From Bean To Cup: An In-Depth Analysis Of India’s Coffee Industry

India has risen as the sixth largest coffee producer internationally. The sustained increase in the production of coffee and its export statistics throughout time provide ample proof of India’s position as the sixth-largest producer in the global market. This study investigates the sustainability challenges of using water efficiently during coffee production in India.

This article ranges from demonstrating the evolution of coffee in India, the availability of different types of coffee, the Coffee Act of 1942, types of export incentives, privatization of the coffee trade and its sustainability in production. This article aims to provide insights into the Coffee Act of 1942 by analyzing historical records and contemporary developments.

Background Information On The Coffee Trade

Coffee holds a prominent position among the plantation crops cultivated in India, serving as the primary cash crop within the tropical region. India is ranked as the sixth largest coffee producer globally following Brazil, Vietnam, Colombia, Indonesia and Ethiopia.

Coffee is cultivated in about 3.99 lakh hectares mainly confined to the southern States of India namely Karnataka, Kerala, and Tamil Nadu, which are also the traditional coffee tracts of India. To an extent, coffee is also grown in non-traditional areas like Andhra Pradesh, Orissa and the north-Eastern States, with the main emphasis on tribal development and afforestation.

Coffee is predominantly an export-oriented commodity in India with 65% to 70% of the production being exported, thereby earning considerable foreign exchange, particularly Indian Robusta, which is highly sought after for its blending quality.  Thesecoffeesareknownfortheiruniquespicy nutmeg, clove, cardamom and pepper flavors.

History Of Coffee In India

Currently, there exists a global workforce of over 125 million individuals who are engaged in various occupations within the coffee industry. The key goal of this enormous workforce is to cater to the global demand for coffee, which amounts to a staggering 400 billion cups annually. The origins of coffee may be traced back to its initial mention as a subject of speculation propagated through tales shared by travellers who had travelled to Eastern regions. These individuals frequently merchants who had acquired novel and captivating

commodities, had a significant role in disseminating the early narratives relating to coffee. The merchants expressed their findings regarding the stimulating effects of coffee, its ability to keep them alert at difficult times of drowsiness and to aid in relaxation after a prolonged day.

The investigation of the origin of coffee originated in [1]Ethiopia and Yemen, with expansion throughout the Middle East prior to its introduction to Europe by capable explorers and traders. Numerous narratives have been recounted regarding the genesis of coffee. Among them stands a prominent anecdote involving a 9th-century Ethiopian goatherd named Kaldi, who observed a heightened state of activity in his flock subsequent to their consumption of berries derived from a specific shrub.

Following his consumption of the fruit, he proceeded to engage in an energetic routine alongside his goats. The monks residing in the vicinity were deeply intrigued by the sight before them and went on to extract the essence from the beans through boiling. Thereafter, ingesting the resultant liquid as their means to enhance their spiritual practices.

Coffee was introduced to India in the [2]late seventeenth century by Baba Budan, a Sufi saint who acquired raw coffee bean seeds during his journey back from the Haj. These seeds were obtained from the port of Mocha in Yemen. During that historical period, coffee was traded to many regions around the globe in diverse forms, hence preventing individuals from cultivating their own coffee plants.

However, Baba Budan remarkably succeeded in clandestinely transporting seven coffee beans concealed within his clothing. Upon his return, he proceeded to sow the aforementioned beans on the inclines of Chandagiri Hills, in close proximity to the caves where he and his disciples had settled. This cultivation of coffee in the highlands, known as Baba Budangiri has persisted over time.

Types Of Coffee And Their History

There are two major coffee varieties they are Arabica and Robusta. India ranks as the sixth largest global producer of coffee. Indian coffee is often regarded as the highest quality coffee produced under shade cultivation, as opposed to being grown in direct sunlight, surpassing coffee from any other region globally.

India is said to possess a diverse range of 15 distinct kinds of coffee. The United States of America holds the distinction of being the foremost global consumer of coffee, while China occupies the position of being the second largest consumer of coffee. The [3]types of Indian coffee vary from:

Arabica Beans

Often regarded as the aristocracy of coffee, commands about 70% of the coffee-growing regions. It finds its sanctuary amid the misty hills of Chikmagalur and Coorg in Karnataka. In India, Arabica coffee is typically grown at higher elevations, where the cooler temperatures and abundant rainfall create ideal growing conditions for this delicate variety. The coffee plants are typically grown in shade, which helps to protect them from direct sunlight and allows them to mature more slowly, resulting in a higher quality bean.

Robusta Coffee

Another popular coffee variety is grown in India, particularly in the regions of Karnataka, Kerala, and Tamil Nadu. Robusta coffee plants are typically grown at lower elevations than Arabica, and they are more resistant to pests and disease. Despite its reputation for being less desirable than Arabica coffee, Robusta coffee from India can still produce high-quality beans with a unique flavour profile that is appreciated by many coffee lovers.

