed to avoid any
unwanted activities like lockouts and strike.

The Trade Policy has considered the processed leather as the thrust area development
as follows:

capital and technical assistance will be provided for feasible commercial farming
to supply the quality raw hides and skin
the export of processed leather and leather goods will be promoted
there will be assistance in essential machineries an equipments to produce the
complete processed leather
effective market promotion program will be conducted for international market
access
foreign investment will be encouraged in leather processing industry
loan facility with cheaper interest rate will be provided to import the machineries
and equipments
facility will be provided to establish the Common Facility Centre for complete
processing of partially processed hides and skin.

The government has emphasized the export of processed leather and leather goods
instead of the export of merely 'wet blue' leather. The compulsory provision of minimum
30% crust or finish production of the total wet blue leather has assisted the production of
these goods and supplied mostly to the domestic leather goods manufacturing
industries. According to the notice of Ministry of Commerce published on the Gazette
dated 2053.7.30 additional issue 38 (kha +2), the export provision is that the exporters
must export 50% crust and finished leather and 50% wet blue leather during the 3 years
period of 057/58 059/60 fiscal year. Similarly the notice of the ministry dated 2057.4.16
explained further about the previous notice that the export of the wet blue leather would
be allowed on the basis of the export ratio of crust and processed leather or leather
goods. Likewise, the Ministry of Industry, Commerce and Supply (letter no.
1140/2058.5.29) formed an Action Team under the coordination of joint secretary of
Technology and Environment Division in order to manage the necessary means for
making the leather and leather goods export sustainable, promotion of export of value
added leather products and developing the leather industry.

Similarly the meat act and regulation don't allow the consumption of the skin intact meat;
and hence favour the much more quantity of skin collection. Likewise the machinery
installation including animal-up-hanging electric device, driving device, Pulling machine,
de-hiding and de-skinning knives etc., hygiene and sanitation in the slaughterhouse and
slaughter places help for quality hides and skin production.
31

2.12.2 Some Hindering Factors as Perceived by the People Involved in the
Tannery Business

It is difficult for the Nepalese leather industry to produce 30% crust, finished or leather
goods of exportable quality with competitive price. This compulsory clause in the current
situation may still reduce the export. The international market demand of wet blue
leather is greater than that of finished products. Some of the entrepreneurs requested to
avoid the compulsory condition in the current international open market system.

The south Asian countries use raw materials, chemicals and machines produced in their
own countries while Nepalese industries have to import them except raw materials.
Subsidy programme of INR 290 crore for technology upgradation
8
and 6%
concessionary finance rate in the leather sector in India, & 6% concessionary finance
rate in Bangladesh, up to 18 per cent in Sri Lanka,
9
cash support on leather footwear
export and freight subsidy in Pakistan, 7.50 per cent export cash subsidy in Bangladesh
10

and re-instituted export support programs for the most high value leather products in
China
11
are some of the examples of incentives/subsidies for the promotion of leather
industries in other countries. But none of these facilities and incentives are available in
Nepal. Hence the cost of production of crust, finished or leather goods is definitely
higher than in other countries. Like other countries the major markets of Nepalese
leather products is also Europe. And thus, without export subsidies it is increasingly
becoming tough to compete in the European markets of leather goods. In order to
promote Nepalese leather industry and trade the Association recommended the cash
incentive of 10, 15 and 20% for crust, finished and readymade leather goods
respectively.

Similarly, local taxes under the provision of Local Self Government Regulation 1999
(second amendment 2005) for raw hides and skin and even harassment activities like
illegal forceful money collection in several places along the transport route due to
unstable political and conflict situation are hindering the promotion of this business.

