How India became a niche coffee player?

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How India became a niche coffee player?



By Sreekumar Raghavan

It is believed that saint Baba Budan of Mysore brought coffee to India while returning after a pilgrimage from Mecca. He had actually smuggled the coffee seeds to India. Therefore, looking at from a historical point of view, the nation has more than 500 year history in coffee cultivation.

India has one of the best regions in the world whether it is Coorg, Chikmagulur, Hassan, Wayanad and recently Andhra Pradesh and North East was also found favourable for cultivating coffee.

Vietnam which has already outclassed India in pepper production is now the second leading exporter of coffee and produces close to one million tonnes per annum just after relaunching coffee cultivation in late 1980's after an initial enthusiasm generated in late eighteenth century when coffee was introduced by French. Whereas India’s production is still lagging at 3 lakh tonnes accounting for just over 4 percent of global production despite the fact that we have the best robustas and Arabica varieties of coffee.

Historically, speaking there were many reasons why India could never attain a leadership status in Coffee. During the Mughal period, the coffee consumption was restricted to the elite while the common man was denied access to this brew which Baba Budan tried to change.

However, in the late eighteenth century, records show that coffee prices were high and that had led to planters in South India especially turning to coffee plantation in large numbers. No wonder that when the Britishers introduced tea plantations in Assam and Bengal, planters in South India who were happy with the high price of coffee refused to turn to tea. However, an unexpected attack of coffee leaf disease ruined the plantations and it was only then that South India looked at tea as an option.

In 1942, by an Act of Parliament, the R&D, extension and monopoly marketing of coffee fell into the hands of Coffee Board. That monopoly rights continued till 1994. Coffee Board claims that coffee was pooled and auctioned in the most transparent manner. However, facts prove that growers never got remunerative prices. As a result they never felt the need to expand cultivation even when the prices were high.

Now that replantation schemes have been announced as part of the 11th Plan, prospects look good for increasing production and acreage of coffee. Domestic consumption is also increasing and present prices are remunerative. However, India has lost considerable ground to Vietnam already.

Vietnam's recent ascent in the coffee-growing world is not its first foray in the trade. Before the Vietnam war, it was a “major exporter,” according to Scott Wilson of the Washington Post. French colonists introduced coffee to the country's central highlands region late in the 19th Century, and this proved to be a fertile are for growing coffee. Between the many years of war on its soil and the Communist government has ruled since, Vietnamese coffee exporting prowess became a thing of the past until the early 1980s, when it quietly reentered the global coffee market.

Vietnam which rose to become world’s second largest exporter also faced problems on account of higher production of robusta which brought down prices. However, now Vietnam is reducing its output and increasing Arabica cultivation in some regions. It has also diversified into cultivation of cocoa and other crops following the realization that putting all energies into a single commodity could prove disastrous.

The problem with being a niche market player is that India can only be a price takers while a frost in Brazil could raise prices in one season or a dry spell Vietnam, a bumper crop could send prices crashing down. However, this year fortunately, coffee prices are still ruling high despite a 50 mn bag output expected on account of higher world wide demand, analysts said.

The experience with India’s coffee sector shows that any kind of regulation on sale or movement of a commodity can have serious repercussions on the growth of the sector. Rubber did not suffer the fate of Coffee since growers and traders had the freedom to sell and buy from the market with Rubber Board only playing a catalytic role in promoting the industry right from cultivation.

Replantation schemes in pepper, cocoa, cashew and several other cash crops needs to be strengthened if India is not to lose its position as a major commodity producing-exporting nation. Analysts have warned that unless the agricultural extension services are geared upto promoting cultivation of certain crops in non-traditional areas as is being done with rubber and spices in North East, India’s position will be further weakened in global agricultural trade.

In Coffee atleast there is potential despite being a niche player - if India can supply speciality and premium grade coffee that commands a good price in global markets, analysts said.

[amyfieldadams]

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