Coffee Price Hike Bad For Sector
The current spurt in coffee prices world over will badly effect efforts to build up the domestic coffee market in India, coffee board chairman Philippose Mathai, has warned. Coffee is not inelastic even in developed countries like Japan and once the consumer shifts loyalty, it would be difficult to increase consumption again, Mathai said.
Though there were no regular studies on the pattern of the Indian market, international studies had shown that coffee consumption fell by two per cent if the prices went up by 10 per cent. And in the case of India, where the consumers are cost conscious, the fall in consumption could be more, he said.
When coffee prices went up abnormally in 1994 due to a frost in Brazil and pressure on exports from India, coffee consumption was stated to have declined by 20 per cent, though there were no statistics, he said.
Criticising the practice of announcing hike in coffee prices well in advance, the coffee board chairman said it amounted to threatening the consumers. Let them increase the prices when the time comes. But why should they say they are going increase on this day or that day, he wondered.
Mathai said basically, there should not be a price hike everyday. It will disillusion the consumer. The domestic dealer is doing a disservice through such means.
He said there were various reasons for the current spurt in coffee prices, which were totally out of control and there was a genuine shortage of the commodity globally. But that should not mean a big thrust should be made on the price front, he said and added that the domestic prices were equal if not higher than international prices.
With winter for Brazil ahead in June and July, the price was likely to witness an uptrend, he added.
However, the current prices at retail outlets should reflect the prices of green coffee two or three months back, the coffee board chairman said.
That is since the roasters have a two to three months stock. Today's prices are unhealthy and unreal. But the conditions too is unpredictable as, if you think the prices will go down, it moves up and if you say it will move up, the reverse takes place, he said.
The consumers were looking towards the coffee board to do something, but it would not like to intervene, he said and added that the government could get concerned over the price in the face of vociferous protest from consumers in the south, who feel the prices were unaffordable. (PTI)
Asked how the government could step in to control the increasing coffee prices, Mathai said he felt nothing could be done to regulate the prices.
On a previous occasion, the government had put a cap on exports for sometime and also banned export of plantation 'A' and peaberry varieties. But it was relaxed slowly in view of export commitments and the prices, too, showed a declining trend.
On allowing coffee imports under open general licence, he said it could be done but international prices were on par with domestic prices and there were also problems of freight charges. The import could probably made from some African nation which was growing inferior Robusta variety, he said.
Mathai's views on the prices assume significance in the wake of rising coffee prices, especially the Arabica variety. The prices of Arabica touched of a 20-year high last week in the New York coffee and cocoa exchange with futures and spot rates of the commodity being over three dollars a pound.
The prices have gone up mainly in view of poor stocks with traders, while in India, a fall in domestic production has compounded the situation.
Coffee prices have been hiked four times since Feb 24 by Rs 10 a kg each time from Rs 150 a kg. A further rise of Rs 10 a kg is on cards from June 9. (PTI)
No decision on export permits
Press Trust of India BANGALORE
A coffee board official yesterday said that no decision had been taken to suspend issuing of export permits. He was reacting to the United Planters' Association of Southern India (Upasi) statement on suspension of export permits.
Upasi, as a responsible organisation, should have contacted the board and ascertained facts before going to the press, the board official said, adding that no action has been decided to stall the skyrocketing of domestic coffee prices.
Upasi had, in a statement on Monday from Coonoor, said the coffee industry is shocked to learn that the coffee board has suspended the issue of export permits all of a sudden.
Upasi also warned the board of the long term effect on India's coffee exports.
Prices of filter coffee have shot up to Rs 220 per kg in the domestic market following a boom in the international market last month.
Growers and traders are accused of hiking prices in line with the international price hikes, not realising the domestic market realities.