Monsoon Malabar

A unique coffee variety that is grown in the Malabar region of Karnataka and Kerala in India. This coffee variety is known for its distinct earthy and spicy flavour, low acidity, and unique aroma.

Peaberry Coffee

Peaberry is highly sought after by coffee connoisseurs because of its unique flavour profile. Peaberry beans are believed to be richer and more flavorful than regular coffee beans, with a more concentrated flavour and higher acidity.

 Nilgiri Coffee

This particular variety of coffee is grown in the Nilgiris district of Tamil Nadu, India. The Nilgiri region is located in the Western Ghats Mountain range, which provides an ideal climate for growing coffee. Nilgiri coffee is typically grown at elevations between 1,000 and 2,500 feet.

The Coffee Act, 1942

The Coffee Board of India was enacted by the state through [4]Section 4 of the Coffee Act 1942. The Indian coffee economy was in a deplorable state and thus the Government of India established the Coffee Board and Enacted Coffee Act 1942. The trade of coffee was uplifted and improved by removing the barriers and privatizing the coffee trade in 1996. The new legislation is also expected to promote economic, scientific and technical research in coffee, including breeding new varieties and focusing on sustainable coffee production.

 According to the provisions of this legislation,  it is mandated that any individual who possesses land on which coffee beans are planted, irrespective of whether the ownership of such land is consolidated within a single estate or distributed across multiple estates, regardless of whether the coffee plants are located entirely or partially within the borders of India, must, within one month from the date of acquiring ownership of such estates, submit an application to the designated registering officer appointed by the state government for the purpose of registering the ownership of each estate possessed by the individual.

Coffee Export And Regulation

[5]No coffee shall be exported from India save under the circumstances outlined in 8 of 1878. The consumption of coffee regulated by the Board or under an authorization granted by the Board in accordance with the specified procedures and in the prescribed cases, the provisions shall have effect as if they were enacted through a notification issued under Section 11 of the Customs Act, 1962, (52 of 1962). 

Provided that nothing herein contained shall apply to coffee –

(i) shipped as stored any vessel or aircraft in such quantity as the Collector considers reasonable, having regard to the number of the crew and passengers and the length of the voyage or journey, as the case may be, on which the vessel or aircraft is [about to proceed, or

(ii) carried as per personal baggage of a passenger not exceeding such quantities, as the Central Government may, by notification in the Official Gazette, specify. Provided further that the Central Government may by order in writing, specify the quantity of coffee which shall be permitted for export during any year and where any such order is made, no coffee shall be exported from India in excess of the said quantity.

The following notification was issued by the Government of India, Ministry of Commerce and Industry, New Delhi, on 1st November 1963.

Types Of Export Incentives In India

RoDTEP Scheme

[6]Remission of Duties and Taxes on Export Products, often known as RoDTEP, is the latest scheme or export incentive that came into effect on January 1st, 2021. Under the RoDTEP Scheme, exporters will get a refund of taxes and duties paid in India while manufacturing or processing the goods for export.

Scheme For Indian Service Exports (Seis Scheme)  

Service exports can contribute to vital foreign exchange; hence service exporters are also encouraged. Under the SEIS Scheme, service exporters in India are eligible for a 3%-7% incentive on their net foreign exchange revenues for designated services.

Advance Authorization Export Incentive    

The Advance Authorization Scheme (AAS) allows the duty-free import of raw materials used in the manufacture of export goods. In other words, if the commodities will be used for the production of export products, then they will be exempt from the import charge.

Under certain situations, imported inputs are free from duties such as Basic Customs Duty, Additional Customs Charge, Education Cess, Anti-dumping duty, Safeguard Duty and Transition Product-Specific Safeguard duty, Integrated tax, and Compensation Cess.

The Duty Drawback Incentive      

It is an incentive scheme that offers reimbursement of government-imposed duties. The Department of Revenue [Customs Department] administers and monitors this initiative.

Customs and excise charges imposed on imported and domestic materials used in the production of exported goods are repaid under this scheme. The duty drawback rate varies depending on the product.

Privatization Of Coffee Trade

1.      Market Competition: India is among the fastest-growing coffee markets, for instance, Nestlé globally, according to the Head of the Swiss food and beverage giant’s Coffee Strategic Business Unit. The Bangalore-based Tata Group subsidiary, which operates retail packaged coffee brands Eight O’clock Coffee, Tata Coffee Grand and Sonnets by Tata Coffee, reported 20% year-on-year consolidated net profit growth to reach Rs 48.8 Cr ($5.9m) and a 10% rise in revenue to Rs 723 Cr ($87.9m).

2.      Direct Trade: The emergence of [7]direct trade results from the frustration with the supply consistency of the market for exceptional quality coffees, hindered by its limited availability and difficulty of access to farmers due to the supply chain’s lack of transparency and traceability The business view of the companies involved in direct trade also included a strong desire to address aspects of sustainability considered intrinsically linked to coffee production

3.      Reduced Bureaucracy: The privatization reduced bureaucratic processes and allowed for fewer permits in the coffee trade, making it easier for growers and traders to conduct business. This in turn brings more flexibility in the operations as it allows coffee traders to adapt to market developments faster.

