Will the Coffee Board’s New Subsidies and Incentives help brew more Coffee?

  • India’s coffee production has been stagnant for the past six years. Low productivity, unfavourable weather conditions and loss of crops due to pests are the main causes.
  • Coffee Board of India hopes to achieve about 30 percent growth over the next 5-10 years.
  • New subsidies and incentives to enhance coffee production and export has been announced.
  • For the first time, co-operatives and corporates will also be eligible for subsidies.

India is one of the major exporters of coffee given that it accounts for nearly 4% of the world coffee production. The sixth largest producer of coffee in the world enjoys a high premium in the international market, especially for Indian Robusta and Arabica. India’s coffee production has not recorded a significant surge in numbers since the past six years. 2013-14 saw a production of 304,500 tonnes, approximately the same as the last six years. India’s coffee board however remained optimistic about the surge in coffee production and went on to peg the estimated coffee production at 344,750 for 2014-15 in July. 13.2 percent over the final estimate for 2013-14.

The projection was way off the mark as it failed to consider the White Stem Borer (pest) which ravaged 3.5 million coffee plants during the first flight period and the continuous and heavy rain which adversely affected plantations in different parts of Karnataka. The state accounts for about 70% of the total coffee production of India. Another reason is low productivity in the country. Overall, India’s productivity (both Robusta and Arabica) during 2013-14 was 809 kg per hectare. That is 580 kg a hectare of Arabica and 1,011 kg of Robusta. Vietnam and Brazil’s Robusta and Arabica productivity is 2,188 and 1,257 kg per hectare respectively.

The Coffee Board has been working earnestly towards turning the fortunes and has set a target of 400,000 tonnes of bean production through increased planting and productivity in the next 5-10 years about 30 percent growth over current output. In an effort to achieve the target the Coffee Board of India has proposed higher allocation for replanting and expansion as well as productivity enhancement. To be implemented under the 12th plan, subsidy rates are approximately 40 percent for up to 2 hectares, 30 percent for 2-10 hectares and 25 percent for holdings of above 10 hectares.

Coffee Board Chairman Jawaid Akhtar made the welcome announcement at the Inauguration of the United Planters Association of Southern India (UPASI) and Karnataka Planters Association (KPA) coffee conference in Bengaluru on Thursday. Akthar said, “Coffee Board has proposed to increase the unit cost by 75 per cent to Rs 1,75,000 per hectare.” Co-operatives and corporates can also avail this subsidy for the first time. A subsidy for eco-certification at 50 percent of the certification cost has also been announced. The ceiling is Rs 50,000 per beneficiary. Further, an enhanced subsidy has been made available. That is Rs 2.50 lakh for up to 20 hectares.

A package specifically tailored for Odisha and Andhra Pradesh has also been introduced. Around 6,000 tonnes of coffee, spread over 58,000 hectares was damaged by the Hudhud cyclone. The board is hoping to generate around 25,000 tonnes in the next five years. To ensure this, the board has decided to offer Rs 10 per kg subsidy to tribals for marketing it. Rainfall premium insurance will also soon be made available for small growers. The reimbursement of which will be 75 percent of the premium. The board is also working towards protecting the environment and has put into place a subsidy scheme for pollution abatement measures and will hold corporate and co-operative growers responsible as well.

The board has also decided to up the ante when it comes to exports. The incentive for Indian brands retail packs of value-added coffee has been increased by 50 percent to Rs 3 a kg. The incentive for high-value coffee has been doubled to Rs 2 a kg. What remains to be seen is whether these measures prove effective enough.

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