It said $720 million could be fetched annually from the sector, which currently earns less than $300 million, mainly from export of crust leather.

The earnings from leather sector was $290.68 million in 2000-01 of which only $39.97 million came from finished leather products, said the study.

Bangladesh Finished Leather, Leather Goods and Footwear Exporters Association (BFLLFEA) and Bangladesh Tanners Association (BTA) conducted the study titled "Inventory of Leather Sector Industries of Bangladesh: Problems and Prospects."

It pointed out that more than 80 percent of the total 180 million square feet yearly exports of hides and skins are crust leather.

However, the study said, a significant volume of the crust leather is exported in the name of finished leather to obtain higher rate of duty drawback facilities.

The leather processing industries enjoy higher rate of duty drawback facilities for finished leather than crust leather.

The government in 1990 banned export of wet blue leather in a bid to increase the export of value-added and finished products. But, the study said, the move benefits Bangladesh a little as traders in connivance with some customs officials export wet blue leather in the guise of finished one.

Large scale smuggling of leather to India further deteriorates the situation, Dr Karam Ali Ahmed, former principal of Bangladesh College of Leather Technology who compiled the study, said in the study.

Lack of modern machinery, weak management and wrong lending policy of banks, lack of cost analysis, high rate of interest and heavy burden of overdue bank loans are the prime impediments to develop finished leather industry, the veteran leather expert said.

BFLLFEA Chairman Rezaul Karim Ansari told The Daily Star that export earnings from the sector could be raised to as high as $720 million if the government reduces interest rate and provides necessary logistic supports to the export-oriented leather industry.

He said the Prime Minister at the International Leather Fair early this year had assured of reducing lending rate for export-oriented leather sector to seven per cent from existing nine per cent but it is yet to be implemented.

The commerce minister also assured recently that he would sit with the industry leaders soon to discuss their problems and interest rate cut, Ansari said.

"Interest rate cut is key to rejuvenate the sector as overdue bank loan of the industry has soared to Tk 1,200 crore," he said.

The study recommended modernisation of Bangladesh College of Leather Technology for developing human resources.

The government should also make investment in research and development to develop new designs for finished products, it said.

Special incentives should be given to those who export finished leather products, Rezaul Karim Ansari, also the proprietor of Karim Leathers Ltd said.

He lauded the government for reducing import duty on chemicals and withdrawing proposed increase in supplementary duty on salt in this fiscal budget.

Bangladesh has 206 tanneries, 83 of them are sick due to huge overdue loans. They have a total capacity of processing about 400 million square feet of wet blue, 300 million square feet crust leather and 130 million square feet finished leather per year.

Bangladesh produces about 223.71 million square feet leather including 117.54 million square feet crust leather for export and 106.17 million square feet various type of finished leather for export and local consumption.

Indian export earnings from leather sector were $1963.55 million in 2000-2001 in which finished leather products contributed $1582.06 million.