Coffee Reforms Boost Domestic Prices

The government announced on Saturday that coffee growers would no longer be required to pool their output for auction by the state-run Coffee Board in domestic and export markets.

It abolished a quota system that obligated growers to sell 30 percent of their output to the pool.

Coffee dealer Kasim Bhai said that since the announcement, prices of coffee powder in the retail shops in the country had risen Rs 5-10 ($0.14 to $0.28) per kg to about Rs 145.

Dealers said prices had risen due to an anticipated shortage of coffee in the remaining three months of 1996.

They feared the government decision last week would encourage more growers to export available coffee, capturing lucrative overseas markets at the cost of the domestic consumer.

 

If the growers choose to export more coffee as they will, there will be a shortage in the home market adequate to spin off prices, Bhai told Reuters in Coonoor.

We expect the prices to soar by at least Rs 25 ($0.70) per kg by year-end.

All coffee grown in India used to be pooled by the Coffee Board, which auctioned supplies for domestic and export markets.

In 1995-96 (April-March), the government exempted small growers owning less than 10 hectares of coffee from the system.

Small growers account for 98 per cent of all producers. The remaining two per cent, who own plantations exceeding 10 hectares and account for 40 per cent of total production, were required to pool 30 per cent of their coffee with the board.

All India Coffee Merchants Association general secretary A K Jayakumar, said his members were buying coffee powder from growers for Rs 140 ($3.90) a kg.

He said they would eventually be forced to raise prices by Rs 20 ($0.55) a kg. Ramesh Rajah, president of the Coffee Exporters Association, said growers would be keen to hold back their produce, putting pressure on roasters.

Growers said unseasonal rains had reduced India