Coffee banks on budget props

The Indian coffee industry, which faced a crisis two years ago, was not yet out of the woods and needs help in the coming budget to stimulate growth.

Last year's recovery in international prices was not enough to wipe out the damage done by several years of low prices.

Top most among the reliefs the industry was seeking was reduction in cess on exports. Currently there was a cess of Rs 500 on every ton of coffee exported.

"It's time for the government to look at bringing this down to Rs 200 per ton. This will help ease margin pressures the exporter faces today," says Harish Bijoor, a consultant.

Export finance was available on rupee terms at 8 per cent interest rates. On dollar terms it was LIBOR plus 2-3 percentage points (3.5-4.5 per cent for three moth funds) and far from satisfactory.

D M Purnesh, Secretary, Speciality Coffee Association of India and MD, Classic Coffee & Spices, said foreign exchange earned was hardly ploughed back for infrastructure development.

The industry would like waiver of interest, reduction of interest for the future loans and a minimum support price, particularly for small growers. Quality had to be encouraged with incentives.

Bijoor said coffee bars proved the coffee retail segment was at the take-off stage. India could accommodate 1,20,000 coffee vending machines in the next few years but rationalisation of duties on imported coffee making machines was needed.

Naresh Malhotra, director, Cafe Coffee Day, sought lower taxes on imported capital goods and machinery.

Excise duty on instant coffee and liquid coffee concentrates for vending machines had to be reduced from 16 per cent at present.

Bijoor warned that years of low prices had kept coffee area limited and led to decline in productivity owing to lack of funds for crop maintenance and management.

A tax holiday under a special coffee processing zone plan for key areas like Coorg, Chikmagalur, Hassan and Wayanad, or a special economic zone at Hassan, could be considered for long-term revival.