CHAPTER – III

HUMAN RESOURCE POLICIES AND PRACTICES IN LEATHER

INDUSTRY
3.1 LEATHER INDUSTRY IN INDIA

3.1.1 Introduction

The Leather Industry holds a prominent place in the Indian economy. It is known

for its consistency in high export earnings and it is among the top foreign exchange earners

for the country (CLE). Leather industry is one of the India‟s oldest manufacturing

industries that catered to the international market right from the middle of the nineteenth

century (www.cec.india.org). There has been an increasing emphasis on its planned

development, aimed at optimum utilization of available materials for maximising the

returns, particularly from exports. With an annual turnover of over US$ 8.5 billion, the

export of leather and leather products increased manifold over the past decades and

touched US$ 4.99 billion in 2012-13, recording a cumulative annual growth rate of about

8.54% in 5 years (www.leatherindia.org).

3.1.2 Organized and Unorganized Sector

The Indian leather industry includes both organized and unorganized sectors. The

unorganized sector is dominated by the family units. The organized manufacturing sector

broadly consists of tanning and dressing of leather manufacture of luggage, handbags

saddler, harness and footwear. Currently unorganized sector plays a dominant role in the

entire production (www.leatherindia.org).

3.1.3 Small and Cottage Industries

The small scale, cottage and artisan sectors account for over 75 per cent of the total

production and majority of them belong to unorganized sector carrying out family base

operations. Though footwear is produced by both large and small scale sectors, the small

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scale sector has almost 90 per cent share in the total production of footwear in India

(www.leatherindia.org). In view of widespread modernization and mechanization of the

tanning industry, the role of the cottage sector is declining rapidly.

3.1.4 Major Production Centers in India

The major production centers for leather and leather products in India are located in

Tamil Nadu - Chennai, Ambur, Ranipet, Vaniyambadi, Vellore, Pernambut, Trichy,

Dindigul and Erode; West Bengal – Kolkata ; Uttar Pradesh – Kanpur, Agra, Noida,

Saharanpur; Maharashtra – Mumbai; Punjab – Jallandhar; Karnataka – Bangalore; Andhra

Pradesh - Hyderabad; Haryana - Ambala, Gurgaon, Panchkula, Karnal and Faridabad;

Delhi; Madhya Pradesh – Dewas; Kerala – Calicut and Ernakulam / Cochin

(www.leatherindia.org).

Table 3.1.1
Leather Clusters in India

Region State Cities / clusters

Chennai, Ambur, Ranipet, Vaniyambadi,
Tamil Nadu
Tiruchirappalli, Dindigul
South Karnataka Bengaluru
Andhra Pradesh Hyderabad
Union Territory of Delhi Delhi
Uttar Pradesh Agra, Noida
North
Punjab Chandigarh, Jallandhar
Haryana Ambala, Gurgaon, Panchkula, Karnal
Uttar Pradesh Kanpur
West Bengal Kolkata
East
Maharashtra Mumbai
[Source: Council for Leather Exports]

3.1.5 Leather Industry Network

The leather and leather products sector consists of the following activities: The
process of raw material production, i.e., carcass collection and flaying, production of

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leather from the raw material, i.e., tanning, and manufacture of leather products from
finished leather (www.cec.india.org).
An ideal leather industry network would comprise the following:
A. Livestock (Cattle, Buffalo, Goat)
B. Slaughter houses
C. Raw Hide/Skin Collection
D. Tanning Industry
E. Leather Industry
Table 3.1.2
Sector/Product wise Major Production Unit
Household, Small Medium
Estimated Annual Tiny and Scale and Large
Sector/Product
Production Capacity Cottage Sector Scale Sector
Industry
Tanneries 2.5 billion sq.ft. . 10% 35% 55%
Foot wear – 1009 million pairs
leather (includes about 100 million 60% 25% 15%
pairs of shoe uppers)
Footwear – non
1056 million pairs 15% 70% 15%
leather
Garments and
20 million pieces Nil 95% 5%
outer wear
Assorted
120 million pieces 10% 85% 5%
leather goods
Saddler and
12 million pieces 40% 60% Nil
harness
Leather gloves 100 million pieces
[Source: www.siadipp.nic.in/publicat/footwear.htm]

A small scale industrial unit is one where the investment in plant and machinery
does not exceed Rs. 10 million.
3.1.6 Employment in Leather Industry

The leather industry is an employment intensive sector, providing job to about 2.5

million people, mostly from the weaker sections of the society with 75 per cent of the

production from small and cottage sectors. Women employment is predominant in leather

products sector with about 30% share (www.leatherindia.org). The skilled and semi-skilled

employees constitute nearly 50% of the total work force.

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 Table 3.1.3
Estimated Employments in Different Sectors of Leather Industry

Sector Total Employment

Flaying, Curing and Carcass Recovery (Self-Employed) 8,00,000
Tanning and Finishing (organized) 1,25,000
Full Shoe (organized) 1,75,000
Shoe Uppers (unorganized) 75,000
Chappals and Sandals (organized) 4,50,000
Leather Goods and Garments (organized) 1,50,000
[ Source: (www.leatherindia.org)]

Being a labour intensive industry, its contribution to employment is significant

which consists of a large chunk of illiterate employees. About 40% of employment is

represented by unskilled employees indulging in table work operation in the assembly line

(www.npc.com). The industry is also one with strong links with the social structure

through caste and community. Thus a large number of people engaged in the industry

(entrepreneurs as well as employees) are from traditional leatherworking castes (belonging

to the lower castes in the caste hierarchy) and the Muslim community (Shivam Gupta et

al., April 2007). Minority community and lower caste people have their sole source of

livelihood from collecting carcasses, skinning dead animals and tanning leather which also

consists of a large proportion of employment provided by leather industry

(www.npc.com).

a) Employment in Tanning and Finishing Segment

Table 3.1.4
Distribution of HR across Various Functions in Finished Leather Segment