III. SWOT ANALYSIS

3.1 Strength

Domestic raw material based industry

8
http://www.financialexpress.com/news/mof-approves-rs-290crore-capital-subsidy-for-leather/126780/
9
http://www.dawn.com/2007/05/24/ebr4.htm
10
http://www.thefinancialexpress-bd.com/2009/09/09/78578.html
11
http://www.chineseleather.org/news/?id=94

32

About one thousand of Nepalese people are employed in hide and skin
processing units (CBS, 2008) and another one thousand people are in collection
and supply business.
Likewise, about 200 industries of leather goods are getting raw materials
produced in the country (Leather Footwear and Goods Manufacturers'
Association of Nepal).
By now, it is one of the important exportable livestock commodities which is
constantly earning foreign currencies.

3.2 Weakness

Relevant policies, acts and regulation are not effectively implemented.
It is increasingly becoming difficult for Nepalese leather products to be
competitive in the international market due to the additional subsidies and
incentive facilities in India and other countries.
Traditional tendency of consuming skin intact meat is adversely affecting the
adequate supply of domestic raw skin.
Similarly, technologies and expertise are better in other countries, and
technology is much traditional here.
Our major export is the wet blue leather instead of more value added finished
leather and leather goods. These final value added products are mostly
imported.
Unwanted and scattered animal slaughtering processes in open ground produce
the hides and skin mostly of inferior quality.

3.3 Opportunity

Very high potential for value chain development of hide and skin.
After the enforcement of Slaughterhouse and Meat Inspection Act 2055 and the
respective regulations there is potential of improvement in quantity and quality of
raw hides and skin that may bring much change in this sector.
If the Government creates congenial environment by supporting the technology
improvement and trade promotion incentives in this sector there may exist
tremendous scope to increase the export of leather and leather made goods.
Market access in all WTO member countries widens further the scope of this
industry.
Currently, the readymade leather goods are mostly imported in Nepal. But there
is ample opportunity for import substitution because of cheaply and easily
available labour forces and abundant domestic hides and skin production. Public
support for quality improvement and infrastructure development may promote
33

the processing units for producing more value added crust, finished leather and
leather goods production.

3.4 Threats

If the existing unstable situation continues longer
If the policies, act and rules are not congenial for leather industry and trade
If our production becomes unable to compete the international markets

IV. AREAS FOR FAO - GOVERNMENT COLLABORATION IN THE MEDIUM-TERM
PERIOD

Promotional inputs and Training programs for value chain development of hides
and skin
Technical assistance for the improvement of leather industries, particularly for
the promotion of value added finish leather or leather goods
Capacity development of respective entrepreneurs, suppliers/traders and
supportive staff to facilitate the access for international market

4.1 Possible Investment Project Outline

It is recommended to include the following components in the value chain development
of hides and skin program for impact of import substitution of skin and leather goods and
export promotion of hides and skin and their products.

4.1.1 Business Development

This component addresses the value chain development of hides and skin involving
even the small producers and processors in this business. Under PPP principle, the
Project would provide finance support open to applications for value chain development
of hide and skin from traders and entrepreneurs of tannery business. Applicants would
have to meet appropriate criteria which will be developed by the team of experts. The
criteria would include contribution from the applicants. The implementation modalities
will be a simple and for the term of the Investment Project only. Directorate of Livestock
Market Promotion and respective agencies would assist applicants to prepare
investment plan. Member from respective association and FNCCI could be involved in
preliminary assessment of proposals.

34

4.1.2 De-Hiding and De-Skinning Training

In order to produce the quality hides and skin without any flaycuts and its preservation,
DLMP, with close coordination with the Directorate of Livestock Training and Extension,
will organize practice-based de-hiding and de-skinning training at the spot. This program
will be conducted in the slaughter houses and major slaughter places, particularly in
Kathmandu in the beginning and will gradually cover most of the slaughter places later.
The training plan and schedule will be prepared after consultation with the respective
stakeholders. At least one well equipped de-hiding and de-skinning training room and
one hide and skin preservation room will be established for regular training activities.

4.1.3 Capacity Development

This component will include the slaughterhouses and hide and skin processing
industries within the country and abroad for the capacity development of respective
entrepreneurs, suppliers/traders and supportive staffs and for efficient domestic and
international market management of their products. The value chain linkage will be
developed through workshops, trade fairs involving all levels of products and any of the
full range of the enterprises involved in their value chains.

