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Coffee industry in India

2022 NOV 1

Mains   > Agriculture   >   Crops   >   Food processing

IN NEWS:

  • Coffee cultivation is becoming an increasingly loss-making proposition in India. Already weighed down by the high cost of inputs and production as well as labour shortage, the industry is now also affected by changes in climate patterns.

COFFEE CULTIVATION IN INDIA:

  • The saga of Indian coffee began with the planting of seven seeds of coffee during 1600 AD by saint Baba Budan, in the courtyard of his hermitage in Chikmagalur, Karnataka.
  • Commercial plantations of coffee started in the 18th century under British entrepreneurship.
  • Today, India is among the top 10 coffee-producing countries, with about 3% of the global output in 2020.

Agroclimatic conditions needed for Coffee:

  • Coffee is a tropical plant which is also grown in semi-tropical climate.
  • Indian coffee has a unique position as it is shade-grown and grown at elevations, while other major producing countries grow coffee in flat lands.

 Production:

  • India produces two types of coffee: Arabica and Robusta. Arabica has high market value than Robusta coffee due to its mild aromatic flavor.
  • Coffee is largely produced in the southern part of India. Karnataka is the largest producer accounting for about 70% of the total coffee production in India. It is followed by Kerala and Tamil Nadu. Orissa and the North-eastern areas have a smaller proportion of production.

Consumption:

  • The country exports over 70% of its production. According to The Food and Agriculture Organization (FAO), India is the eighth largest exporter of coffee by volume.
  • Indian coffee exports display a seasonality, with exports peaking from March to June.

COFFEE BOARD OF INDIA:

  • The Coffee Board of India is an organization managed by the Ministry of Commerce and Industry and was established in 1942.
  • The activities of the Board are broadly aimed at:
    • enhancement of production, productivity & quality;
    • export promotion for achieving higher value returns for Indian Coffee and
    • supporting development of Domestic market.

CHALLENGES FACED BY COFFEE INDUSTRY:

  • Rising production cost:
    • Due to labour shortage, cost of labour for coffee plantations has been on the rise. In Brazil, labour charges account for 25% of the entire production cost, but in India, planters say they account for about 65%.
    • Plantations face power cuts during the summer months. This makes irrigation expensive as the cost of diesel is high.
    • India’s coffee terrains and topography limit the possibility of extensive mechanisation in plantations.
  • Financial stress among farmers:
    • Most private banks insist that growers provide collateral for financing. This remains a challenge for small and medium-size growers.
    • Also, banks have not restructured the loans taken by coffee growers. Hence, growers are now facing recovery proceedings under the SARFAESI Act.
  • Impact of climate change:
    • Drastic changes in climate patterns have adversely impacted India’s coffee production and quality. There were dry spells between 2015 and 2017 and unseasonal heavy rains, floods and landslides between 2018 and 2022.
    • Erratic weather conditions are also helping pests to breed and new diseases to emerge.
  • Declining bargaining power of producer:
    • There is no official price setting mechanism even in the domestic market. So, traders are controlling the prices and producers are getting marginalised.
  • Poor branding:
    • Despite being highly rated, Indian coffee does not have an individual brand identity in the international markets. Hence, it is unable to compete against hugely advertised brand identities like the Colombian coffee.
  • Competition in international market:
    • Due to high production cost and weak marketing, Indian coffee is losing it European market to coffee exported from other producers like Brazil.  
  • Ecological concern:
    • Coffee in India is grown largely in the ecologically sensitive regions of the Western Ghats. This is one of the 25 biodiversity hotspots of the world. This poses challenges in promoting coffee plantations.

WAY FORWARD:

  • Coffee Act and the new Coffee (Promotion and Development Bill), 2022
    • The Ministry of Commerce and Industry is planning to replace the 80-year-old Coffee Act with the new Coffee (Promotion and Development Bill), 2022.
    • It seeks to remove the provisions that have become redundant and are impediments to the coffee trade.
    • The new legislation is concerned with promoting the sale and consumption of Indian coffee, including through e-commerce platforms, with fewer government restrictions.
    • It also aims at encouraging further economic, scientific and technical research in order to align the Indian coffee industry with global best practices.
  • Create additional revenue streams:
    • In addition to traditional inter-cropping of pepper and cardamom, coffee growers could try planting exotic fruit-bearing trees, fish farming, apiary or green tourism to increase incomes from coffee gardens.
  • Protection for small farmers:
    • Small coffee growers need to be supported with minimum support prices and subsidies to face challenges like global currency fluctuations and climate vagaries.

PRACTICE QUESTION:

Q. What are the climatic conditions ideal for coffee cultivation? Discuss the factors hindering the growth of Indian coffee industry?