Presented  to                                
Pakistan  
Tanners  
Association            

Author:                                              
Kashif  Chaudhry  
  
 Background:  
 
The   nation   often   finds   government   statistics   questionable.     This   trust   deficit  
becomes   more   conspicuous   when   private   sector   institutions   take   Economic  
Survey   of   Pakistan   for   granted.     Private   sector   seldom   base   their   investment  
decisions   on   the   statistics   provided   by   the   government   and   private   market  
research   companies   are   therefore   hired   to   hedge   against   such   risks.     The  
economist  would  categorize  it  as  a  market  failure,  as  this  distorted  allocation  of  
resources  is  socially  suboptimal.    The  cost  of  such  information  for  the  small  and  
medium  sized  private  sector  players  is  prohibitive  and  therefore  results  in  either  
no   investment   or   flawed   investment   decisions.     Such   market   failures   should  
ideally   trigger   a   targeted   public   sector   intervention   to   improve   and   strengthen  
public   sector   organizations   involved   in   the   collection   and   compilation   of   such  
data.     Unfortunately,   no   serious   efforts   have   been   made   by   the   public   sector   to  
address  the  wide  spread  perception,  among  private  enterprises,  of  fabricated  or  
doctored   statistical   data.     Therefore,   Non   Governmental   Organizations   are  
increasingly  taking  on  the  role  of  the  public  sector.    Industrial  associations  play  
an   important   role   in   minimizing   this   prohibitive   transactional   cost   by  
undertaking  research  projects  on  their  own.      
 
One   such   organization   is   Pakistan   Tanners   Association   who   has   been   debating  
on   the   authenticity   of   the   raw   hide   data   published   annually   in   the   Economic  
survey  of  Pakistan  for  a  very  long  time.    This  paper  is  not  an  attempt  to  address  
or   quantify   such   market   failures   but   it   is   an   effort   to   answer   a   more   basic  
question  i.e.  if  government  statistics  can  be  trusted  in  the  case  of  raw  hides  for  
the  leather  industry  in  Pakistan.      
 
Research  Methodology:  
 
What  is  the  total  raw  hides  production  of  Pakistan?    The  easiest  and  most  direct  
approach   is   to   ask   the   consumers   about   their   consumption   and   then   simply  
adding   it   up.     Presence   of   a   relatively   large   informal   sector   and   lack   of   trust  
among   private   sector   enterprises   are   key   impediments   in   running   a   survey   to  
quantify  consumption.    
 
This  paper,  therefore,  employs  a  unique  approach  to  address  this  basic  question  
where   it   relies   on   quantifying   the   consumption   of   certain   imported   raw  
materials,  produced  by  allied  industries,  specific  to  the  leather  industry  namely  
retanning   and   basic   Chromium   Sulphate.     The   consumption   of   these   raw  
materials   is   then   correlated   to   the   area   of   leather   in   square   foot   that   can   be  
processed   annually   using   the   available   quantities.     Finally,   a   comparative  
analysis  is  done  between  the  demand  and  supply  statistics.  
 
 The  import  data  has  been  taken  from  Pakistan  Customs  under  the  PCT  headings;  
3202.1000,  3201.1000,  3201.2000  and  3201.9000  for  the  retanning  material  and  
3202.9000  for  basic  Chromium  Sulphate.    The  import  data  was  scattered  among  
three  different  softwares   used   by  the  custom  authorities  including  CARE,  PRAL  
and   WEBOC.     Data   mining   techniques   were   employed   to   clean,   debug   and  
standardize  the  data  and  relevant  information  was  consequently  extracted.    The  
import   data   is   then   further   verified   through   the   trade   statistics   of   the   United  
Nations   (UNCOMTRADE);   where   trade   data   is   available   on   6   digit   H   S   Code  
aggregation  level  from  1962  onwards.  
 
We   believe   that   there   are   multiple   ways   to   answer   this   research   question   and  
one   can   rightly   argue   that   similar   exercise   can   be   done   with   other   raw   materials  
and   allied   industries.     Yes   indeed;   it   will   be   a   worthwhile   effort   and   should   be  
done   once   the   assumptions   laid   out   in   this   paper   are   better   debated,   understood  
and  agreed  by  the  stakeholders  and  industry  experts.    It  is  also  worth  mentioning  
here   that   this   attempt   is   by   no   means   an   absolute   answer   to   the   research  
question   but   it   is   potentially   a   significant   step   in   the   direction   of   exploring   the  
right  answer.    We  have  taken  a  set  of  assumptions  to  reach  the  conclusion  that  
we  have  and  would  now  request  PTA  to  discuss  and  reach  a  consensus  on  these  
assumptions.     The   reader   should   also   question   these   assumptions   and   try   and  
calculate  the  raw  hides  market  size  on  his  own  using  the  same  methodology  but  
with  a  different  set  of  assumptions.  
 
