BANGALORE (Commodity Online): India continues to be a marginal player in coffee sector and its output is now being threatened on several counts: heavy stem borer infestations that led to 30-40% drop in mature and productive bushes and unfavourable weather conditions since 2003-04.Climate change has also affected cropping patterns in Karnataka, the largest producer of coffee in India. The economic crisis had led to sharp drop in coffee exports in the beginning of this year.

Amidst this backdrop, analysts are divided on whether India could achieve an output above 3 lakh mark in 2009. During crop year 2008-09, the Coffee Board had estimated the output to be around 293,000 tonnes. However, due to the heavy crop loss in Karnataka following erratic rains and pest menace, the output declined to around 262,300 tonnes.

For the present crop year beginning October 2009, the board has estimated an output of around 306,300 tonnes — arabica 101,525 tonnes and robusta 204,755 tonnes — to arrive in the market in January 2010. In 2008-09, the country had produced 262,000 tonnes according to post-monsoon estimates of Coffee Board.

The Coffee Board and Industry has sought increased relief package from the Union Ministry of Commerce to tide over the situation. The Coffee Board submitted a relief package amounting to Rs 504 crore. Veerappa Moily, Union Minister for Law and Justice said at a Karnataka Planter's Association Meeting that the government is working out a package for growers and the likely assistance would be capped at Rs 802 cr. Apart from Coffee Board's Rs 502 cr, growers associations had put forward a package of Rs 1236 as growers owe Rs 1700 cr to banks.

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The coffee growers are in need of an urgent relief package, so as to give them a one-time life line to come out of the crisis. The coffee industry is continuously facing low productivity due to drought of 2003 and 2004, which have had a domino effect on productivity. Most coffee plantations in all the coffee growing regions of the the country lost over 30 to 40 per cent of their mature and productive coffee bushes as a result of severe stem borer infestations. This long period of low productivity has forced coffee growers to resort to fell and sell their shade trees, to meet their working capital requirements, he said.

Challenges
Apart from borer infestations and capital shortage for replantations, coffee growers also face an adverse situation arising out of the Free Trade Agreement with the Association of South East Asian Nations (Asean). Under the FTA with Asean, India has agreed to reduce the duty on coffee imports by five per cent every year over the next 10 years starting January 2010. Currently, India levies a 100 per cent duty on green and roasted coffee imports and reduction would mean duty levels coming down to 50 per cent by 2019. Coffee Board has asked the Government to increase subsidies for farm mechanisation and upgrading processing infrastructure.

Growers fear that reduced duties would hurt their competitiveness against cheaper imports from Vietnam and Indonesia.Hence, Coffee Board has suggested increased subsidies for replantation, quality upgradation and farm mechanisation which could make the Indian crop competitive.

Coffee growing patterns in many parts of India have witnessed change in the past 30 years due to reduction in shade trees. Reports suggest some coffee growing areas have seen rise in temperature by 4 degrees. This issue facing tropical coffee growing regions is expected to be addressed in the World Coffee Conference in February 2010 in Guatemala.

Globally, India continues to be a marginal player with 4% market share but output dynamics are changing as earlier 80% of the output used to be exported and the rest consumed domestically but now that ratio is changing to 67:33 on rising disposable incomes leading to increased consumption in India. The recent India International Coffee Festival 2009 held in Bangalore underscored the fact that India could increase its presence in global coffee trade if it is able to ramp up its production as rising local demand could spur more plantation activity. Raising productivty and mitigating adverse climate change impact on planations was also underscored at the global event.

With rising coffee chains, India's consumption could double to 3 million bags over the next decade from the existing 1.5 million bags. The stagnant market of 1990's is over now. Cafes are growing at a rate of 30% annually and this could drive coffee consumption in the next five to 10 years. The world coffee consumption is expected to touch 140-145 million bags by 2020 from 130 million bags at present, an increase of 10-15 million bags, of which a sizeable portion of 1.5 million bags or 10-15% would be contributed by India.