Functions Percentage of people

Manufacturing/Production 80-90%
Sales and Procurement 2-3%
Other Support Functions* 10-12%
Total 100%
[Source: Primary Research and IMACS Analysis]
*Includes Finance, HR, Administration

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 Table 3.1.5
Distribution of HR across Various Manufacturing Activities in Finished Leather
Segment
Function Manufacturing Activities Percentage of People
Soaking
Pre-Tanning
Liming 15-20%
Deliming
Tanning 15-20%
Adjusting the thickness
Dyeing
Post-Tanning 60-65%
Softening
Buffing
Finishing
Total 100%
[Source: Primary Research and IMACS Analysis]

Majority of the workforce is involved in the post-tanning activity. Some of the

activities in post tanning, such as shaving, splitting, buffing, spraying, etc., are highly

mechanized and require use of skilled operators to operate the machines. The education-

wise distribution of workforce in finished leather segment is provided in the figure below:

Table 3.1.6
Distribution of Human Resource by Education Level in Finished Leather Segment

Education Level Percentage of People

CA, MBA and Other Graduates 1-2%
Engineers, Diploma or Equivalent Certification 2-3%
ITI and other Vocational Courses 1-2%
th th
Class 12 /10 and below 90-95%
Total 100%
[Source: Primary Research and IMACS Analysis]

Current Employment and Training Pattern in Finished Leather Segment

From the above table, majority of the people employed in the finished leather

segment are in the class 12th/10th and below category. Some of the activities where these

people are employed, such as shaving, splitting, spraying, buffing, etc., are highly

mechanized but there is lack of training institutes/centres to train people to work on such

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machines. As a result, industry employs unskilled employees and trains them on the job

and with experience they become skilled employees. It takes nearly a few months to few a

years, depending on the complexity of the task, for converting these unskilled employees

into skilled workforce. Another major problem area for tanneries is related to shortage of

technicians (leather technologists, diploma holders, and engineers) who are in-charge of

activities wherever chemical applications are used and also to supervise overall production

process.

b) Employment in Leather Goods Manufacturing Segment

Table 3.1.7
Distribution of HR across Various Functions in Footwear and other Leather Product
Industry
Functions Percentage of People
Manufacturing/Production 80-85%
Designing and Sampling 2-3%
Sales 3-5%
Other Support Functions* 10-15%
Total 100%
[Source: Primary Research and IMACS Analysis]
*Includes Finance, HR, Administration
As seen in the table above majority of the workforce is involved in the

manufacturing/production activities. Various activities and the percentage of people

involved in the manufacturing/production function are provided below:

Table 3.1.8
Distribution of Human Resource across Various Manufacturing Activities

Functions Footwear Garments and Other Products

Cutting/Clicking 10-12% 15-18%
Stitching/Closing 60-65% 70-75%
Lasting 10-12% -
Finishing* 10-12% 10-12%
Total 100% 100%
[Source: Primary Research and IMACS Analysis]
*Finishing includes Quality Control and Packaging

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 On an average 60-70% of manufacturing workforce in leather product segment is

involved in stitching/closing across various segments. And given that manufacturing

workforce accounts for about 80% of total workforce, it can be inferred that close to 50%

of the total workforce in the leather product industry is involved in stitching/closing alone.

In case of unorganized and small scale units the percentage of the shop

floor/operators/support staff can be as high as 95%. The education-wise distribution of

workforce is provided in the figure below:

Table 3.1.9
Distribution of HR by Education Level in Manufacturing Leather Products

Education Level Percentage of People

CA and MBA 1-2%
Other Graduates 3-5%
Engineers 1-2%
Diploma or Equivalent Certification 2-3%
ITI and other Vocational Courses 1-2%
th th
Class 12 /10 and below 85-90%
Total 100%
[Source: Primary Research and IMACS Analysis]

Current Employment and Training Pattern in Footwear and other Leather Product
Segment
From the above table, majority of the people employed in the leather product

segment are in the class 12th/10th and below category. One of the major problems faced by

the leather product segment is that there is lack of training institutes/centres to train

operator/shop floor employees (the major requirement in the industry) and almost all the

players depend on the in-house training facilities. On the other hand at the supervisor and

managerial level there is a tendency of employees to stay away from the manufacturing job

(factory set up) and look for a sales or desk job. These problems are discussed in detail in

later sections.

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3.1.7 SWOT Analysis of Indian Leather Industry

SWOT analysis for leather industry is given below:

a) Strengths
i) Existence of more than sufficient productive capacity in tanning.

ii) Ready availability of highly skilled and cheap manpower exposure to export markets.

iii) Managements with business background becoming quality and environment

conscious.

iv) Comfortable availability of raw materials and other inputs.

v) Massive world-class institutional support for technical services, designing, manpower

research and development and marketing.

vi) Exporter-friendly government policies.

vii) Tax incentives on machinery by Government.

viii) Well-established linkages with buyers in EU and USA.

ix) Policy initiatives taken by the Government.

x) Capability to assimilate new technologies and handle large projects.

xi) Continuous emphasis on product development and design upgradation.

xii) Strong and eco-sustainable tanning base.

xiii) Presence of support industries like leather chemicals and finishing auxiliaries.

xiv) Constant human resource development programme to enhance productivity.

xv) Continuous modernization and technology upgradation.

b) Weaknesses

i) Low level of modernization and upgradation of technology and the integration of

developed technology is very slow.

ii) Low level of labour productivity due to inadequate formal training / unskilled labour.

iii) Horizontal growth of tanneries.

iv) Less number of organized product manufacturers.

v) Lack of modern finishing facilities for leather.

vi) Highly unhygienic environment.

