Brazil Status Has Pushed Up Coffee Bill

Business Standard: Coffee prices are increasing by leaps and bounds in the domestic as well as international markets. What are the factors responsible for this ?

Ashok Kuriyan : It is true that the coffee prices are witnessing a buoyant trend only because of the lower expected crop in Brazil, a major coffee producing country in the world.

The reasons given for the lower crop are the frost and severe drought conditions faced by Brazil which have resulted in lower output.

Besides, the crop in most of the coffee producing countries has not increased to the satisfactory level to offset the loss of coffee output in Brazil.

 

Any strategy inviting speculative funds in the coffee producing countries will definitely lead to heavy fluctuations in the prices. Looking at the lower stock level in the market, I see that the prices will certainly remain firm during the year.

BS : What have you to say on the government's policy with reference to coffee cultivation and levies?

A Kuriyan: In fact, the existing land reform laws have totally failed to enhance the expansion of coffee plantations.

The individuals are converting their small pieces of land to cultivate coffee. This will not increase either coffee production or the area under coffee cultivation substantially.

Under the existing land laws, planters are not permitted to expand their area by purchasing or cultivating lands, which are not covered by a Coffee Registration Certificates issued by the government.

The government should review the existing land policy in view of the liberalisation and the all around changes taking place in order to enable planters to face global challenges.

A period of five years should be given to the planters to make their plantations viable before the government permits foreign investors to invest in land in the country.

The state government has imposed an Agricultural Income Tax as high as 70 per cent on income accruing from agriculture and the planters were left with little or no resources for the development.

The surplus income left after taxation is as low as 22 per cent for the planters, whereas in case of industry it is 30 per cent. This is even lower as we never get the benefits of depreciation on the main asset which is coffee brush and the land on which it is grown.

There is a general belief that plantations are not taxed and that they enjoy various subsidies from the government. But this is not true. The most highly taxed sector is the plantation sector which enjoy no benefits by way of any government subsidies. If there are any subsidies, they are only for the small growers who hold less than 50 acres of land.

In the rural areas where the plantations are located, there is lack of infrastructure facilities and it is obligatory for the planters to provide almost all facilities to the workers including housing unlike industries where they tap the scarce resources of the state.

BS: Why is the average coffee production per hectare in India far less than the world production. What according to you will improve the situation ?

A Kuriyan : The poor production in Indian coffee plantations was primarily due to the very unremunerative prices offered by the Coffee Board during the pre-freesale quota period.

The best medicine for revitalising the plantations is the best price, which they are receiving now. But the main reason for low yields is that approximately 65 per cent of the coffee area in the country comprises of small growers whose holdings are not more than 25 acres.

About 60 per cent of the crop comes such holdings which comprise 95 per cent of the plantations. If efforts are made to encourage the small growers to adopt modern cultivation methods, plant materials and irrigation facilities, the yield is bound to increase.

BS What is the Indian coffee output estimate for 1997-98 ? What are the production estimates in Brazil and Columbia ?

A Kuriyan : It is estimated that the crop which will be harvested in 1997-98 will be 2,37,215 metric tonnes, an all-time high record. This is will be possible because of the expected favourable weather conditions, better cultivation practices and the easy availability of inputs.

BS: What do you feel is the scope for expanding coffee cultivation to the non-traditional areas ?

A Kuriyan: If the coffee cultivation is economically viable in any part of the country, then we must encourage its expansion in non-traditional areas too.

When these areas are cultivated based on today's price realisation, the growers should bear in mind that these fancy prices will not last long.

Coffee has a gestation period of 6 to 8 years. Coffee grown on marginal or limited lands, it will not be viable when prices slump. Land owners should proceed keeping in mind the overall market conditions.

The government should encourage the coffee cultivation in these non-traditional areas.

BS: Do you see the need for any major shift in the pattern of coffee exports ?

A Kuriyan : The government should follow a policy which needs consistency.

We should be able to instil a sense of confidence in our buyers minds and give them a feeling of reliability.

We should give ourselves time to develop a business relationship with the importer and develop our own niche market. It is important to note that we have only a 3 per cent share in the world market and hence no foreign buyers tend to depend on us for supplies. We export our one third of our produce and there is no other agricultural commodity which is so much dependent on the exports.

BS: Should we allow import of coffee beans for exporting value-added products ? Will it affect the interest of the farmers ?

A Kuriyan: Coffee import is desirable as it will augment our internal markets and permit us to export value-added products.

However, it will not be viable for the exporters to import coffee at international prices paying freight, insurance and conversion costs and then to re-export. As long as the domestic producer is given a level playing field, his interest will not be affected.

It is very important that any coffee which is allowed to be imported, should be subjected to the most rigid quarantine safeguards.