4.1.4 Impact and Outcomes

The investment project impact (goal) and outcomes (objectives) are proposed, with the
activity components to achieve these outcomes.

Impact: import substitution of skin and leather goods and export promotion of leather
and the leather goods

Outcome: 1: adequate domestic production of hides and skin with quality assurance. 2:
adequate supply of raw materials to domestic leather industries. 3: capability
development of domestic leather industries to produce quality finished products and
leather goods to reduce their imports. 4: export promotion of these products.

4.1.5 Working Procedure

The interested eligible organization/ entrepreneur/traders/suppliers must share the
defined share of total investment to participate in PPP Programme. The procedure is
given bellow:
35



















V. RECOMMENDATIONS

It is necessary to organize a workshop on value chain development of hide and
skin involving the participation of policy makers, entrepreneurs, traders, suppliers,
producers and any other stakeholders related to this industry. This forum can be
instrumental to dig out the problems and find the way out for the promotion of
tannery business.
The already approved relevant act and policies including the trade policy must be
effectively implemented.
One of the major expenditures for the raw hides and skin supply is the salt
preservation. Hence, it is essential to provide subsidies in salt supply for hide and
skin preservation, at least in such declining price situation.
It is suggested to provide subsidies for machineries and chemical imports for value
added leather goods production.
There should be training programs for producers, traders and respective
stakeholders to develop their capabilities to produce the quality and value added
goods and to compete in the open market system. It is also necessary to establish
a well equipped training center for the regular value chain development training
operation.
Production of quality hides and skin is attached with the quality of animal
slaughtered particularly complete bleeding and de-hiding or de-skinning process.
The enforcement of the Slaughterhouse and Meat Inspection Act 2055 as early as
possible is one of the major way-out to improve the quality of meat and hides and
Notice from DLMP
for proposal
submission
Evaluation and
selection of the
proposals by special
evaluation committee
Agreement between
selected
entrepreneur and
DLMP
Project
implementation
Regular monitoring
and reporting
36

skin both. Similarly, it is necessary to improve the animal transport system
according to animal welfare norms. And also provide licenses to the traders who
fulfill the defined standards.
Unless the producers, butchers, traders and consumers understand the
commercial value of hides and skin and health hazards from the consumption of
skin intact meat it will be difficult to bring much change in quality production.
Hence, massive meat training for butchers and concerned persons and extensive
public awareness activities must be launched with the involvement of NGOs,
CBOs and consumers organizations. Training curriculum should include the de-
hiding skill training for the butchers or workers involved in de-hiding job,
particularly in Kathmandu to produce good quality of hides.
It also necessary to support the hide and skin processing industries to participate
in the important International Leather Trade Fair and grant assistance for stall
management in these fairs.
Promotional packages for buffalo fattening farming are suggested.
Establishment of machinery and processing facilities for finish products common
to entrepreneur or for the group use for the promotion of manufacturing of value
added finish goods.
Establishment of 'leather zone': The leather processing industries in India are all
located in mainly Madras, Kanpur and Culcutta; that also in a very localized place.
This makes it easier to establish a common chrome treatment plant to reduce
environment pollution and to utilize other byproducts of the processing plants.
Minimize the taxes and illegal charges for hide and skin transportation.
Provide promotional incentives for finish products and leather goods. The
provision of at least 6% export promotion grant for the export of hide and skin
products, subsidy in electricity expenditure and incentives for alternative power
supply management during load shedding period.