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vii) Lack of awareness on international standards by many players as maximum number
of leather industries are SMEs.
viii) Difficulties in accessing to testing, designing and technical services.
ix) Lack of warehousing support from the government.
x) International price fluctuation.
xi) Huge labour force resulting in high labour charges.
xii) Lack of strong presence in the global fashion market.
c) Opportunities

i) Abundant scope to supply finished leather to multinational shops in India.

ii) Growing fashion consciousness globally.
iii) Use of information technology and decision supporting software to help eliminate the
length of the production cycle for different products.
iv) Product diversification - There is a lot of scope for diversification into other products,
namely, leather garments, goods etc.
v) Growing potential in international and domestic markets.
vi) Use of e-commerce in direct marketing.
d) Threats
i) Entry of multinationals in domestic market.
ii) Stiff competition from other countries. (The performance of global competitors in
leather and leather products indicates that there are at least five countries viz, China,
Indonesia, Thailand, Vietnam and Brazil, and they are more competitive than India.)
iii) Non- tariff barriers - Developing countries are resorting to more and more non – tariff

barriers indirectly.

iv) Improving quality to adapt to the stricter international standards.

v) Fast changing fashion trends are difficult to adapt for the Indian leather industries.

vi) Limited scope for mobilising funds through private placements and public issues, as

many businesses are family-owned.

vii) Major part of the industry is unorganised.

viii) Difficulty in obtaining bank loans resulting in high cost of private borrowing.

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3.1.8 Government Regulation and Support to Leather Industry

The Government of India had identified the Leather Sector as a focus sector in

view of its immense potential for export growth prospects and employment generation.

Accordingly, the Government is also implementing various Special Focus Initiatives under

the Foreign Trade Policy for the growth of leather sector. With the implementation of

various industrial developmental programmes as well as export promotional activities, and

keeping in view the past performance, and industry‟s inherent strengths of skilled

manpower, innovative technology, increasing industry compliance to international

environmental standards, and dedicated support of the allied industries, the Indian leather

industry aims to augment the production, thereby enhancing export, and resultantly

creating additional employment opportunities for one million people

Government of India has announced various key policy initiatives to make the

leather industry more competitive. They are:

a) De-licensing of integrated tanneries that convert raw hides and skins into finished

leather.

b) Several leather goods have been de-reserved from the small Scale Sector.

c) Free import of raw hides and skins, semi-finished and finished leather.

d) Concessional duty on imported machinery and chemicals.

e) Free export of raw hides and skins, semi-finished and finished leather and leather

products.

f) Policies to facilitate modernization/upgradation such as “Integrated Leather

Development Programme”.

g) Setting up of leather parks by Council for Leather Exports (five leather parks out of

that two in Chennai - one for footwear and the other for components, one each in

Nellore, Agra and Kolkata).

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h) Establishment of „design centres‟ at individual manufacturing units, to facilitate

improvement in design capabilities under the joint efforts of Council for Leather

Exports (CLE) and the National Institute of Fashion Technology (NIFT).

i) Research and development capabilities by The Central Leather Research Institute

(CLRI) which is the world‟s largest leather Research Institute. State-of-art facilities in

CLRI are to support innovation in leather processing, creative designing of leather

products and development of novel environmental technologies for leather sector.

j) The support is extended to well-equipped training institutions to encourage training

programmes to be given jointly along with reputed foreign enterprises and experts.

k) No industrial license is required to manufacture most of the items of tleather industry.

However, the location of industrial projects will be subjected to Central or State

environmental laws and regulations including local zoning and land use laws and

regulations.

3.1.9 Institutional Support to Leather Industry

Abundant support has been provided by the institutions and associations to promote

leather industry to a special place in the international market.

The main objectives of the institute are:-

a) To train personnel in Footwear Technology as per the requirements of the trade and

industry.

b) To train Footwear Designers.

c) To provide training and research facility to trainers and technologists in the Footwear

and allied industry with a view to upgrade their skills.

d) To train personnel in maintenance of Footwear Machinery.

e) To design and develop moulds and dyes for the Footwear Industry.

f) To introduce modern technology in footwear design.

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g) To assist and promote technology upgradation in Footwear Industry.

h) To develop products and design with a view to secure advantages in export production.

i) To undertake testing and assessment of Footwear and its materials.

j) To promote acquisition of international standards in the industry.

k) To foster appropriate linkages between Central Footwear Training Institute and

Industry for utilization of existing capacity and their upgradation and to undertake

consultancy services for development of Footwear Industry.

l) To establish linkages with educational, research and development institutions in India

and abroad, and to collaborate with them in training, research and development.

m) To organize data bases and information dissemination on Footwear Technology,

Export marketing etc., and to establish suitable Library and Resource Centre for

trainees and industry.

i) Central Leather Research Institute (CLRI): Being the world's largest Leather

Research Institute it was founded on 24 April, 1948. CLRI made an initiative with

foresight to link technology system with both academy and industry. CLRI, today, is a

central hub in Indian leather sector which has direct roles in education, research, training,

testing, designing, forecasting, planning, social empowerment and leading in science and

technology relating to leather. State-of-art facilities in CLRI support innovation in leather

processing, creative designing of leather products viz., leather garment, leather goods,

footwear and development of novel environmental technologies for leather sector

(www.clri.nic.in).

ii) Council for Leather Exports (CLE): The Council for Leather Exports was set up in

July 1984. Being a non-profit company registered under the Indian Companies Act, 1956,

the Council functions under the Ministry of Commerce, Government of India. The Council

is entrusted with export promotion activities and overall development of the Indian leather

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industry. It is the single largest and Apex trade promotion organization of the strong and

rapidly growing Indian leather and leather products industry. The Council's activities also

include promoting Foreign Direct Investments and Joint Ventures in the Indian leather

industry. CLE serves as a bridge between Indian leather exporters and buyers all over the

world. CLE is committed towards the overall development of Indian leather sector and

achieving higher export growth to enhance India‟s share in global leather trade. It is the

notified Export Promotion organization for entire leather and leather products industry.

iii) Indian Leather Development Programme (ILDP): Department of Industrial Policy

and Promotion (DIPP) has implemented an Indian Leather Development Programme

(ILDP) for the overall industrial growth of leather sector. The thrust of the ILDP scheme is

on technology upgradation and modernization of production units, expansion of production

capacities, creation of institutional facilities in the country, training Human Resources for

the leather sector, support to rural artisans for design and product development, to create

market linkages, environment management in the tanning sector etc. The Government

through its various policy measures is endeavouring to facilitate the leather industry in

augmenting production capacity on modern lines.

