Nepal's leather industry, which has been gradually recovering from the impacts of the COVID-19 pandemic, is now grappling with a shortage of raw hides, hampering production and export potential.

According to the Biratnagar Customs Office, leather exports have shown an upward trend in recent years. In the fiscal year 2020/21, Nepal exported 821,629 kilograms of leather worth Rs 105.9 million through the Biratnagar customs checkpoint to India and third countries. In 2023/24, exports rose to 1,224,798 kilograms, valued at Rs 211.7 million. By mid-February of the current fiscal year (FY 2024/25), the country has exported 685,462 kilograms of processed leather worth Rs 108.07 million. The customs office projects that exports will surpass last year's volume by the end of this fiscal year.

Despite this growth, exports remain significantly lower than the fiscal year 2017/18, when Nepal exported 5.13 million square feet of leather worth Rs 376.1 million. Nepal mainly exports processed leather to India, China, Italy, Mexico, France, Turkey, and Latin American countries.

Industrialists report that the shortage of raw hides within the country has severely impacted production. The 12 leather industries operating in Biratnagar and Birgunj are struggling to source raw materials. To address this, they have requested permission to import semi-processed leather, allowing for value addition and re-export.

Javed Nabi, Central President of the Nepal Leather Industry Association and operator of Nepal Tanning Industries Pvt. Ltd., stated that the decline in raw hide production is largely due to the closure of slaughterhouses, particularly in the Koshi Province.

"Nepali leather can only meet the demands of three industries. Therefore, we have urged the government to allow the import of semi-processed leather and raw hides from India," Nabi said.

Two weeks ago, the association submitted a proposal to the Ministry of Industry, requesting the reduction of customs duties on chemicals used in leather processing and permission to import semi-processed leather. Nabi noted that during the pandemic, industries were forced to halt operations, and did not get the orders as expected from Europe and other markets post-pandemic.

Junaid Iftikhar, General Secretary of the association, highlighted that the Russia-Ukraine war has also reduced demand from key markets like Italy and China. Although the government provides a 6% export subsidy, Iftikhar mentioned that industries lack access to concessional loans and other facilities. He added that delays in disbursing cash subsidies are further affecting production.

Nabi also revealed that Nepal’s leather production capacity has declined by 75% due to the pandemic and the ongoing Russia-Ukraine war. "With reduced demand from Europe and the US, industries are now operating at just 25% capacity," he said.

Currently, four industries—Asian Leather Industry, Nepal Tanning Industry, Golden Leather Industries, and United Leather—export leather via the Biratnagar customs checkpoint. One industry in Biratnagar has already shut down, while eight others continue operations in Birgunj.

Hassan Ansari, operator of Asian Leather Industry, stated that the Russia-Ukraine conflict has severely impacted industries already weakened by the pandemic. "Exports have declined, except to India and a few other countries, leading to reduced production. The government should provide facilities like reduced bank interest rates to support the leather industry," he urged.