Assumptions  &  their  Rationale:  
 
• Raw   hide   is   a   byproduct   of   meat   industry   and   we   have   assumed   that  
eating   habits   of   the   nation   has   not   changed   since   the   last   census   which  
means   that   product   substitutions   among   meat   categories   has   not   taken  
place  and  consumer  preferences  remain  unchanged.  
• Local  consumption  of  leather  is  only  in  the  form  of  leather  shoes  while  the  
rest  of  the  leather  produced  is  only  for  export  purposes.  
• The   chemicals   (Basic   Chromium   Sulphate   and   retanning   materials)  
imported   in   the   country   are   consumed   completely   to   produce   leather   in  
the  same  importation  year  and  therefore  no  effect  is  passed  on  either  to  
the  closing  stock  or  in  the  opening  balance  of  the  next  year.  
• Split  leather  is  obtained  only  from  the  hides  (cows  and  buffalos).    
• The   rawhide   proportion   among   hides   and   skins   given   by   the   Economic  
survey   of   Pakistan   is   taken   as   the   basis   for   the   overall   livestock  
population  and  its  consequent  contribution  in  hides  and  skins.  
• Polymer   retanning   agents   are   not   included   in   the   overall   retanning  
percentage,   however   the   correction   factor   is   introduced   to   account   for   its  
effect    
• Local  chrome  is  estimated  at  4,000  tons  per  annum  as  per  the  information  
provided  by  key  stakeholders  in  the  chrome  manufacturing  industry.  
• The   consumption   of   chemicals   in   the   tanning   process   was   calculated  
using   standard   recipes   for   upper,   garment   and   split   leather.     It   is  
estimated   that   1000   kgs   of   wet   salted   hide   will   approximately   consume  
4%   chrome   in   the   production   of   wet   blue.     It   is   further   estimated   that  
1000   kgs   of   wetblue   will   then   give   250   kgs   of  shaved   weight   along  with  
88   kgs   of   split   leather.     6%   chrome   is   then   given   on   the   shaved   weight  
basis;   along   with   21%   retanning   (including   neutralizing   syntans   but  
excluding  polymers)  for  the  upper  leather  and  6%  (including  neutralizing  
syntans   but   excluding   polymers)   for   the   garment   leather.     As   polymers  
are  used  in  multiple  industries  and  are  imported  under  the  same  H  S  code  
 therefore   the   import   figures   available   are   not   appropriate   for   these  
calculations.  
• Basic   Chromium   Sulphate   is   used   at   a   stage   where   its   division   among  
upper  and  split  leather  is  aggregated.  
• 250   kgs   of   shaved   weight   of   a   hide   yields   approximately   1500   sqft   of  
finished   upper   leather   and   88   kgs   of   split   leather   yielding   646   sqft   of  
finished  split  leather.      Therefore  each  square  foot  of  finished  hide  offers  
0.43  square  foot  of  split  leather.  
• 250   kgs   of   skin   (shaved   weight)   yields   approximately   5000   sqft   of  
finished  garment  leather.  
• An  average  of  1.5  sqft  of  leather  is  required  to  make  a  pair  of  shoes.  
• An  average  of  2.5  sqft  of  leather  is  required  to  make  a  pair  of  gloves.  
• An  average  of  30  sqft  of  leather  is  required  to  make  a  garment.  
• Local  shoe  market  consumes  90  million  pairs  of  leather  shoes  annually.    
• Average   Raw   hide   yield   per   hide/skin   based   on   government   statistics   are  
Cow  –  30  sqft;  Buffalo  –  40  sqft  and  goat/sheep  –  6  sqft  
 
 
Realizable  Production  Calculations:  
 
The  import  data  for  Basic  Chromium  Sulphate  and  retanning  material  including  
vegetable   extracts   but   excluding   polymer   retanning   material   was   compiled   and  
analyzed  for  the  last  five  years  (Table  3)  and  it  gives  a  fairly  clear  picture  of  the  
overall  size  of  the  market.    One  can  easily  see  a  clear  downward  trend  since  2010  
in  the  import  of  both  these  chemicals  and  it  fits  well  with  the  overall  downward  
trend  of  exports  of  the  leather  and  leather  goods  from  the  country.  
 