iv) Indian Shoe Federation (ISF): Started in 1992, the Indian Shoe Federation has come

a long way and many leading manufacturers and exporters of footwear and footwear

components from India are its members. In addition to helping its members to constantly

upgrade the technology, use of best materials and skill, maintain strict quality control and

fine tuning of customer orientation, the ISF co-ordinates with the Government in

overcoming procedural and policy bottlenecks for a smooth conduct of the business. Its

pro-active initiatives have helped the industry tremendously and have brought it to the

position of eminence that it enjoys today. The ISF is committed in promoting the growth

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of the Indian Footwear Industry globally through adoption of modern, transparent and

superior industry practices.

v) Indian Institute of Leather Fair (IILF): IILF displays the entire range of products

relating to leather industry from raw material to finished products (excepting shoes) and

auxiliary products such as finished leather; shoe components - uppers, soles, heels,

counters, lasts; machinery and equipment, process technology, software, chemicals and

publications. The business visitors will surely be attracted to exhibits displayed by more

than 150 companies, including over 50 from foreign countries. The brand IILF is well

established and recognized by the trade and industry not only in India but in overseas

market also. A large number of companies participate in the show regularly. IILF has

played a catalytic role in showcasing innovative products, technologies and services and

contributed to the economic growth of the country. Apart from mirroring the advances

made by the Indian leather industry, IILF also provides a ready and reliable window to the

status of the global market and its changing demands to enable the industry to review its

marketing strategies and makes it more effective and result-oriented. It is hoped that the

foreign participants take note of the highly conducive climate in India for investment on a

big scale and the returns that these can offer.

Other Contributing Institutions/Associations are:

i) International Council of tanners (ICT) (UK), to promote the interests of the leather

industry internationally

ii) International Council for Hides Skins and Leather Traders Associations

(ICHSLTA), to promote, develop and protect the international trade in raw hides,

skins and leathers.

iii) International Union of Leather Technicians and Chemists (IULTCS), to establish

and to maintain regular contact and effective co-operation between Member

Societies.

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iv) A UNDP-assisted National Leather Development Programme (NLDP), to

upgrade training systems for design and manufacture of footwear, garments and

leather goods.

v) The All India Skin and Hide Tanners and Merchants Association, Chennai

(AISHTMA), to promote the interest of tanning industry, leather trade and other

allied trades and industries.

vi) Indian Finished Leather Manufacturers and Exporters Association (IFLMEA),

it sorts out problems facing the leather industry by undertaking survey of availability

of raw materials, present infrastructures and the technology in the manufacture of

sophisticated and high quality finished leather.

vii) National Leather Technology Mission (NLTM), to promote leather industry

internationally.

viii) National Environmental Engineering Research Institute (NEERI), to overcome

the problems faced by them in day-to-day operation and maintenance of the plants.

ix) People for Ethical Treatment of Animals (PETA), for ethical treatment of animals.

x) The United Nations Industrial Development Organization (UNIDO).

3.1.10 Environmental Impact of Leather Industry

India‟s tanners make leather in a responsible, sustainable and environmentally

friendly way. The leather sector is well known for its effluent problems. Most of the major

leather and footwear produced in developed and developing countries have research and

development laboratories and have pilot effluent treatment facilities which are of benefit in

helping the local industry adopt relevant methods of emission limitation and treatment.

While a number of large tanneries have now set up effluent treatment plants, many smaller

tanneries (in clusters) have been connected to central effluent treatment plants (CETPs) to

recycle the wastages.

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3.1.11 Future Outlook of Leather Industry

a) Establishment of Mega Leather Clusters under ILDP Scheme

The Indian leather industry is operating on low profit margins on account of fierce

competition in the international market. Considering the low risk-taking capacity of the

existing entrepreneurs, it may be difficult to attract investments in large quantities unless

the government also participates in the creation of infrastructure in a big way. The concept

of Mega Leather Clusters seeks to address the constraint of large infrastructure with

integrated production chains in the country.

The major objective of developing Mega Leather Cluster is to create a world-class

infrastructure and to integrate the production chain in a manner that caters to the business

needs of the leather industry so as to cater to the domestic market and exports. In brief,

these mega clusters will assist the entrepreneurs to set up world-class units with modern

infrastructure, latest technology, and adequate training and Human Resource Development

(HRD) inputs. The development of Mega Leather Clusters would help in creating

additional employment opportunities, particularly for the weaker sections of society. The

Mega Leather Clusters may host production units of all segments namely footwear,

footwear components, leather goods (including gloves), leather garments and saddlery and

harness items.

The scheme targets development of Greenfield Mega Leather Clusters with all

required facilities for the functioning of a cluster such as Core infrastructure - road, water,

power, lighting, and sewage lines, parking space etc., Social infrastructure - warehouse,

trade centre, display centre, design studio, hostel with dormitory, raw material bank,

administrative building, health centre etc., Production infrastructure- ready to use factory

sheds with plug in facility for machinery / equipment, HRD - Training Centers,

Recruitment centre, Library, Crèche and Canteen, Labour Restroom etc., Research and

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Development facilities - Product Design and Development Support Centre, Testing

Laboratory, Quality Benchmark Centre, Material and Technology Research etc., and

export services related infrastructure.

Each Mega Leather Cluster will be implemented by a SPV (Special Purpose

Vehicle), which will be a corporate body registered under the Companies Act 1956 formed

by stakeholders, particularly a group of willing entrepreneurs (minimum being seven

legally independent companies) that are engaged in leather tanning, manufacturing of

leather goods and components and other activities associated with the leather industry and

who intend to set up production units in the proposed Mega Leather Cluster. The SPV

would formulate, achieve financial closure, implement and manage the infrastructure.

