The Hindu Business Line : Trading on a growth platform

THE India International Commodity Fair, held here during June 15-18 has been an appropriate forum to debate the fortunes of a number of key commodities that are vital to Kerala's economy.

In the four days of the Fair, all stakeholders of the trade that included representatives of growers, consumers, traders and policy makers discussed wide-ranging issues of coir, coffee, cashew, rubber and spices. The Fair was organised by TEFLA's Conferences & Events Pvt Ltd.

Mr S. Sundareshan, Chairman of the Forward Markets Commission, who inaugurated the Fair, said volumes in futures market surged by a whopping 440 per cent during 2004-05 to $129 billion, as compared with the previous fiscal. Commodities such as guar seeds, soya, castor seeds and metals such as gold and silver have helped the futures trade achieve this growth.

Currently, 24 commodity exchanges operate in the country. Mr Sundareshan said an internal committee of Forward Markets Commission would soon come out with recommendations on the proposal to allow mutual funds and foreign institutional investors to invest in the country's commodity futures market. He said 90 commodities are being traded in the country. Active participation of stakeholders of each commodity, rather than speculators and fly-by-night operators, takes place in the futures market, said Mr Sundareshan.

The commodity exchanges in the country have been demanding that mutual funds and FIIs be allowed to participate in the commodity market, as this would give a further boost to the trade. The Chairman said other pending issues of the futures trade such as options, bank's role in commodity exchanges in introduction of new products such as weather derivates were also likely to be resolved soon.

He said the FMC would emerge as an independent regulator and facilitator for commodity futures in the country, on the lines of the Securities and Exchange Board of India (SEBI). The Forward Contracts Regulation Act 1952 is about to be amended in this regard. A draft Bill is being readied and it would soon be submitted to the Cabinet for approval. Also, the FMC is now in the process of inducting more officials and implementing new technology.

`Rural areas cold to coffee'

The topic of Coffee, when debated at the Fair, saw some interesting points emerging. According to Mr Harish Bijoor, CEO of Harish Bijoor Consults Inc, the Indian coffee sector should now focus its attention on the domestic market where the consumption of coffee is abysmally low.

"Coffee has become an urban phenomenon in India. It is going out of fashion in rural India," he said. "Penetration of condoms, lipsticks and sanitary napkins is higher than coffee (in rural areas)." In order to increase the consumption of coffee in rural areas of the country, the industry needed to adopt innovative measures, Mr Bijoor said.

Though India produces over three lakh tonnes of coffee a year, domestic consumption is only between 55,000 and 60,000 tonnes. The per capita consumption of coffee in India is just 58 gm as against 12,000 gm in the US. Another dismal factor of the trade was that the number of brands in coffee has come down to just 236, from 3,741 in 1961.

Mr Bijoor said coffee is an urban drink in India these days and many upmarket chains such as Barista have cropped up in the metros. Even so, consumption remains at lower levels.

The 393 coffee outlets together sold only some 600 tonnes of coffee in a year.

In view of this low level of consumption, the coffee industry should take to a co-operative model to popularise the drink by building more regional brands, developing recipes etc.

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