Bangalore: Coffee is the second most traded commodity in the world after oil. India is a peripheral participant in the global coffee market with a 4% market share. This year, the country is expected to produce 262,000 tonnes of coffee, of which around 95,000 tonnes will be consumed domestically and the rest exported mainly to Italy, Russia and Germany.
India’s coffee exports this year will be the lowest in a decade, mainly owing to decreased production because of climate change, high production costs and increasing domestic consumption. Last year, India produced 292,000 tonnes of coffee. The Coffee Board of India, which in its modern avatar was set up in 1942, was primarily geared towards exporting the produce.
Until 1997, it had a major role in pooling and marketing Indian coffee globally under a quota system. With the quotas disappearing, the board’s role is now limited to promotion, research and development, as well as providing a neutral platform for all stakeholders to achieve higher growth.
Facing challenges: Coffee Board chief G.V. Krishna Rau says global warming is having a deleterious effect on production. Hemant Mishra / Mint
G.V. Krishna Rau, an Indian Administrative Service (IAS) officer who heads the board, says that global warming is having a deleterious effect on coffee production. To boost production, the board is working with growers and is trying to increase the area under plantation across the country. Edited excerpts:
What is the Indian coffee industry scenario like this year?
The total production, which we had estimated earlier at around 3.06 lakh tonnes, has been revised downwards to around 2.62 lakh tonnes. Of this, around 1.8 lakh tonnes will be exported. The rest will be consumed in the domestic market.
This decreased production is due to the damage done to crops because of heavy rains in coffee growing areas like Coorg. Also, global warming is leading to a deleterious effect on our coffee production. It is lower by at least 10% because of the constantly fluctuating weather patterns... We need to address this challenge globally and this will be one of the important themes of the third India International Coffee Festival that we will be hosting from 7 October.
What are the key export markets for Indian coffee?
Italy absorbs about 25% of our exports and is our largest market. Russia is about 10-11%, Germany about 8%, Belgium and Spain about 5-6% each and the rest (is exported) to various other parts of the world.
What about the domestic market?
This is one of the unheralded stories in the coffee industry. The domestic market consumption has increased from 58,000 tonnes to around 95,000 tonnes over the last five years.
Comparing value terms would not present an accurate picture as 2002-2004 was the worst period for the industry with prices being at their lowest, both domestically and internationally.
What about competition from the likes of Vietnam and Uganda?
Two-thirds of India’s production is Robusta and the rest is Arabica (the finer and more expensive coffee bean). Our Robusta is of better quality than that of Vietnam’s which is reflected in the higher prices paid to our coffee.
India is not a swing player, as we have only around 4% of the global market and, therefore, cannot decisively alter market price unlike, say, a Brazil or a Columbia. The growth in the domestic market means that eventually, the exports of Arabica from India will decline gradually. In a decade from now, we might actually end up being net importers of Arabica.
Have you been expanding the area under coffee cultivation?
Karnataka, Tamil Nadu, Kerala are the major producers of coffee in the country and there isn’t much land available for expansion in these states. Relatively newer areas like parts of Orissa and north-east are adding to our production. We have consciously tried to expand the area in Visakhapatnam in Andhra Pradesh (AP).
There aren’t too many areas which can be added easily. We have added 40,000 hectares in AP, but productivity is low there as the land is of much poorer quality, which we are trying to improve.