Proposals are being prepared by the SPVs for establishing six Mega Leather Clusters in
various parts of the country.
i) Three clusters in Uttar Pradesh (Ramaipur, Sandila and Agra)
ii) One cluster in Haryana (Mewat)
iii) One cluster in Andhra Pradesh (Tada Mandal)
iv) One cluster in Tamil Nadu (Perambalur)
b) Establishment of Leather Tanning Complex in Andhra Pradesh under ILDP

Scheme

A Leather Tanning Complex is coming up at Nellore district, Andhra Pradesh. The

SPV is taking necessary action to establish the Leather Tanning Complex in Nellore

district, Andhra Pradesh.

c) Upgradation / Installation of Infrastructure for Environment Protection in the

Leather Sector under ILDP Scheme

This sub-scheme provides financial support to the CETPs to meet the prescribed

pollution control discharge norms, by way of establishment of infrastructure viz.,

establishment of CETPs, installation of Reverse Osmosis system and reject handling etc.

Broadly, the scheme would cover establishment / expansion / upgradation of CETPs,

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developing Secure Land Fills, conversion of waste into some bye-products and any other

techniques for hazardous waste management.

d) Setting up of Leather Parks : under ILDP Scheme

The sub scheme of leather parks under ILDP was proposed during XI Plan for

addressing the infrastructure constraints faced by leather industry in the country. The

scheme would be assisting the industry in addressing the infrastructure needs of the entire

sector in a holistic manner. This would enable the industry in improving its global

competitiveness, apart from meeting the regulatory and trade related compliances. The

scheme will cover the entire value chain of leather industry i.e., tannery, finished leather

products, footwear components etc. The strategy is to aggregate the demand of the industry

in the form of clusters and to develop need-based infrastructure for them through exclusive

leather parks/complexes.

The basic concept of a complex is to develop a particular industrial sector

demanding a special and common infrastructure in one select location and to organize the

planned growth of a group of industries. Complex is like a well planned and constructed

city. Development of leather industry in complexes has started gaining importance in

European, Asian and Latin American Countries. Realizing that infrastructure is the key to

a globally competitive leather industry, the Department has laid emphasis on setting up of

infrastructure for the growth of the leather sector in the XI Plan Period. It proposes to

establish at least six to seven parks during the XI Five Year Plan period with the total

outlay of Rs.300 Crore. Establishment of such parks will enable the provision of

infrastructure in a more cost effective manner, will help in addressing the environmental

concerns more effectively, will ensure greater sustainability of the efforts finally resulting

in positive impact on the competitiveness of Indian leather industry.

e) Human Resource Development Sub-Scheme of LDP

HRD sub-scheme would target potential work force in the rural areas and would

lay stress on skill development and technical development. The main objective of this

scheme is to upgrade the skills of the existing workforce which would lead to the

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improvement in production as well as quality, upgrading the skills of the trainers/experts

of technical institution/NGOs involved in the project and expose them to the best practices

to spread and sustain a technology culture in the Indian leather sector.

The expected outcome of the intervention of HRD sub-scheme will enhance the

skills of the operators to produce technically better products for the consumers and will

help establish Indian Brands. Imparting market based skills on shop floor operations to the

youth through a demand driven Skill-Development Programme and making them

employable in the leather industry and placing the successful trainees in leather units are

other expected outcomes.

f) Leather Technology, Innovation and Environmental Issues: Sub-Scheme of LDP

Leather Industry and tanning activity in particular, all over the world is linked to

environmental concerns. The environmental issues are slowly gaining ground and

extensive measures are to be put in place for industries to cope with the stringent norms.

Tanneries have taken considerable steps to address the issue of waste water treatment.

Tanneries are connected to wastewater treatment mechanisms, which could render the

wastewater amenable to discharge. Zero wastewater discharge is also made mandatory in

some states and the tanneries have installed adequate amenities in place to attain zero

waste water discharge. However, the environmental issues continue to exert significant

force of down pulling; this is one issue that is directly connected to the sustainability of the

industry. Assistance could be provided for the following four categories of environment

related projects:-

i) Technology Bench Marking and Environmental Management for Leather Sector:

The objective of the scheme is to enhance the sustainability of Indian Leather Units by

providing financial and technical support for assessing the process technology adopted at

present and re-engineering them in order to add economic and environment benefits

ii) Common Effluent Treatment Plants (CETPs): This component would provide

financial support to Leather Cluster to meet the prescribed pollution control discharge

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norms. This would cover establishment / expansion / upgradation of CETPs, developing

Secure Land Fills and any other techniques for hazardous waste management. Other

actions taken to reduce the environmental issues by tanneries are Chrome Recovery, Zero

Liquid Discharge Technology through RO and Bio Processing.

iii) Solid Waste Management: The aim of this scheme is to involve the industry in the

utilization of solid waste from tanneries for the production of valuable products that could

be utilized locally.

iv) Environment Related Workshops: This scheme aims at organizing the workshops to

educate and train the tanners and tannery employees on housekeeping, chemical storage

and handling, safety and health and enhancing productivity and quality.

3.1.12 Leather Process

The leather process is divided into two components

a) Tanning and Finishing

b) Manufacturing Leather Goods and Garments

a) Tanning and Finishing

Figure 3.1.12.1

Skins received
Soaking Liming Deliming
from
Slaughter
houses
Dyeing Adjusting Tanning
the
thickness
Softening Buffing Finishing

Leather for
making leather
products

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b) Manufacturing Leather Goods and Garments

Figure 3.1.12.2

Pattern making Cutting Inspection

Stitching Stamping Skiving

Upper ready Lasting department Toe puffing

Side lasting Toe lasting Counter lasting

Insole fixing Roughing Sole pasting

Finishing De-lasting Heat setting

Packing

3.2 LEATHER INDUSTRY IN TAMIL NADU

Tamil Nadu has a dominant presence in the leather and leather based industries.