37

References

Annual Report 065/66. Department of Livestock Service, Hariharbhawan.
Annual Report (Barshik Bastugat Bibaran) 062/63. Department of Customs,
Tripureswore,
Annual Report 064/65. Central Quarantine Office, Tripureswore
Annual Report 065/66. Regional Livestock Service Directorate, Biratnagar.
Annual Programme 065/66. Directorate of Livestock Market Promotion, Hariharbhawan.
Annual Report 065/66. Quarantine Office, Biratnagar.
A Glimpse of Nepal's Foreign Trade. Ministry of Industry, Commerce and Supply. Trade
and Export Promotion Center, Pulchock. 2007.
A Glimpse of Nepal's Foreign Trade. Ministry of Industry, Commerce and Supply. Trade
and Export Promotion Center, Pulchock. 2009.
Final Report on Nepal-India Trade on Livestock & Livestock related products. Agri-
business and Trade Promotion Multi-purpose Cooperative, Anamnagar.
Local Self Governance Regulation 1999 (second amendment 2005). Ministry of Law,
J ustice and Parliamentary Management, Legal Books Management Committee,
Kathmandu.
Nepal Overseas Trade Statistics 2007/08. Trade and Export Promotion Center,
Pulchock.
Nepal Foreign Trade Statistics 2008/09 Vol-I & Vol.-II. Trade and Export Promotion
Center, Pulchock.
Selected indicators of Nepalese agriculture and population. Ministry of Agriculture and
Cooperatives Agri-business Promotion and Statistics Division, Gender Equity and
Environment Division. 2008. Singh Durbar, Kathmandu.
Nepal in figures 2009: GON, NPC, Central Bureau of Statistics, Ramshahpath,
Kathmandu
Statistical Pocket Book Nepal 2008: GON, NPC, Central Bureau of Statistics,
Ramshahpath, Kathmandu






















Annexes


Annex 1

List of Tanning and Leather Processing Industries Consulted

S.N. Name of Leather Industries Contact person Phone
1 Narayani Leather
Manufacturing Industries, head
office Chachan Market Mahabir
Road Barging
Factories - Chainpur and
Barging
Mr. Netra Prasad Mainali,
Mr. Deepak Shrestha
051-529836,
521468


2 Marium Leather industries,
Lipni Birta VDC 8, Parsa
Pharrukh J . Lari
(discussed with
Rabibhushan Srivastav)
051-524220,
9855021529
3 Everest Leather Industries
Parwanipur, Bara
Sanjaya Giri,
Binod Chaudhary
051-522040
9725142094
4 Progressive Leather Industry,
Parwanipur
Bijaya Shankar Hada

051-521514,
9845020404
5 Global Leather Tanning
Industries (Pvt.) Ltd., leather
Complex, Lipni Birta 9, Parsa
Sanjay Agrawal
Ramesh Kumar Singh

985020000
051-522093
6 National Leather, Parwanipur Damodar Subedi,
Hari Gautam
051-529814
7 Standard Tanning Industry,
Parwanipur
Mobin Iftarbar (Pro),
Krishna Shrestha
(Manager)
051-521270
8 Nepal Tanning Industry Pvt.
Ltd. Budhnagar, Biratnagar 18,
Morang
Director, Mr. Khursi Dhabi
Iraki
021-435175,
435786
9 Asian Leather Industries (Pvt.)
Ltd., Duhabi, Sunsari
Managing Director Mr.
Hasan Ansari
Director Mr. Afid Ali Ansari
9852020308

9852025670
10 United Tanneries, Duhabi 9,
Sunsari
Executive Director Mr.
Parweg Akhtar
9842022802
11 Universal Leather Industry
Katahari, Morang
J akis Haque Miya
(discussed with Bijay Sah)
021-522302







2






Annex 2

Overseas Exports by Commodities and Countries FY 2007/08
(Raw hides and skins other than fur skins and leather)

S.N. HS Code Description, Commodities/ Countries Unit Quantity Value (Rs.)

