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India: coffee and tea update.

India: Coffee & Tea Update

The election of Dr. P.K. Ramaiah, chairman, Indian Coffee Board, to the International Coffee Council for the 90/91 session as vice-chairman is particularly significant at this point of time when Indian coffee exports are reeling in a situation of highly unremunerative international prices. It is hoped that the voice of the unfortunate producing countries will be heard more loudly, and impact of its weight will improve conditions in the near future. The fallout of the suspension of quota, and price balancing mechanism as an integral part of it, has been disastrous. The more we export, the more we lose. Taking a long-term view of this situation, it appears that planters will gradually diversify coffee land to raise other crops which will give them their money's worth, after keeping just enough to maintain the minimum infrastructure for raising coffee, causing disincentive for cash investment on fertilizer, labor, etc. Such a situation will, in turn, mean quality deterioration leading to near extinction.

However, the coffee industry is not one to take the situation lying down. Besides more than 3,000,000 persons employed in the plantations and a large number engaged in the ancillary industries, a substantial amount is contributed towards foreign exchange earnings for the country. The Government of India is equally anxious to put it back strongly on its own legs. The Commerce Secretary has even gone to the extent of recently announcing the setting up of an Institute for Coffee Technology to look into the post-harvest problems of coffee growers. In this background, much is expected of Dr. Ramaiah to press the matter of starting the process of negotiation for a new agreement with economic clauses.

Alexander Beltrao, ICO executive director, gave a lucid description of the international coffee situation at the Coffee Convention held at Cooncor under the auspices of United Planters' Association of South India. He mentioned that loss of revenue to the exporting countries due to suspension of the quota system has been to the extent of $4 billion a year--a substantial amount to continue to bear for another year while making more coffee available to the importing countries.

Eastern Europe and the USSR have served as a captive market for Indian coffee due to Rupee trade agreement between India and Russia. India exports about 55,000 tons on contract sale basis to Russia, which helps to balance the stocks at the end of the season. A problem arose with the bumper crop of 88/89 with a quantity of 216,000 tons harvested. The situation, however, was balanced with a poor crop of 117,000 tons in 89/90. These figures, however, take into calculation the commitment to the USSR.

Beltrao dropped a bombshell in this background when he announced in his address the possibility of bringing Eastern Europe and USSR within the ambit of membership. While the effort is welcome in view of the problems arising out of a two-tier market, the Indian coffee industry will have its shock when Russian export goes out of the Rupee Trade Agreement between the two countries.

Due to availability of large quantities for import at reduced prices and there being no impact of lower prices to the consumer as yet, the roasters are drawing upon large volumes of Mild Arabicas to improve their blends. Coffee planters are also realizing the need for maintaining and further improving quality. In this respect, Ramesh Rajah, a qualified horticulturist (besides having grown up in a family of coffee planters), places much importance to the need for being quality conscious at this critical stage. Rajah points out that 14 main producers of Mild Arabicas held a 51.7% share of the market, and export of Robustas slumped to 22.93%, also with unfavorable prices. Use of modern marketing techniques are required to survive and draw benefits out of this situation, says Rajah.

India is continuing to remain in the category of suppliers of a primary commodity. We do not sell coffee, our coffee is bought. If we don't sell at unremunerative prices, our stocks will pile up and rot, causing more losses. Bulk selling of instant coffee is also hardly any remedy. Ramesh Rajah says, "We should stop treating coffee as a commodity. Coffee must be positioned as a high interest product." This marketing approach calls for a total reorientation of the industry.

It involves marketing Indian coffee as specialty products in the world market. "Monsooned coffee" has already made a special mark with connoisseurs. There are specialties must be recognized, carefully nurtured at every stage of cultivation and processing.

While capacity export must continue even at low prices, preliminary work to initiate activity for the new marketing approach has to begin. This correspondent feels that, under the leadership of Krishna Kumar, president of UPASI (and vice chairman of Tata Tea) the industry is adequately alert, when he calls for a change in the marketing system that has been in vogue in the country for the last 50 years. He mentions that the present pool system does not permit diversification and provides little incentive for value-addition. This is perhaps the beginning of a new era.

Tea Update

While the members of the Indian tea industry were complimenting each other for the wonderful work they have done and turning huge profits year after year, the Special Secretary to the Government of India gave them a shock at the general meeting of the Tea Association of India, when he asked them to shed complacency. India's share in the world tea exports has declined to 21% and, if serious efforts are not made, the plan of reaching 300 million kg. export by 1995 will remain a dream. In the current year, exports will suffer due to the Gulf crisis. Iraq and Kuwait--two important markets--are out of reach. Hardly any attempt has been made to reach new markets to compensate for Iraq and Kuwait. Diversification areas such as packet tea, instant tea and tea bags are growing at such a slow pace that it is not really making a dent in the tea export market.

During 1990, exports may turn around 225 M kg., of which 65% go to Russia under contract sale agreement in Rupee Trade. Like coffee, tea is also being traded as a primary commodity. Until modern marketing techniques are applied to turn it into a consumer interest product, foreign exchange earnings as projected are hard to come in.

India's internal market is expending at the rate of 15 to 20 M kg. per year. This high growth rate is largely responsible for keeping the industry thriving.

A notable development has, however, taken place in the packaging scheme. Though too late, B & A sacks, a company sponsored by Barooah & Associates, have produced satisfactory paper sacks at its factory in Ballasore, in technical collaboration with Paper Sacks of U.K. There are undoubtedly many advantages of multi-walled paper sacks over wooden tea chests. African tea producing countries are already using them.

Economy in space, transport cost, etc. are some of the advantages. Some 6,000 hectares of forest area land are devastated every year for procurement of timber for tea chests. Paper sacks will be of great benefit for India's ecological problem. The company intends to effect further improvement in quality. At present, B & A sacks are recommended for packing only CTC and Dust teas. It is hoped that gradually, wooden tea chests may be eliminated in the future.
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Author:Bose, Bimal
Publication:Tea & Coffee Trade Journal
Date:Jan 1, 1991
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