The tanning industry in India has a total installed capacity of 225 million pieces of hide

and skins of which Tamil Nadu alone contributes to an inspiring 70%. Leather industry

occupies a pride of place in the industrial map of Tamil Nadu. Tamil Nadu enjoys a

leading position with 40% share in India‟s export. The large scale presence of the Tanning

industry in Tamil Nadu has made it a dominant production centre in the country for leather

and leather based products. In Tamil Nadu 0.5 Million people are employed in the

industries dealing with leather and leather based products especially to the illiterates and

Scheduled Castes. (www.sinetinfo.com).

With the expansion and huge investment in national and international reputed

brands, the employment opportunities in this sector is increasing globally. It is estimated

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that the leather industry will require at least one million additional human resources in the

next five years. Apart from this the major strength of Tamil Nadu is the availability of raw

materials at cheaper cost, well equipped with tanning and finishing and plenty of

traditional skilled employees in training, finishing and manufacturing downstream

products. Out of the 19 common effluent treatment plants 14 are operational in Tamil

Nadu which shows the significance of leather production (www. wikipedia.com). In

respect of leather, a sizeable percentage of goat and sheep skins as well as calf skins are

also processed in better organised modern tanneries of Tamil Nadu. The key production

centers of leather goods in Tamil Nadu are located in Vellore district which includes

Ranipet, Ambur and Vaniyambadi taluks.

3.3 LEATHER INDUSTRY IN VELLORE DISTRICT

Vellore district has a dominant presence in leather and leather based industries. In

Vellore district the leather companies are primarily focusing on quality of leather and

leather products other than productivity to achieve a supreme place in the global market. It

accounts for more than 37% of the country‟s export of leather and leather related products

such as finished leathers, shoe uppers, shoes, garments, gloves and so on. The Govt. of

Tamil Nadu provides all possible capital subsidies and infrastructural support in the form

of setting up Industrial Estate and common effluent treatment plant (Directorate of

Industries and Commerce – District Industries Centre, Vellore district). Most of the

companies work on subcontract basis i.e., design, component selection and methods of

production which are given by the buyers of large scale companies. The proximity to

Chennai, the State capital, good transport with well-connected roads, availability of power,

raw materials and abundant cheap labour are the contributing factors for the industrial

development in Vellore (Directorate of Industries and Commerce – District Industries

Centre, Government of Tamil Nadu) and (www. wikipedia.com).

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3.4 INTRODUCTION TO HUMAN RESOURCE PRACTICES

Meaning of Human Resource

Human Resource refers to the individuals or personnel or workforce within an

organisation responsible for performing the tasks given to them for the purpose of

achievement of goals. Human resources are otherwise called as manpower, labour,

personnel, or simply people.

Meaning of Human Resource Management

Human resource management is the function within an organization that focuses on

recruitment of, management of, and providing direction for the people who work in the

organization.

Definition of Human Resource Management

According to Decenzo and Robbins, "Human resource management is a process,

consisting of four functions; acquisition, development, motivation and maintenance of

human resources".

According to Gary Dessler, "Human resource management refers to the policies

and practices one needs to carry out the people or human resource aspects of management

position including recruiting, screening, training, rewarding and appraising".

According to G.R. Agrawal, "Human resource management is a process concerned

with the management of human energies and competencies for achieving organizational

goals through acquisition, development, utilization and maintenance of a competent and

committed workforce in a changing environment".

Meaning of Human Resource Policies

According to Investopedia, “Human resource policies are systems of codified

decisions, established by an organization, to support administrative personnel functions,

performance management, employee relations and resource planning”.

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3.4.1 SEVEN FACTORS OF HUMAN RESOURCE POLICIES

a) Recruitment and Selection

According to Edwin B. Flippo, “Recruitment is the process of searching for

prospective employees and stimulating them to apply for jobs in the organisation”.

Sources of recruitment

Internal sources External sources

i) Promotion i) Management consultant

ii) Departmental exam ii) Employment agency

iii) Transfer iii) Campus recruitment

iv) Retirement iv) News paper advertisement

v) Internal advertisement v) Walk in interview

vi) Employee recommendation

Employee Selection is the process of putting right men on right job. It is a

procedure of matching organizational requirements with the skills and qualifications of

people. Effective selection can be done only when there is an effective matching.

Employee selection also refers to the the process of interviewing and evaluating candidates

for a specified job and selecting an individual for employment based on certain criteria.

The Employee selection process takes place in following order-

i) Initial screening interview

ii) Completion of the application form

iii) Employment test - Written test and Performance simulation test

iv) Comprehensive interview

v) Background interview

vi) Physical examination

vii) Final employment decision

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b) Job Analysis

Job analysis is a systematic exploration, study and recording the responsibilities,

duties, skills, accountabilities, work environment and ability requirements of a specific job.

It also involves determining the relative importance of the duties, responsibilities and

physical and emotional skills for a given job. All these factors identify what a job demands

and what an employee must possess to perform a job productively.

The outcomes of job analysis are job description, job specification and job

evaluation. Job analysis helps to develop job design and job design matches the

requirements of the job with the human qualities required to do the job. Job rotation, job

enlargement and job enrichment are the methods of job design.

c) Training

Though there are several definitions available, the most convincing definition by

Wayne Cascio is given here. According to him, “training consists of planned programmes

undertaken to improve employee knowledge, skills, attitude, and social behaviour so that

the performance of the organization improves considerably”.

Techniques of Training

On the job training Apprenticeship Vestibule Off the job training

training training
i) Job rotation i) Simulation

ii) Planned progression ii) Business games

iii) Coaching and counseling iii) Committees

iv) Under study iv) Readings

v) Junior boards v) In-basket training

vi) Case studies and

Seminars

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d) Compensation
Compensation is the remuneration an employee receives in return for his or her

contribution to the organization. Remuneration occupies an important place in the life of

an employee. His or her standard of living, status in the society, motivation, loyalty, and

productivity depend upon the remuneration he or she receives.

