RAWHIDE TRADE AND SYNDICATE
Record low price of rawhide
An unusually low price of rawhide has precipitated a deeper crisis as traders are abandoning rawhide all over the country in absence of even a minimum price. The government decision to allow
export of rawhide in this situation is not clear how it would immediately stabilize the market.
Prices of rawhide were fixed this year by the government after a meeting with representatives of traders and tanners but it collapsed on the Eid-Day as traders and tanners started blaming each other for precipitating the crisis.
Seasonal traders are blaming merchant traders for offering throw away prices apparently taking the market hostage to force them to sell at unusually low price. Merchants are on the other hand blaming tanners for not paying arrears of Tk 3 billion running them short of fund to buy enough rawhide at fair price.
In this situation, the Commerce Minister on Tuesday announced the removal of ban on export of rawhide in a bid to allow merchants traders to buy at fair price from seasonal traders hoping that they could sell at higher export price.
It is not clear why the industry is falling short of fund when five state-owned banks alone lent Tk 655 crore for buying rawhide on this occasion. Moreover, tanners should have their own fund for the occasion.
The government this year left the minimum prices unchanged from last year at Tk 45 to Tk 50 per square foot of rawhide of cattle in Dhaka and Tk 35 to Tk 40 sqf in the rest of the county. The price of goat hide was set at Tk 18 to Tk 20 and Tk 13 to Tk 15 for 'Baqra' goat hides across Bangladesh.
As per government set price, price of each 20 to 35 sq ft cattle rawhide should vary between Tk 900 and Tk 1,750 but tanners are reportedly offering between Tk 300 and Tk 500 for the same. Rawhide merchants are therefore refraining from buying from seasonal traders forcing them to dump their collection. But tanners are blaming a 'syndicate' of merchant traders for not buying while waiting for buying at low cost at the end.
The seasonal traders in Dinajpur - the rawhide trade hub in the north and Chattogram left thousands of rawhides in dumping ground after being offered meagre prices or failing to find any buyer and seller.
Meanwhile, the commerce ministry's move removing the ban on export of rawhide came has also raised the question whether or not it will help to resolve the crisis. Commerce Minister's bid to give 'reasonable price' to traders has no guarantee that exporters will get fair price and that it will protect the country's interest.
Many question whether Indian buyers will give fair price when local tanners are not paying fair price. Local wholesalers and merchants have however welcomed the decision because it will remove their dependence on local tanners as the only buyers.
Half the 125 million cattle slaughtered in the country this year come from sacrificial animals. The decision to export rawhide will threaten local leather, leather products, and footwear industry. Bangladesh Hide and Skin Merchants' Association General Secretary Tipu Sultan said, "The government decision to export rawhide will benefit us." He blamed tanners for creating the situation by withholding their fund (Tk 3 billion) which has dried their capacity to mobilize capital to buy. "We have not enough money, tanners have crippled us," he said.
"This is why hide price is so low, it will drop further if the situation lingers," Tipu added.
Chattogram Rawhide Merchant Cooperative Association President Abdul Kader said the tanners of Dhaka were yet to pay around Tk 500 million for rawhides sold previously. He wondered why the government didn't move earlier to prevent the situation.
Bangladesh Tanners' Association President Shaheen Ahmed however denied the allegations of arrear dues. He admitted there have been "some" dues as 30 to 40 per cent tanneries were yet to start production after shifting to Savar from Hazaribagh. "But that cannot be a reason to cut rawhide price," he added.
Shaheen brought a counter allegation saying rawhide merchants have formed a syndicate to manipulate the market and deceive the seasonal traders.
"They will charge the government-fixed prices when they sell to tanners," he said. Bangladesh Finished Leather and Leather Goods Exporters Association Senior Vice-President Diljahan Bhuiyan fear leather industry will face a dire situation once rawhide export begins as the industry is dependent on domestic markets for its main raw material - rawhide.
"We've built an industry by spending tens of billions of taka. We can operate for maximum three to four months with rawhide from the domestic markets and keep the factories closed for the rest of the year without rawhide collected on the occasion of Eid-ul-Azha. This industry will be totally destroyed if the government permits rawhide export," he said.
He said they have no money to buy. Otherwise they would have bought at this low cost market, he said. The country's 220 tanneries process around 2.5 billion sq ft rawhide annually while 93 large and listed footwear producing firms make more than 378 million pairs. If the bulk of the rawhide go for export, the wheels of the industry will stop running, he said.