The imposition of sharp 10 percent customs duty on import of finished leather products will lead to the price increase, manufacturers said on Monday.
The hike would also make it difficult for the manufacturers of footwear and other leather products to remain competitive in exports due to higher input costs.
Finance Minister Nirmala Sitharaman has proposed to impose a basic customs duty of 10 per cent on "wet blue chrome tanned leather, crust leather, finished leather of all kinds, including splits and sides" from nil duty.
Reacting to the announcement, Harkirat Singh, managing director, aero club, which operates in the shoes and apparels segment through brand - woodland and woods, said this might lead to an increase in costs.
"The 10 percent customs duty hike on the leather is in line with its intention to promote local sourcing and might lead to an increase in costs till we manage to find alternate sourcing hubs without compromising our quality standards though we do welcome the intention of being self-reliant," he said.
Expressing similar views, Iatric Industries Director and CEO Ashish Jain said that for the footwear industry, there are no major benefits in the budget.
"We were looking for production linked incentives being announced for footwear and leather, for it is one of the top employment sectors of the world. Also, increased leather prices would make things difficult for leather footwear exports and domestic prices," he said.
Harkirat Singh also welcomed the government's commitment of Rs 1.97 lakh crore to the manufacturing sector in India to boost employment.
"The government is making conscious efforts to promote domestic production in India," he said.
In addition to that, the government has also increased the duty on import of raw silk and raw cotton to 15 per cent and reduced the duty on nylon chips and nylon fibre and yarn to help the industry.
Ishaan Sachdeva, Director, Alberto Torresi footwear brand, said, "The finance minister made many key changes to improve business standards and also make India self-reliant. As to the textile industry, the industry took a hit due to the pandemic, but tax exemption on the import of leather has been withdrawn, leaving a scope for huge opportunities in the near future."
Exporters will now derive incentives out of their products and special leather will act as a great substitute for the leather for which the companies would have to pay a larger amount, he said.
"Customs duty hike to make leather expensive. The government has also taken a huge step towards boosting employment, by promising an amount of Rs 1.97 lakh crores to the manufacturing sector in the country. We look forward to the schemes announced by the government being implemented soon," Sachdeva noted.