Compensation / Remuneration

Financial Non - Financial

-Challenging job
Hourly and Incentive Fringe benefits
-Responsibilities
monthly -Individual plans -Provident fund
-Recognition
rated -Group plans -Gratuity
-Growth opportunities
-Wages -Medical care
-Working conditions
-Salaries -Accident relief
-Job sharing etc.
-Health
insurance etc.

e) Performance Appraisal

According to Edwin Flippo, “Performance appraisal is the systematic, periodic and

an impartial rating of an employee‟s excellence in matters pertaining to his present job and

his potential for a better job”.

It serves two functions. First, it enables management to evaluate an individual's

performance in the current job to identify strengths and overcome weaknesses. Second, it

provides information to assist management plan, postings, transfers and promotions. In so

doing, management is able to compare performance and potential between officers of the

same rank.

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 Methods or Techniques of Performance Appraisal

Traditional methods Modern methods

i) Check list method i) Role analysis

ii) Confidential report ii) Assessment centers

iii) Critical incident method iii) Management by objective

iv) Ranking method iv) Behavioural anchored rating scale

v) Graphic rating scale v) Psychological testing

vi) Narrated essay vi) Human resource accounting

vii) 360* Appraisal

f) Workplace Amenities and Environment

Workplace amenities and environment can be defined as the place that one works,

which means the milieus around the person. It is the social and professional environment

in which a person is supposed to interact with a number of people. It has a significant

impact on employees‟ performance and productivity. When people are working in

situations that suit their physical and mental abilities, the correct fit between the person

and the work task is accomplished. People are then in the optimum situation for learning,

working and achieving, without adverse health consequences, e.g. injury, illness.

Important factors in the work environment that should be considered include

building design and age, workplace layout, workstation set-up, furniture and equipment

design and quality, space, temperature, ventilation, lighting, noise, vibration, radiation and

air quality.

g) Employee Benefits

Employee benefits and benefits in kind (also called fringe benefits, perquisites, or

perks) include various types of non-wage compensation provided to employees in addition

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to their normal wages or salaries. Examples of these benefits include housing, group

insurance, disability income protection, retirement benefits, day care, tuition

reimbursement, sick leave, paid vacation, social security, profit sharing, funding of

education and other special benefits and allowances.

3.4.10 COMMONLY USED MAJOR HUMAN RESOURCE PRACTICES IN SIX

LARGE SCALE LEATHER COMPANIES

The study focused on six large scale leather companies in Vellore district namely

Farida Group, T. Abdul Wahid and Co., N. M. Zackriah and Co, KH Leather Industries

Private Limited, KAR Group and Florence Shoes Private Limited which are engaged in the

activities of manufacturing shoes (shoe uppers, soles and full shoe) and are practising

major human resource policies and practices consistently and effectively for the

enhancement of job performance of employees. These practices include recruitment and

selection, job analysis, training, compensation, performance appraisal, workplace

amenities and environment and employee benefits.

a) Recruitment

The leather companies follow both internal and external sources of recruitment.

The internal sources of recruitment adopted by the leather companies are promotion and

transfer. Direct application, referrals, notice/pamphlets, banners, camp survey and

advertisement in local channel are the external sources of recruitment followed by them.

The referring employee is provided Rs. 200 to Rs. 500 as commission by the employer.

b) Selection

The following are the step by step selection processes adopted by the leather companies:

i) Application screening: It is done based on skill and experience of applicants.

ii) Selection test: Being manufacturing companies, technical test is conducted for all the

applicants and proficiency test is conducted for the experienced employees.

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 iii) Personal interview: Finally, personal interview is conducted to get information

regarding their socio-economic background and to negotiate remuneration.

c) Job Analysis and Design

The leather companies are adopting both line process and team work methods for

producing the product. The techniques adopted for producing the final product vary

according to the design of the shoe. Technology is upgraded according to the size and

profit of the company. But apart from profit, the main objective of majority of the

companies is to provide quality product to attract buyers from foreign countries. The type

of work is well explained when the employee enters the organization. Employees get

experienced with the product, process and methods during training period.

The line-in-charge employs close supervision to guide, monitor and control the

work of employees according to the quality standards and target fixed per day. He also

communicates all the changes in work methods. The work timings for the employees in all

leather companies are eight hours i.e., from 9.00 a.m. to 5.00 p.m. Shift work is not

followed by the leather companies. Overtime is provided to adjust the holidays apart from

nine public holidays and according to the orders from buyers.

d) Training

The training provided by the leather companies is divided into two types. They are

i) On the Job Training: This kind of training is provided for technical employees. In

leather shoes manufacturing companies technical employees are called stitchers. The

training period is for one to six months. In those six months, for the first three months

basic training such as paper cutting and stitching practice is provided and for the next three

months training is provided in the manufacturing area. If an employee performs well as per

the expectations of the trainer, his training period comes to an end without considering the

full training period. After six months according to the performance of the employees, they

will be posted with the following grades:

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 i) Skilled – A (stitching, quality control inspection and cutting)

ii) Semi-skilled – B (attaching, folding etc.) and

iii) Unskilled – C (pasting etc.)

ii) Soft Skill Training: Quality management and stress management are the soft skill

trainings provided to improve the quality of products and to reduce the stress of

employees.

Compensation during Training Period

During training period full salary is not provided to employees because they are

treated as apprentice and they are provided salary according to the Apprentice Act. If an

employee is a fresher he will be getting half a month salary during training period. But it

varies from company to company. Usually after getting one year of experience, the

company employs the employee on permanent basis.

According to Factories Act, every manufacturing company should take minimum

six months and maximum eighteen months to make an employee permanent. But

practically it is not followed by leather companies. If an employee performs well, within a

year he will become a permanent employee and after 18 months even though an employee

is not performing well, he will become a permanent one with a minimum designation i.e.,

unskilled – C.

e) Compensation and Employee Benefits

The leather companies follow time cum output based salary method for the blue

collar employees. The increment provided is based on experience and it is fixed for all the

companies i.e. 5% - 10%. Sometimes based on company policy it may be increased but

cannot be decreased. Yearly increment Rs. 200 is fixed by some companies. The incentive

provided by the company varies according to the grade of employees (A, B and C grade).

