The Hindu Business Line : Rise in coffee prices not enough, feel growers

COFFEE prices in the country have seen a steady increase over the last few years tracking global market conditions, but growers feel that the uptrend is not enough to check their mounting debt piles.

On an average, coffee prices at the auctions and the farm-gates in Chikmagalur have seen a rise of between 33 and 43 per cent for different varieties since 2001.

The prices of plantation `A' variety, which dropped from Rs 80 a kg in 2000 to Rs 56.58 in 2001 at the auctions have shot up to Rs 81.36 as of October 14, 2004. Similarly, prices of Arabica Cherry, which fell to a low of Rs 36.70 a kg in 2002 from Rs 55.30 a kg in 2000, are ruling around Rs 52 currently.

Farm gate prices at Chickmagalur for uncured Plantation A have shot up to Rs 56 a kg as of October 2004 compared with Rs 40.18 in 2002. Arabica cherry ruled around Rs 22.50 in October this year as against Rs 15.52 in 2002. The International Coffee Organisation indicator prices that fell to a low of 60.43 cents per pound in 2002 from 85.09 cents for arabica in 2000 was at 78.86 cents per pound in October 2004.

However, this uptrend in prices is just enough to neutralise the production costs, but not enough to offset the losses caused by the worst-ever crisis, said Mr Shankare Gowda, Chairman of the Karnataka Planters Association (KPA). The average production costs varies between Rs 60-65 a kg.

"We want the Government to come to the aid of the 40,000-odd growers, who are not in a position to service their mounting debts due to rising interest costs," Mr Gowda told reporters on the eve of KPA's 46th Annual Conference. The two-day conference would be deliberating various issues relating to the plantation industry.

The debt burden on the coffee industry currently amounts to over Rs 1,300 crore, including an interest component of Rs 300 crore. "There is a need for the Government to repay the interest burden to the Banks, thereby providing relief to the growers," said Mr Anil Bhandari, Chairman, United Planters Association of Southern India said, adding that such relief was not new. It already existed for other agricultural commodities besides a few select industries, including the public sector, he said.

Meanwhile, the coffee sector is eagerly looking forward to the comprehensive bailout package being mooted by the Union Government for the revival of the industry. The package drawn up by the Commerce Ministry is almost in final stages and has to be vetted by other key ministries, including Finance, before the Central Cabinet approves it, said Mr Anil Bhandari.

The proposed package, among other things, is expected to provide for repayment of the interest burden of planters to banks, reduction in interest rates and rescheduling of Special Coffee Term Loans.

A similar package amounting to over Rs 3,000 crore was being planned for tea, which was also going through a long crisis period, he added.