Chapter
41
Raw hides and skins ( other than fur skins ) and
leather
Sq.
ft.
5,187,632 310,211,453
233 41012000
Whole hides and skins, of a weight per skin not
exceeding 8 kg when simply dried, 10 kg when dry-
salted, or 16kg. when fresh, wet-salted or otherwise
preserved
Sq.
ft.
391 16,060
Hong Kong 45 6,849
J apan 346 9,211
234 41022100
Raw skins of sheep or lambs (fresh, or salted, dried,
limed, pickled or otherwise preserved, but not
tanned, parchment-dressed or further prepared),
without wool on, Pickled
Sq.
ft.
3,465 242,605
China P. R. 3,465 242,605
235 41022900
Raw skins of sheep or lambs preserved but not
tanned without wool on
Sq.
ft.
3,200 227,446
J apan 3,200 227,446
236 41039000 Raw hides and skins, whether or not dehaired or split
Sq.
ft.
1,736 135,501
Italy 36 9,201
Mauritius 1,700 126,300
237 41041100
Tanned or crust hides and skins of bovine or equine
animals in wet state, full grains, unspiit, grain splits
Sq.
ft.
696,100 42,722,933
Bangladesh 513,100 32,380,900
Bulgaria 18,000 1,709,100
France 63,000 4,143,460
J apan 5,000 410,177
Netherlands 62,000 2,340,101
Spain 4,000 156,695
3

S.N. HS Code Description, Commodities/ Countries Unit Quantity Value (Rs.)
Turkey 31,000 1,582,500
238 41041900
Tanned or crust hides and skins of bovine or equine
animals, without hair on whether or not split, but not
further prepared, in the wet state
Sq.
ft.
626,390 34,215,665
China P. R. 283,020 15,758,054
France 35,000 2,013,606
Hong Kong 144,222 7,396,145
J apan 3,521 67,439
Netherlands 200 14,106
Taiwan 70,000 3,895,542
Ukraine 36,045 2,037,295
Vietnam 54,382 3,033,478
239 41044900
Tanned or crust hides and skins of bovine (including
buffalo) or equine animals
Sq.
ft.
2,160 161,730
J apan 2,160 161,730
240 41051000
Tanned or crust hides and skins of sheep or lambs,
without wool on whether or not split, but not further
prepared, in the wet state
Sq.
ft.
747,720 50,270,194
Hong Kong 102,000 4,468,425
Italy 645,720 45,801,769
241 41062100
Tanned or crust hides and skins of goats of kids,
without wool on whether or not split, but not further
prepared, in the wet state
Sq.
ft.
2,839,370 166,650,971
China P. R. 120,000 8,019,900
Italy 2,051,370 119,187,747
Mexico 19,000 789,375
Pakistan 9,000 449,688
Romania 110,000 5,541,900
Swaziland 120,000 7,620,481
Switzerland 130,000 9,214,766
U.K. 165,000 8,044,201
U.S.A. 115,000 7,782,913
242 41062200
Tanned or crushed hides and skins of goat of kids, in
the dry state
Sq.
ft.
240,000 15,382,082
4

S.N. HS Code Description, Commodities/ Countries Unit Quantity Value (Rs.)
Italy 240,000 15,382,082
243 41063100
Tanned or crust hides and skins of swine, without
wool on whether or not split, but not further prepared,
wet state (including wet-blue)
Sq.
ft.
1,100 84,679
Brazil 1,100 84,679
244 41071100 Full grains, unsplit hides and skins
Sq.
ft.
7,000 101,587
China P. R. 7,000 101,587



5

Annex 3

Overseas Exports by Commodities and Countries FY 2007/08
(Articles of leather, saddlery and harness; travel goods, handbags and similar containers; articles of
animal gut other than silk-worm gut)

Chapter
42
Articles of leather, saddlery and harness; travel goods,
handbags and similar containers; articles of animal gut (
other than silk-worm gut)
Unit No. 32,237,230
245 42021100
Trunks, suitcases, brief-cases with outer surface of leather,
or composition leather or of patent leather
Pcs. 81 74,805
J apan 81 74,805
246 42021200
Trunks, suitcases, briefcases with outer surface of plastics
or of textile materials
Pcs. 56,401 4,547,830
Australia 2,948 97,005
Belgium 9,040 818,529
Denmark 14,300 794,889
Sweden 19,200 1,931,236
U.K. 10,913 906,171
247 42021900
Trunks, suitcases, vanity cases, briefcases and similar
containers
Pcs. 5,514 3,042,203
Hong Kong 792 11,503
Singapore 372 13,892
Thailand 2,448 44,354
U.K. 1,902 2,972,454
248 42022100
Handbags with outer surface of leather, of composition
leather or of patent leather
Pcs. 435 319,282
J apan 201 173,713
U.S.A. 234 145,569
249 42022200
Handbag with outer surface of plastic sheeting or of textile
material
Pcs. 7,195 3,117,097
Canada 4,365 2,292,848
China P. R. 150 14,100
J apan 1,964 528,166
Singapore 487 76,606
Thailand 144 13,536
U.K. 85 191,841
6

