Arrears worsen leather sector’s woes

The crisis in the leather and leather goods industry has deepened further as the tanners are yet to pay Tk 350 crore in arrears fully to the rawhide merchants.

In August, the tanners agreed to settle the arrears at a meeting brokered by the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).

“The tanners have paid the highest 15 percent of the arrears to the rawhide merchants so far,” said Tipu Sultan, general secretary of the Bangladesh Hide and Skin Merchants Association (BHSMA).

The merchants could not buy the rawhides, as the tanners did not clear all the dues before Eid, he said.

As a result, seasonal traders and farmers did not find buyers and had to throw away 35 percent of more than 1 crore pieces of rawhides collected during the last Eid-ul-Azha.

“Still they are promising to pay the arrears,” Sultan said.

He said the tanners are buying the rawhides collected during Eid-ul-Azha by paying only 10 percent to 15 percent of the price. What is more, tanners are buying rawhides on credit this year.

At present, tanners are settling the arrears for 2017, 2018, and 2019 and are saying that they would pay the committed arrears in phases, Sultan added.

According to the decision of the meeting in August, tanners are supposed to clear the arrears in three phases: from 1990 to 2010, 2010 and 2015, and 2015 to 2019.

At the meeting, the merchants demanded the arrears accumulated since 1990 and the tanners agreed. The tanners were supposed to clear 50 percent of the dues of the period between 2015 and 2019.

Sheikh Fazle Fahim, president of FBCCI, said a significant amount of the money has already been paid to the merchants based in Dhaka.

The tanners have promised that they would clear the dues gradually, Fahim told The Daily Star by phone.

Md Shaheen Ahmed, president of the Bangladesh Tanners Association, said both tanners and merchants would sign a memorandum of understanding soon on settling the arrears.

He said the tanners have already paid a significant amount of the arrears.

The problems in the rawhide business have not been resolved as the merchants did not receive the expected arrears, said Ali Hossain, a former president of the BHSMA.

Rather, nearly 40 percent of the rawhides have remained unsold even two months after Eid. The merchants are selling salt-applied cowhides at prices as low as Tk 600-700 per piece, he said.

“The quality of the rawhide is deteriorating every day as they have remained unsold for a long time.”

According to Hossain, the whole chain of rawhide and leather and leather goods business is facing troubles now.

For instance, the tanners can’t pay the merchants and the merchants can’t buy the rawhides at fair prices from grassroot traders and farmers.

“As a result, nobody is getting better prices,” Hossain said. He said tanners also can’t sell tanned leather at better prices because of poor compliance at the Savar Tannery Industrial Estate.

Tanners have to sell tanned leather at 40 percent lower prices to Chinese non-compliant buyers as European and American buyers are not interested to buy the leather from Bangladesh as the country has not obtained the vital Leather Working Group certification.