These  chemicals  are  used  to  process  leather  and  the  next  step  is  to  calculate  the  
overall   production   in   square   foot   of   leather   that   can   be   achieved   with   these  
chemicals.      
 
 
Percentage   Quantity  
 
Consumption  Heads   used   Used   Units  
 
Basic   Chromium   sulphate   used   for  
tanning  1000  kgs  of  wet  salted  hide    
4%   40   kgs    
Basic   Chromium   sulphate   used   at    
the  re-­‐chroming  stage  on  250  kgs  of   6%   15   kgs    
shaved  weight    
Total   Chromium   sulphate   used   in   55   kgs  
 
the  process      
 
Table  1:  Consumption  of  Basic  Chromium  Sulphate  to  process  1000  kgs  of  wet  salted  hide  
 
 
 
 
 
 
Basic  Chromium  Sulphate  Consumption  Calculations  Per  Square  Foot  of  
Leather  
 
55   kgs   (table   1)   of   Basic   Chromium   sulphate   is   used   for   tanning   1000   kgs   of   wet  
salted  hide  which  in  turns  produce  intermediate  products  i.e.  grain  leather  250  kgs  
of  shaved  weight  and  88  kgs  of  split  leather.  
 
According   to   J.Buljan,   G.   Reich   and   J.   Ludvik;   2000;   250   kgs   of   shaved   weight  
approximately   produces   finished   grain   leather   1500   Sqft   while   88   kgs   of   split  
leather  will  yield  646  Sqft  of  finished  split  leather  
 
Hence,  the  Basic  Chromium  sulphate  quantity  required  to  produce  1  sqft  of  finished  
leather  =    55  (kg)  ×  1000  (gms/kg) ÷ 1500  (Sqft)  =  36  (gms/Sqft)  
 
However,   the   actual   quantity   is   less;   as   per   the   information   gathered   from   the  
local  experts  in  the  leather  industry.    The  Kasur  market  consumes  around  2-­‐3%  
of  chrome  on  the  wetblue  that  they  produce  and  generally  only  2-­‐3%  of  chrome  
is  used  on  the  buffalo  leather.    Therefore,  in  this  study;  we  have  taken  an  average  
of   Basic   Chromium   Sulphate   consumption   originating   from   Kasur   24   gms/sqft  
and  the  consumption  of  rest  of  the  industry  at  36gms/sqft.    
 
Therefore  the  actual  consumption  of  Basic  Chromium  Sulphate  comes  out  to  
be  30  gms/sqft.  
 
Similar   calculations   were   carried   out   for   all   other   raw   materials   for   each  
category  of  leather  produced  and  the  consumption  table  (Table  2)  was  populated  
accordingly.  
 
Bovine/  Upper   Bovine/  Split   Skins/  Garment  
Consumption   Leather   Leather   Leather  
Basic  Chromium  Sulphate  consumed  
30   9.09  
in  gms/sqft  of  finished  leather    
Retanning   material   consumed   in  
30   8   9.09  
gms/sqft  of  finished  leather  
Fatliqour   consumed   in   gms/sqft   of  
13.3   9.5   8.06  
finished  leather  
Percentage   of   consumption   among  
Upper,   Split   and   Garment   in   case   of   70%   30%  
 
Chromium  Sulphate  
Percentage   of   consumption   among  
Upper,   Split   and   Garment   in   case   of   70%   8%   22%  
retanning  material  
Table  2:  Consumption  of  various  chemicals  and  split  among  various  product  categories    
 
   
Table  3  below  gives  the  import  data  for  Basic  Chromium  Sulphate  as  well  as  the  
retanning  material  in  tons  since  2008.  
   