250 42022900 Handbags Pcs. 35,452 6,821,584
Denmark 135 64,800
Hong Kong 972 56,899
Italy 2,109 70,337
J apan 5,919 1,745,963
Singapore 77 99,614
Sweden 20,220 3,528,975
Switzerland 35 24,147
U.K. 3,749 1,078,000
U.S.A. 2,236 152,849
251 42023200
Articles of a kind normally carried in the pocket or in the
handbag with outer surface of plastics sheeting or of textile
materials
Pcs. 1,009 213,963
252 42023900
Articles of a kind normally carried in the pocket or in
handbag
Kg. 4,755 3,686,973
Sweden 4,525 3,337,869
U.S.A. 230 349,104
253 42029200
Handbags with outer surface of plastic sheeting or of textile
materials
Kg. 1,199 520,074
Netherlands 49 45,952
U.K. 1,150 474,122
254 42029900 Bags and similar articles Kg. 7,812 8,486,835
Denmark 3,990 1,843,061
Italy 34 50,449
Portugal 3,588 6,593,325
255 42031000 Leather apparels Kg. 200 440,932
U.K. 200 440,932
256 42032900 Gloves of leather or of composition leather Kg. 33 32,112
Denmark 33 32,112
257 42034000 Clothing accessories of leather Kg. 8,545 913,593
258 42050000
Articles of leather or of composition leather, used in
machinery or mechanical appliances
Kg. 12 19,947
U.S.A. 12 19,947

7

Annex 4

Import of Selected Commodities from India

(Value in '000 NRs)
S.N. Commodities FY 2006/07 FY 2007/08
*
% Change
1 Live Animals 376,000 238,600 -36.5
8 Milk Products 357,800 445,300 24.5
39 Shoes and Sandles 108,900 81,300 -25.3
Note :- Trade with India for the F.Y. 2007/08 is provisional.
Source :- Nepal Rastra Bank.

8

Annex 5

Import from Overseas by Commodities and Countries FY 2007/08
(Raw hides and skins other than fur skins and leather)


S.N. HS Code Description, Commodities/ Countries
Value
(Rs.)
Chapter 41 Raw hides and skins other than fur skins and leather 1,715,466
903 41012000
Whole hides and skins, of a weight per skin not exceeding 8 kg when
simply dried, 10 kg when dry-salted, or 16kg. when fresh, wet-salted or
otherwise preserved
7,051
China P. R. 7,051
904 41021000 Raw skins of sheep or lambs with wool on 107,324
Indonesia 107,324
905 41069200
Tanned or crust hides and skins of other animals, without wool or hair on,
whether or not split, but not further prepared in the dry state (crust)
4,159
U.S.A. 4,159
906 41132000 Leather further prepared after tanning or crusting of swine 583,648
J apan 583,648
907 41151000
Composition leather with a basis of leather or leather fiber, in slabs,
sheets or strips, whether or not in rolls
1,013,284
China P. R. 1,013,284







9

Annex 6

Imports from Overseas Countries by Commodities Countries FY 2007/08
(Articles of leather, saddlery and harness; travel goods, handbags and similar containers; articles of
animal gut other than silk-worm gut)