4.      Increased Investment: Private traders were more inclined towards investing in the coffee sector, leading to the modernization of infrastructure and technological advancements in coffee cultivation and processing. The growing demand of consumers can be one of the major causes for the increased investment in the coffee trade market. This can be a positive sign as adapting sustainable practices in order to preserve the long-term feasibility as well as to sustain the well-being of coffee communities is increasingly important for coffee traders.

5.      Entrepreneurship: Privatization encouraged entrepreneurship in the coffee industry as entrepreneurs may conduct market research to identify the current trends in the consumption of coffee and also to understand the growing consumer needs and preferences. Another major benefit is that entrepreneurs create a brand image and brand development, unlike other industries, enabling them to create a higher success rate and customer loyalty.

6.      Adaptability to Market Trends: The privatized system is quicker in adapting to market trends which involves the rapidly changing consumer needs. Grasp of market trends and market strategies engage more flexibility. Adapting to market trends helps in faster decision making and generates innovation of varieties available in the coffee industry aligning it to the different consumer demands.

7.      Government Support: The Indian government offers various incentives and support measures to promote coffee exports. It enables a shift in the control of trade from the government to the private sector. This transfer indicates a less government bureaucratical involvement in the coffee business allowing the entrepreneurs to make independent decisions and conduct their own market research without any restraints from the government. This also gives access to the free flow of coffee goods limiting bureaucracy.

8.      Challenges: The coffee cultivation industry in India is experiencing a decline in its profitability. The sector is currently facing significant challenges due to the substantial burden of advanced material and manufacturing expenses, scarcity of workforce, and the additional impact of constantly changing climate patterns. The manpower scarcity on coffee farms is leading to a rise in production costs.

Labour expenditures in Brazil constitute 25 per cent of the overall production costs, whereas Indian coffee planters assert that they account for 65 per cent. Electricity interruptions are a common occurrence on plantations throughout the summer season. Consequently, the expense of irrigation grows as an outcome of the exorbitant price of diesel fuel. As a result, certain measures can be followed to face the current challenges. They are,

·  Crop quality needs to be improved through quality hubs for superior processing, whereby even cherries will yield higher returns.

·  Small coffee growers need to be supported with minimum support prices and subsidies as they face bigger challenges like global currency fluctuations.

Sustainability In Coffee Production

The presence of a healthy environment is essential for the sustainability of a thriving economy, particularly over an extended period of time. The only reason to adopt such sustainable factors would be for the preservation of the environment and to remain in this industry for a longer period. Sustainable approaches include rainforest alliance and fair trading.

Utilization of sustainable coffee cultivating practices such as shade-grown coffee helps preserve India’s biodiversity along with the usage of organic farming methods.

[8]Organizations need to act and contribute to balanced socioeconomic and environmental stability. One effective strategy for farms to mitigate their carbon emissions is to adopt circular practices that involve repurposing waste materials such as utilizing wastewater to facilitate compost generation. In both scenarios, nonetheless, the water reintegrated into the ecosystem, limiting wastage and promoting the sustainability of the producer.

Alongside look to buy sustainable coffee. In turn, this can translate into a higher price for their crop, supporting them to invest in their farm and improve their quality of life.

Conclusion

The provisions and regulations of the Coffee Act 1942, state that the Coffee Act has played a major role in facilitating the export of coffee. It renders a comprehensive framework that not only ensures the quality and high standards of coffee but also promotes fair trade practices and immense sustainability within the industry.

Furthermore, the Act’s provisions for export control and promotion, enable countries to maximize their potential for coffee export while also ensuring compliance with international trade agreements and safeguarding the interests of producers. The Coffee Act remains an essential instrument in promoting a sustainable and thriving coffee trade ecosystem.

References

[1]Ethiopia and Yemen: https://www.slurrp.com/article/the-journey-of-coffee-in-india-1652075626978

[2]Late seventeenth century: https://coffeehunter.com/our-origins/india/

[3]Types and History: https://levista.in/blogs/news/history-of-coffee-origin-types-and-facts

[4]Coffee Act 1942: https://commerce.gov.in/wp-content/uploads/2020/03/Coffee-Act.pdf

[5]Coffee export and regulation: https://www.indiacode.nic.in/bitstream/123456789/2412/1/a1942-07.pdf

[6]Export Incentives Schemes: https://www.e-startupindia.com/learn/export-incentives-in-india-types-benefits/

[7]Privatization of coffee trade: https://www.vedantu.com

[8]Sustainability in coffee production: https://perfectdailygrind.com/2021/11/environmentally-sustainable-coffee-production-profitability/

This article has been contributed by Somaiah Nithyesh.