 
 
 
Leather  Production  Based  on  the  Consumption  of  Basic  Chromium  Sulphate  
 
Basic  Chromium  Sulphate  available  in  tons  =  14,183  tons  (Imported  10,183  tons  +  
Local  4,000  tons)  
 
Conversion   into   grams   =   14,183   Tons   × 1000Kg/ton   × 1000   gms/Kg   =  
14,183,000,000  gms  
 
 

 Table  3:  Import  figs  for  Chromium  Sulphate  and  retanning  material  excluding  polymers  
   
Upper  Leather:  
   
30  gms  of  BasicChromium  Sulphate  is  required  to  make  1  sqft  of  finished  leather  =  
14,183,000,000  (gms) ÷ 30  (gms/sqft)  
 
Total  square  foot  of  finished  leather  =  472,766,667  sqft  
 
70%  of  the  total  is  consumed  for  upper  leather  =  472,766,667  ×  70%  
 
Total  square  foot  of  upper  leather  =  330,936,667  sqft  
 
Split  Leather:  
 
Each  square  foot  of  upper  leather  produces  split  leather  =  0.43  sqft  
 
Therefore  330,936,667  sqft  will  produce  split  leather  =  330,936,667  (sqft  of  finished  
upper  leather)  ×  0.43  (sqft  of  split  leather/sqft  of  finished  upper  leather)  
 
Total  square  foot  of  finished  split  leather  =  142,302,767  sqft  of  split  leather  
 
Garment  Leather:  
 
9.0909   gms   of   basic   chromium   sulphate   is   required   to   make   1   sqft   of   finished  
garment  leather  =  14,183,000,000  (gms)  ÷ 9.0909  (gms/sqft)  
 
Total  square  foot  of  finished  leather  =  1,560,131,560  sqft  
 
30%  of  the  total  is  consumed  for  garment  leather  =  1,560,131,560  ×  30%  
 
Total  square  foot  of  garment  leather  =  468,039,468  sqft  
 
Similar   calculations   were   carried   out   for   all   other   raw   materials   for   each  
category   of   leather   produced   and   the   consumption   table   (Table   4   and   Table   5)  
were  populated  accordingly.  
 
 
Leather  Production  Based  on  the  Consumption  of  Chromium  Sulphate  
 
 
Upper   Leather   -­‐   Split   Leather   -­‐   Garment   Leather   -­‐   Total   Leather   -­‐   Million  
Year   Million  Sqft   Million  Sqft   Million  Sqft   Sqft  
2012   330.9   142.3   468.0   941.3  
2011   304.7   131.0   431.0   866.8  
2010   389.8   167.6   551.3   1108.7  
2009   306.0   131.6   432.8   870.5  
2008   370.9   159.5   524.5   1054.9  
Table  4:  Leather  production  based  on  the  consumption  of  Basic  Chromium  Sulphate  
 
 
Leather  Production  Based  on  the  Consumption  of  Retanning  Material  
 
 
Upper   Leather   -­‐   Split   Leather   -­‐   Garment   Leather   -­‐   Total   Leather   -­‐   Million  
Year   Million  Sqft   Million  Sqft   Million  Sqft   Sqft  
2012   380.4   163.6   394.0   937.9  
2011   428.8   184.4   444.2   1057.5  
2010   457.2   196.6   473.6   1127.3  
2009   370.6   159.4   383.9   913.9  
2008   438.1   188.4   453.8   1080.3  
Table  5:  Leather  production  based  on  the  consumption  of  Retanning  material  
 
 
The  above  two  sets  of  independent  calculations  reveal  that  they  are  quite  closely  
related   to   each   other   as   far   as   the   total   leather   production   is   concerned.    
However,   the   reader   can   also   detect   an   anomaly   in   the   year   2010   and   year   2011  
in   the   Basic   Chromium   sulphate   data   where   a   large   quantity   is   imported   in   2010  
while  2011  saw  a  sharp  decline.    This  can  be  explained  as  over  importation  of  the  
raw   material   (Basic   Chromium   Sulphate)   based   on   the   healthy   market   growth   of  
2010   that   did   not   translate   into   a   realizable   business   in   the   2011   and   hence  
lower   imports   to   rationalize   the   overall   stock   situation.     These   market  
adjustments  are  based  on  the  future  outlook  of  the  industry  and  at  times  create  
an  anomaly.    
   
As  we  have  adequately  laid  down  the  foundations  for  this  study  therefore,  let  us  
now   look   at   the   government   statistics   and   try   to   compare   them   with   our  
calculations.  
 
