Coffee Auctions Expected To Resume In July

Coffee auctions, which has been suspended since April, is expected to resume in July with the private trade sorting out the problem of levy of local taxes with authorities, auctioneers said on Friday.

Arun Bidappa, chief executive of the Karnataka Coffee Brokers Private Ltd, whose firm is one among four conducting the auction, told Reuters by telephone from the southern city of Bangalore that dealers were waiting for an official notification before resuming the auctions.

"The Karnataka government has agreed to exempt brokers from payment of turnover tax and also in principle agreed to reduce the turnover tax on coffee," Bidappa said

 

"I think it will take two or three weeks for the notification to be issued and auctions will resume in a month's time," he said. Bidappa did not set a firm date for the resumption of the auction.

The auction, by the Indian Coffee Trade Association (Icta), was suspended on April 1 after the Karnataka government imposed a three percent turnover tax on coffee dealers and brokers.

Icta had been conducting the auction since October 1995 after the state-run Coffee Board stopped direct marketing operations.

Turnover tax is a levy which each dealer and broker has to pay to the state government on sales.

Bidappa said auctions had been affected because brokers collected one percent commission from the sellers and were being asked to pay three percent on the turnover.

"It is not feasible," said Bidappa. He said dealers could adjust their prices since it was a value added transaction but brokers could not do it since they take a fixed commission.

Traders said merchants were forced to pay higher prices to the growers in the absence of auctions. This had also led to high domestic coffee prices.

India, which exports bulk of its coffee, has freed coffee trade from the five decade old controls in the last four years. (Reuter)