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Industry & Economy - Budget


A Budget wish list for coffee sector

Harish Bijoor

THE coffee sector is in dire need of relief. The last several years have been bad for the industry as a whole.

Background: I believe this Government is about change. The Government must address the dire need of the coffee sector. This is a much-ignored sector. Lot of downs and very little of ups!

Here's the wish list then for the coffee sector:

  • Reduce cess on export. Currently, there is a cess of Rs 500 on every tonne of coffee exported. This is fine when coffee prices are high and realisations are better. Time for the Government to bring this down to Rs 200 per tonne. This will help ease margin pressures faced by exporters when their realisations are not exactly great.

  • Export finance is an area that needs to be looked into. Today, export finance is available on rupee terms at 8 per cent interest rates. This is high. On dollar terms, it is Libor plus 2-3 points. This is bearable, but not all banks are giving dollar loans.

  • A special economic zone, quite like the one at Kochi, to be set up at Hassan.

  • Waiver of interest dues by coffee farmers (I refuse to call them planters now). The small planter is in misery and at the hands of the small money lender. To repay loans, he will have to get into deeper debt with the local money lender.

  • The vending segment of the front-ended coffee retail segment is just at the take-off stage. The country can accommodate 1,20,000 coffee vending machines in the next few years. Accelerate this movement by allowing for rationalisation of the duty regime on imported coffee making machines. We look for duty free imports of machinery that will be used at the end of the day by the small entrepreneur in the market, dispensing coffee and tea through these machines.

  • Accelerate the coffee movement in the country by reducing excise duty rates on instant coffee and liquid coffee concentrates that go through vending machines. A 16 per cent duty regime here is unnecessary. Instant coffee and liquid coffee decoction is no longer a rich man's drink. It is consumed by the commonest of common people.

    Overall, the coffee industry is reeling under severe pressure. This is an industry that has suffered low prices for many years. While coffee area is limited and is not expanding, productivity through individual estates is coming down due to the lack of adequate inputs into the crop maintenance and management programs. Coffee cultural practices have got affected. Productivity is, therefore, low. Take a bold step and assuage the feelings of lakhs of small coffee farmers and multiples of lakhs of dependant estate labourers.

    Declare a tax holiday under a Special Coffee Processing Zone plan that will cover the key coffee growing areas of Kodagu, Chikmagalur, Hassan and Wayanad.

    (The author, a coffee domain expert, is CEO of Harish Bijoor Consults Inc.)

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