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In light of no quotas, India must initiate new export strategy.

In light of no quotas, India must initiate new export strategy

The announcement by the International Coffee Organization (ICO) of the suspension of all export quotas and the introduction of a free world market is hardly surprising. It has become clear over the last few weeks that the pact in its present form had very few advocates.

The Commerce Ministry of the Government of India is evolving a strategy to market Indian coffee in the world market following the decision of the ICO to suspend quotas for two years. A spokesman of the Indian Coffee Board said that talks on chalking out a plan to bail out Indian coffee from the deep crisis are on. What Indian coffee needs is a little push in the global market using diplomatic channels. Indian coffee with its refreshing aroma could be marketed any where in the world, he added. However, the Commerce Ministry must finalize an imaginative pricing formula to give an edge to the aggressive marketing to be launched soon.

The immediate impact of the suspension of quotas will of course be negative. There are already reports of a collapse in world prices to the lows of 1987. Witness the decline in prices by Rs 250 to Rs 500 per 50 kg at the Bangalore auctions recently. As a result, India's export earnings are bound to show a fall even if the quantity exported remains the same. An element of uncertainty remains about the prospects of exports to the former quota countries. and the erstwhile non-quota market will also become more competitive.

In the long term, however, these developments must be seen as an opportunity. The quality of Indian coffee as well as the fact that the country currently has a very small share of the world market should make significant increases in exports possible. But this would require a new export strategy. The effectiveness of such a strategy will determine whether India is a long term beneficiary or not.

The Indian Coffee Board official said that the Government of India is finalizing a plan to protect the East Bloc market, has been a major buyer of Indian coffee among non-quota countries. The East Bloc countries lift 50,000 tons a year. Though India is expected to have a bumper production of over 200,000 tons this year, domestic consumption has been stagnant at 60,000 tons a year. The instant coffee segment may account for another 10,000 tons. In the free market regime India would have to compete with other coffee producers to offload over 60,000 tons.

The United States had led the consumers' resistance to a quota system which allowed the non-members to buy coffee at a lower price than the member of ICO. The resultant effort to introduce quotas for exports to non-member countries was not appreciated by the smaller producers. Many of these producers, including India had been offloading their large surpluses on the non-members. They feared that a quota for non-member countries would reduce their exports.

M.D. Balakrishna, president, United Planters Association of South India (UPASI) welcoming the suspension of global coffee quota says that India has been opposing moves of the U.S. and European Economic Community for a universal coffee quota. The Government of India in the Ministry of Commerce is expected to use diplomatic channels to ensure that Brazil does not knock off the Indo-Soviet coffee contract by indulging in dumping. Brazil has already made dents in the East Bloc coffee market by its aggressive marketing of instant, giving a tough condition to India.
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Title Annotation:coffee trade
Author:Dudeja, Vijay
Publication:Tea & Coffee Trade Journal
Date:Sep 1, 1989
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