A deepening slump in the prices has led to a crisis of supply of rawhides and skins to the country's leather industry during this peak season. Nervous traders are reluctant to sell the hides and skins of sacrificial animals to the industry to avert losses.
The lowly set official rates are being cited as the reason behind such plummeting prices. Amid such a mismatch in the leather sector, fears are rife that much of the hides could be smuggled out to the neighbouring countries. In that eventuality, the domestic leather industry may face shortage of supply of this material.
Leather and leather goods are the second-highest export-earners after readymade garments. The sector fetched US $1.23 billion last fiscal year, according to the Export Promotion Bureau (EPB).
The supply of hides and skins dropped in the city's Posta area, a key wholesale hub of animal hides in the country, as seasonal traders are maintaining a wait-and-see stance. Prices of animal hides fell by 20-30 per cent in the country during the Eid-ul-Azha. The price of per-square-foot cow rawhide was fixed at Tk 50-55 in Dhaka and Tk 40-45 outside of the capital. For the goat hides the rate was Tk 40-45 and for she-goats Tk 15-17 across the country.
On their part, traders are attributing the slump to fund crisis, high salt prices and relocation of tanneries outside Dhaka city. The country's tanners usually collect 65 to 70 per cent of their required hides and skinss during the occasion of animal sacrifice by devoted Muslims.
As of now, a small-sized cowhide is being traded at Tk 600-Tk 800, medium one at Tk 800-Tk 1000, big-sized at Tk 1000-Tk 1500 a piece at Posta for last few days. The prices are 20-30 per cent lower compared to that of last year.
There is an allegation by some rawhide wholesalers that the tanners did not pay them more than Tk 1.5 billion during the last two years. In such a situation, the collection of hides and skins might drop by 20-25 per cent this year compared to that of last year when 4.8 million pieces of cowhides and 7.1 million of goatskins were collected.
Meanwhile, Bangladesh Tanners Association (BTA) chief said many tanners could not manage adequate funds from banks. Only 20 of the tanners were now running their operations while majority of them could not do so for lack of gas connection and incomplete factory structures.
Many people think that the government fixed the prices of rawhides and skins without taking into account the average inflation rate. Hide traders believe if the market forces worked, the prices of rawhides would have been higher as the number of sacrificial animals was at least 10 per cent lower this year compared to that of last year due to floods and non-availability of cattle in many parts of the country a day before Eid-ul-Azha.
A state-owned bank, which usually invests the largest amount of money for hide purchase, did not disburse their special loan this year as many tanners failed to repay their loans. On the other hand, there is no tangible coordination among the Bangladesh Finished Leather, Leather-goods, and Footwear Exporters Association (BFLLFEA), Bangladesh Tanners Association (BTA) and Bangladesh Hide and Skins Merchants Association (BHSMA) for collecting rawhide jointly across the country.
The authorities had been reducing the prices of rawhide of sacrificial animals every year from 2013 to 2016 in the name of fall in the prices on the international market and high relocation cost of tanneries. In the years 2011 and 2012, they did not set the prices of rawhides of sacrificial animals and the market price of cowhide was Tk 110-Tk 120 per square foot across the country.
In the circumstances, the government should provide loan to the tanners immediately to bail out the leather sector from a dull business cycle. Also, it needs to raise vigilance on the borders to prevent widespread smuggling of rawhides outside the country.