Leather  Production  Based  on  the  Government  Raw  Hide  Statistics:  
 
Table   6   below   is   populated   using   the   statistics   from   the   Economic   survey   of  
Pakistan   on   the   production   of   raw   hides   for   the   past   five   years   and   our  
assumptions   on   the   overall   yield   exploitable   in   each   of   the   Bovine   and   Skins  
category.  
 

 
Table  6:  Leather  production  based  on  Government’s  raw  hide  statistics  
 
 
Leather  Production  Based  on  the  Export  Statistics:  
 
 
Table   7   below   is   populated   using   the   export   statistics   available   with   PTA   since  
2008   and   our   assumptions   on   each   product   category   that   is   exported   out   of  
country.      For  these  calculations,  we  have  assumed  that  90  million  pair  of  leather  
shoes  are  consumed  locally  on  annual  basis  and  the  corresponding  square  foot  of  
leather   has   been   accommodated   in   the   our   calculations   below.     Furthermore,   we  
have   also   assumed   that   the   entire   leather   production   of   Pakistan   is   exported  
except  the  local  consumption  of  90  Million  leather  shoes.  
 
 

 
Table  7:  Leather  production  based  on  the  Export  Statistics  PTA,  FBR  
 
 
Conclusion:  
 
In   the   light   of   the   above   discussion,   we   can   now   compare   the   total   realizable  
production   employing   four   independent   criterions   i.e.   Basic   Chromium   Sulphate,  
retanning   material   excluding   polymers,   raw   hide   statistics   and   the   export  
statistics.    Table  8  and  Graph  1  below  compares  the  achievable  production  level  
using  each  criterion  independently.  
 
Based   on   the   above   calculations,   we   can   safely   conclude   that   Government  
statistics   are   dependable   and   although   some   variations   exist,   but   the   private  
sector   can   still   use   these   statistics   as   a   good   starting   point   to   make   investment  
decisions.      
 
However,   it   is   worthwhile   mentioning   here   that   the   government’s   raw   hide  
statistics  are  not  responsive  to  the  supply  and  demand  conditions  of  the  industry  
and  are  relying  on  the  annual  growth  rate  of  2.26%  while  UN,  FAO  and  the  USDA  
statistics   show   a   stagnation   in   both   the   number   of   animal   heads   as   well   as   the  
raw  hides  since  2008.    Although  the  current  statistics  are  still  agreeable  but  the  
current   trend   of   ill   founded   growth   will   very   soon   make   the   government  
statistics   unreliable.     PTA   should   take   it   up   with   the   relevant   authorities   and   a  
remedial   action   should   be   sorted   along   with   an   explanation   from   the   Statistics  
division  of  the  Government  of  Pakistan.    
 
 

 
Table  8:  Leather  production  based  on  4  independent  criterions  
   
 
  
Graph  1:  Leather  production  based  on  4  independent  criterions  
 
 
Future  Course  of  Action:  
 
This  study  has  been  a  wonderful  learning  journey  and  a  lot  of  work  still  needs  to  
be  done;  if  one  has  to  realize  the  dream  of  sustainable  growth  and  prosperity  of  
the   organizations   as   well   as   the   individuals   involved   in   the   leather   trade.     In   this  
final  section,  we  will  highlight  some  of  the  areas  demanding  immediate  attention.  
 
• A  benchmarking  study  –  to  compare  the  allocation  of  resources  including  
tanning   chemicals,   labour,   energy,   etc   against   countries   with   similar  
social,  economic  and  environmental  conditions  
• A  benchmarking  study  –  to  establish  per  unit  price  of  leather  and  leather  
articles   against   countries   with   similar   social,   economic   and  
environmental   conditions.     The   study   should   also   identify   growth   areas  
in   both   product   categories   as   well   as   the   potential   target   countries   for  
each  product  category.  
• Develop  a  project  proposal  to  improve  raw  hide  quality  in  Pakistan  using  
a   triple   helix   model   whereby   private   sector   industry   asscociation   (PTA)  
takes   a   lead   in   convincing   public   sector   organizations   (MINFAL,   LDDB)  
and   educational   institutions   (University   of   Veterinary   and   Animal  
Sciences   and   University   of   Agriculture   Faisalabad)   to   undertake   joint  
project.  
• Diagnostic   Study   –   to   understand   the   reasons   for   declining   exports   of  
leather   shoes   since   2005   from   11.5   million   to   6.6   million   pairs   in   2012.    
The   study   should   also   give   recommendations   to   improve   the   exports   in  
this  sector.