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1.

Overview
Coffee is a world famous beverage and it is widely drunk in almost every part of the world. The
seeds from which this drink is made are actually seeds of the fruit borne by the coffee plant and
are called ‘beans’ in trading terms. These coffee beans stand at the 3rd place in the list of legally
traded products in the world and are considered to be a very important commodity in terms of
trading.
1.1 Coffee history:
According to a coffee history legend, an Arabian shepherd named Kaldi found
his goats dancing joyously around a dark green leafed shrub with bright red
cherries in the southern tip of the Arabian Peninsula. Kaldi soon determined
that it was the bright red cherries on the shrub that were causing the
peculiar euphoria and after trying the cherries himself, he learned of their
powerful effect. The stimulating effect was then exploited by monks at a
local monastery to stay awake during extended hours of prayer and
distributed to other monasteries around the world. Coffee was born. After
year 1600, it started reaching the nearby countries like India through
smuggling practices. The Turks first adopted coffee as a drink. This is how
coffee was popularized as a drink in the rest of the world and people started
planting coffee as a crop.
Despite the appeal of such a legend, recent botanical evidence suggests a
different coffee bean origin. This evidence indicates that the history of the
coffee bean began on the plateaus of central Ethiopia and somehow must
have been brought to Yemen where it was cultivated since the 6th century.
What is however true that coffee is gained its widespread popularity in Yemen where it was
grown and brewed from the fifteenth century onwards but who was the person who first
introduced coffee to the Yemen after discovering it in Ethiopia? The most popular theory is that
it was a Sufi grand master named Ali Ben Omar al-Shadili who came to be known as the «Saint
of Mocha». Ali Ben Omar lived first in Ethiopia then shifted to the Yemini port Mocha where he
founded a monastery.

1.3 Coffee varieties

There are around 25 varieties of coffee under ‘Coffea’ known to the world. But two of these
varieties are very much popular and are widely used throughout the world. These are coffea
arabica and coffea canephora (or coffea robusta). Commercially too, only these types are traded
in the various commodity markets. Around 70% of the coffee production is constituted by coffea
arabica and 25% by coffea robusta.

1.3.1 Arabica coffee

Arabica is the oldest species of bean and is the most widely cultivated, accounting for 74 percent
of the beans grown in the world. Arabica beans grow at altitudes between 600 and 1,800 meters
above sea level and take six to nine months to mature.
The Arabica beans command a higher price on the coffee market because growing coffees at
higher altitudes is more expensive and labour-intensive. Arabica beans fall to the ground soon
after they ripen, so they must be harvested as soon as they are ripe to prevent them from spoiling
or absorbing flavour taints from the ground. High-grown coffees are also at risk of frost damage,
so farmers tend to build plant replacement costs into their prices. Production costs are higher
since most Arabicas, especially those grown at the highest altitudes, are hand-picked and
processed in the more expensive wet method.

Arabica coffee is generally more highly regarded than robusta coffee; robusta tends to be bitter
and have less flavor but better body than arabica. For these reasons, about three-quarters of
coffee cultivated worldwide are C. arabica. Robusta strains also contain about 40–50% more
caffeine than arabica. For this reason, it is used as an inexpensive substitute for arabica in many
commercial coffee blends
1.3.2 Robusta coffee

Coffea robusta is cultivated in the areas of West and Central Africa, Southeast Asia, South
America including Brazil. It is said to be a more economical variety of coffee as compared to the
other one as it can be grown on moist lands having low altitudes. And also it is harvested 3-4
times a year that leads to a higher production level and lower cost level.
Unlike Arabica beans, Robusta beans do not fall off the tree when they
become ripe, so they don't need immediate harvesting. Robustas are also
used for commercial, canned and instant coffees. Because they are cheaper
to produce, Robustas are sometimes combined with Arabicas to make a low-
cost blend with some of the flavour characteristics of the more expensive
Arabica beans.
1.4 Production Process
As we know, Coffee is a brewed drink prepared from roasted seeds, commonly called coffee
beans; they are seeds of coffee cherries. Once ripe, coffee berries are picked, processed, and
dried. The seeds are then roasted to varying degrees, depending on the desired flavor. They are
then ground and brewed to create coffee. Coffee can be prepared and presented in a variety of
ways.

Depending on the type, the coffee tree can reach a height of 10 to 15


meters. The tree's leaves are broad, dark green and shiny, similar to those of
a camellia bush. The blossoms are white, star-shaped flowers and resemble
the flowers of the Jasmine tree in fragrance, colour and appearance.
Trees blossom over a six- to eight-week period in countries. Pickers must go
over the trees again and again to pick only perfectly ripe berries. Because
harvesting is so labour-intensive, it's one of the most expensive steps in
coffee processing. The time span between the blossom and the harvest
generally covers eight to nine months, depending on the altitude and
prevailing weather conditions. Coffee trees produce for about 20 to 25 years,
yielding about 2.000 beans a year, which is about one kilogram of raw coffee
per year. With modern cultivation methods the harvest in a good year lies
between 3,000 and 4,000 kg per hectare.
Green coffee
The coffee bean is the seed of the berry. It resembles a cranberry and has a
sweet pulp, protected by a membrane called parchment and a silky thin
membrane called silver skin. Coffee beans are actually the two flat-sided
seeds inside the cherry. Unprocessed coffee is called green coffee.