Chapter
42
Articles of leather, saddlery and harness; travel goods, handbags
and similar containers; articles of animal gut ( other than silk-
worm gut)
242,830,964
908 42010000 Saddlery and harness for any animal of any materials 280,979
Thailand 280,979
909 42021100
Trunks, suitcases, brief-cases with outer surface of leather, or
composition leather or of patent leather
346,462
China P. R. 346,462
910 42021200
Trunks, suitcases, briefcases with outer surface of plastics or of textile
materials
12,522,769
China P. R. 6,958,450
Hong Kong 63,353
Singapore 6,855
Thailand 114,208
U.A.E. 572,403
U.S.A. 4,807,500
911 42021900 Trunks, suitcases, vanity cases, briefcases and similar containers 54,579,835
China P. R. 51,056,396
Hong Kong 299,524
Indonesia 636,151
Korea R 8,268
Malaysia 4,819
Singapore 338,970
Thailand 462,048
U.A.E. 615,977
U.S.A. 1,020,568
France 137,114
912 42022100
Handbags with outer surface of leather, of composition leather or of
patent leather
4,280,175
10

China P. R. 2,542,936
Hong Kong 53,381
Israel 55,340
J apan 576,690
Korea R 195,430
Malaysia 58,054
Thailand 25,016
Vietnam 14,176
U.S.A. 367,130
U.K. 366,350
Australia 25,672
913 42022200 Handbag with outer surface of plastic sheeting or of textile material 36,229,614
China P. R. 36,003,666
Singapore 133,346
Thailand 25,847
U.A.E. 24,424
Italy 15,572
Poland 26,759
914 42022900 Handbags 29,583,744
China P. R. 23,656,475
Hong Kong 449,330
Indonesia 29,580
Korea R 2,000
Malaysia 43,781
Pakistan 1,595
Singapore 513,962
Taiwan 23,872
Thailand 1,064,360
U.A.E. 1,655,963
Vietnam 572,104
Brazil 2,000
11

U.S.A. 1,076,126
Austria 72,253
Switzerland 420,343
915 42023100
Articles of a kind normally carried in the pocket or in handbag with outer
surface of leather, of composition leather or of patent leather
1,821,064
China P. R. 1,793,504
Malaysia 12,706
Thailand 14,854
916 42023200
Articles of a kind normally carried in the pocket or in handbag with outer
surface of plastic sheeting or of textile materials
5,067,621
China P. R. 5,067,621
917 42023900 Articles of a kind normally carried in the pocket or in handbag 2,195,229
China P. R. 1,452,420
Hong Kong 121,988
Singapore 62,130
Taiwan 2,810
Thailand 141,200
U.A.E. 5,358
France 92,987
Switzerland 316,336
918 42029100
Bags and similar articles with outer surface of leather, or composition
leather or of patent leather
31,961
China P. R. 13,100
Singapore 16,321
Vietnam 2,540
919 42029200
Bags and similar articles with outer surface of plastic sheeting or of
textile materials
1,305,111
China P. R. 866,886
Hong Kong 167,167
Belgium 271,058
920 42029900 Bags and similar articles 324,720
China P. R. 323,159
Thailand 1,561
12

921 42031000 Leather apparels 965,942
China P. R. 965,942
922 42032100 gloves specially designed for use in sports 828,895
China P. R. 828,895
923 42032900 Gloves of leather or of composition leather 6,212,826
China P. R. 621,380
Korea R 5,343
Singapore 8,286
Thailand 5,365
U.S.A. 5,550,130
Italy 22,322
924 42033000 Belts and bandoliers of leather or of composition leather 85,841,158
China P. R. 85,051,578
Hong Kong 153,123
Korea R 35,430
Singapore 47,135
Thailand 495,197
Swaziland 9,901
Switzerland 48,794
925 42034000 Clothing accessories of leather 143,078
China P. R. 99,125
Indonesia 7,562
Korea R 33,791
Singapore 2,600
926 42050000
Articles of leather or of composition leather, used in machinery or
mechanical appliances
247,486
Indonesia 240,330
Malaysia 7,156
927 42060000
Articles of gut (other than silk-worm gut), of goldbeater's skin, of
bladders or of tendons
22,295
China P. R. 22,295