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The Coffee Board of India, an autonomous body under the commerce ministry, has signed an agreement with the National Spot Exchange Ltd (NSEL) to launch a warehouse receipt-based electronic spot market for coffee beans. This is a first-of-its-kind initiative by the Board to provide an opportunity for better price realisation and educate growers about quality assessment. Currently, Rs 2,000 crore worth of is traded in physical form at the farm gate. Agents of exporters collect the beans at estates and transport it for curing (drying and de-husking of coffee beans). Earlier, ABN Amro and ITC had tried to provide online trading platforms for coffee, which did not work well, said growers.
According to the agreement, NSEL will conduct online trading beans for both raw and cleaned coffee. It has tied up with companies for curing after the online transaction. NSEL has set up two warehouses at Kushalnagar in Kodagu district and Chikmagalur in Chikmagalur district for storing coffee on behalf of the growers.
"The aim of this partnership is to ensure that small and medium coffee growers get an opportunity to sell their coffee online. We will provide them quality assessment and grading facilities at their farm gate with the help of the Coffee Board. The growers are free to fix their own prices. There will be no fee for the growers for online trading. We will charge the buyers a small commission," said an NSEL official.
The partnership between the Board and NSEL is also aimed at providing market linkages and relevant back-end infrastructure, education, training and technical advice to growers. The Coffee Board will carry a mobile laboratory to conduct the grading of coffee beans at the farm gate. The price will be discovered based on transparent electronic bidding. After the online trading is carried out, NSEL will deliver the beans at the doorstep of buyers or curing works through its transport network, the official added. The NSEL is also in the process of providing finance. Federal Bank, Standard Chartered and ICICI Bank, among others, have approached NSEL for providing finance on the warehouse receipts.
Ramesh Rajah, president of Coffee Exporters' Association of India, said: "It is an excellent idea. The seller will know how much price he will get for his coffee. However, there are many glitches involved in online trading." He said issues such as Rule 7B, VAT and transaction costs will have to be sorted. As the sale of cured coffee attracts taxation, growers will not come forward to sell through online platform. NSEL and the Board will have to sort out these issues, said Rajah.