For team work, the amount of incentive is shared equally by all the employees in a team.

Basic pay is provided as per Tamil Nadu Government Act. According to the revision of

Minimum Wages Act, September 2014, employees working in leather shoes

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manufacturing companies, B Zone (employees in town) are getting the following basic

salary:

i) Skilled- Rs. 4,476

ii) Semi-skilled- Rs. 4,191 and

iii) Unskilled- Rs. 3,906

Dearness Allowance (DA) is fixed equally for all grade employees as per

Consumer Price Index points for Industrial Workers in Chennai, received from Labour

Bureau Southern Region and it is amounted for Rs. 1843 (237 points). This may increase

or decrease monthly wise, but basically the change in DA ranges between Rs. 200 to Rs.

300 (calculated by keeping 2001 as an Index base year). 12% Provident Fund (PF) is

provided for employees and equal proportion is contributed by the company. The ceiling

limit for PF is Rs. 15,000. Double the wage rate is provided if an employee works for

overtime.

ESI is provided as per the Employees State Insurance (ESI) Act. The ceiling limit

for ESI is Rs. 15,000. Bonus is offered during appropriate festival seasons. If majority of

the employees are Christians, the bonus is provided during Christmas. Minimum 8.33%

and maximum 20% bonus is provided as per the Bonus Act. Practically the companies are

following 15.5%, 17%, 18% etc., as bonus. If the management wishes it may give 22% and

24% bonus also. It is also given in advance if an employee needs it. House Rent

Allowance (HRA) is also provided by some companies.

f) Performance Appraisal (100 marks)

Performance appraisal is calculated for 100 marks. Out of 100 marks, 80 marks are

calculated on the basis of quality, efficient production and target achievement of

employees and 20 marks are awarded on the basis of employees‟ punctuality, timing, co-

operation, etc. For example, even though an employee performs well as per the quality

standards and target, if his regularity to the company is unfair subsequently his

performance evaluation may reach B or C grade. The eligibility criteria for employees to

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get incentive is 50% of performance standards. The incentive provided for different graded

employees who reach 100% performance standards is as follows:

i) A grade – Rs. 500 /month

ii) B grade – Rs. 450 /month
iii) C grade – Rs. 400 /month
Therefore different companies follow different incentives for different categories of

employees (A, B and C). Some companies do not provide incentive to employees at all.

Target: It is fixed by the National Productivity Council (NPC) and Industrial Engineering
and it varies from process to process.
g) Promotion, Transfer and Separation

Employees are promoted and transferred from B to A, C to A and C to B and also

demoted from A to C and B to C according to his/her performance. Transfer is done

according to the quantity of production of company and when an employee is on leave.

Employees are removed from the job unless they leave the organization and also due to

malpractices, bad performance etc.

h) Leave Rules

Earned Leave and Casual Leave are for 12 days in a year. Apart from nine

stipulated holidays, other holidays‟ days may vary according to the religious based

majority of employees. If the holidays increase, they will be adjusted on Sundays.

i) Workplace Amenities and Environment

It is provided as per the guidelines of OHSAS 18001 Certificate and as per

Factories Act. Almost all provisions related to health, safety and welfare measures are

provided to blue collar employees working at floor level, like crèches, first aid, nurse,

canteen, washing allowance, gloves, mask, meddle guard, ventilation, heat protection

equipment, RO water plant etc.

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j) Job security

It is provided to all the employees unless they engross in malpractices and perform

below the quality standards towards their job.

k) Leadership

Leather companies follow both participative and democratic type of leadership. All

the employees are treated as human beings and special attention is given to women

employees.

l) Social Accountability Certificate 18000

Every company should obtain a “Social Accountability Certificate 18000” and such

certificate is provided to the company which follows:

i) Restriction of child labour

ii) Restriction of forced labour

iii) Restriction of working above eight hours

iv) Restriction of working on daily OT

v) Prohibition of Promotion increment discrimination

vi) Prohibition of sexual harassment

A company which obtains this certificate is considered as a benevolence company

and the buyers will place the orders without inspecting the company. If the companies do

not possess this certificate, before placing the order the buyers will inspect the company to

verify whether all the above conditions are in place and then if they are satisfied they will

place the order.

m) Motivation and Rewards

In leather companies motivation is purely linked with performance appraisal i.e.,

monetary based motivation is provided for products produced by employees as per quality

standards. Motivation followed by leather companies varies from company to company.

Some companies provide only technical guidance, counselling and negative motivation i.e.

“If you do not perform well you will be detached or fined”. Some organizations conduct

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motivational classes on quality standards by arranging resource person from VIT and other

Delphi persons.

n) Communication

Leather companies adopt two way communication systems. Line-in-charge is

always close to the employees to inform about the changes in the work and to give

information concerning company‟s policies and practices. Methods adopted for

communication differs according to the size and financial stability of company.

o) Retention

To retain the efficient employee, high salary is provided by the organization by

comparing it with other organizations. Counselling is also provided to those employees

who intend to quit the organization.

p) Committees (Eight Employees – Voted by Employers and Employees)

It consists of work committee, safety committee, canteen committee and anti-

harassment committee. This differs according to the type and size of company.

q) Grievance procedure

As per Factories Act, leather companies adopt work committee and the

representatives of the committee are selected by the employees. They deal with the issues

like health, safety and welfare provisions and other tiny problems. Salary related problems

are dealt by the HR manager. Production issues are dealt by the union leader and

production manager. Separate suggestion box and grievance committee exist in some

companies to solve these issues.

r) Code of discipline

Simple code of discipline is followed by leather companies such as restriction of oil

to the hair and Kungumam, punctuality to the organization etc. No dress code is followed.

Uniform clothes are given only to certain category of employees.

Thus all the six leather companies practise healthy human resource practices and

the employees seem to feel comfortable to work in the leather companies.

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