A. Cultivation
The cultivation, care and harvesting of coffee is extremely labour intensive.
It begins with the sowing. Coffee seeds will only germinate if sown within the
eight weeks following the harvest. They are sown one to two cm deep in
specially constructed beds.
After five to eight weeks the tiny plants reach the surface. As soon as the
first pair of leaves appear, sometimes even sooner, the seedlings are
transplanted to special foil planting bags, so called polycovers, or often to
peat pots. They are then set 20 to 25 cm apart in large, predominantly
shaded beds.
Six months later the young plants are 30 to 50 cm tall. At this stage they are
transplanted to their final place in the coffee plantation, now at a distance of
one to three meters apart. Here, the plants are usually protected by other
trees which shade the plants from intense sunlight.
The newer varieties of coffee tree begin to bear fruit from the third or fourth
year and go on to produce an optimal crop for ten years. Older varieties
produce their first harvest after five years, but continue to produce
maximum crops for 25 years.

B. Harvesting
Around nine months after the flowers appear; the berries are ripe and can be
harvested. Harvesting is mainly carried out by hand.
The main harvesting season lasts around four months for Arabica coffee and
for Robusta coffee a little longer. In some countries, however, there is no
standard harvesting season because of the significant climatic and
geographical differences. In Colombia for example, harvesting continues
throughout the year.
There are two reasons for the length of the main harvest of Arabica coffee,
which can last for up to four months. Firstly, the speed at which the coffee
berries ripen varies from tree to tree. And secondly, the coffee tree is
unusual in that blossom, unripe and ripe berries can all be found on the
same branch.
There are three methods of picking:
• Hand-picking (also called selective picking)
• Strip-picking
• Mechanical harvesting

I. Hand-picking
higher quality Arabica beans are almost always hand-picked. Although
this is a more expensive method of harvesting, it ensures that only
ripe, high quality berries are picked. The workers go between the trees
and selectively pick only the cherries that are at the peak of maturity.
Hand-picking is the most labour-intensive harvesting method. Coffee
cherries are at their peak for only a few days before they turn overripe,
so workers must go over each tree many times. On a single day
a coffee picker harvests on average between 50 and 100 kg of coffee
berries.
II. Strip-picking
In Brazil, and for the Robusta coffees cultivated in Africa and Indonesia,
the coffee berries are not picked individually. Here, the pickers strip the
branch of all the berries, both ripe and unripe, with one sweep of the
hand. The berries, together with torn leaves and twigs, fall on the
ground beneath the trees, onto large cloths, from which the harvest is
later gathered. This method of harvesting is used for cheaper,
commercial Robusta beans and causes some of the flavour taints
associated with lower quality coffees.
III.Mechanical harvesting
On large plantations, harvesting machines are sometimes used, which
shake all the berries from the tree.

C. Processing
The two coffee beans make up only one
third of the coffeeberry, the rest
consisting of fruit flesh (also known as
pulp), skin and husk, all of which must be
removed so that only the green beans
remain.
Structure of coffee berry and beans: 1:
center cut 2:bean (endosperm) 3: silver
skin (testa, epidermis), 4: parchment
(hull, endocarp) 5: pectin layer 6: pulp
(mesocarp) 7: outer skin (pericarp,
exocarp)

Different methods of processing the coffee beans have now been adopted
worldwide:
I.Wet processing II. Dry processing and III. Other process
I. Wet processing

• Wet processing, whereby the beans are washed. This process is relatively
expensive, but is beneficial to the quality of the coffee. The berries are
first fed through a water channel to soak them and to remove any
impurities. The unripe berries sink to the bottom, leaving the ripe fruit to
float to the top.

• The ripe berries can then be processed further. The fruit flesh of the
berries is removed with the help of a 'de-pulper', a machine that has a
roller with a roughened surface. This scours away the fruit flesh (pulp)
from the berries under a stream of water. Previously, the remaining pulp
was treated as waste, but nowadays it is blended with minerals and turned
into fertiliser.
• In the second stage of wet processing the coffee beans are
fermented in large water containers. The object of the
fermentation process is not only to dissolve any remaining
fruit flesh, but also to remove the sticky film surrounding
the coffee beans, which is not water soluble. This part of
the procedure, which lasts approximately two days, is very
important. The long period of fermentation is what first
gives the coffee its rich aroma and special flavour.

• Washing : On completion of the fermentation process the


coffee beans have to be washed. At this stage, the beans
are still surrounded by their parchment husk, and for this
reason the coffee is also referred to as 'parchment coffee'.
I. Drying

The washed parchment coffee is then spread out on


concrete slabs or drying racks and left out in the sun. To
ensure that the beans dry evenly they are turned over
several times a day. Depending on the weather conditions,
this process takes five or six days. Cultivators operating on
a medium to large scale make use of drying machines,
huge metal drums inside which hot air circulates. Again, to
ensure that the beans dry evenly the drums rotate
continually. In the drums the drying process lasts about 24
hours. Dried parchment coffee has an attractive golden
yellow colour and is known as pergamino coffee.
At this stage the work of the coffee cultivators is largely at
an end. The producer parts with his product, selling it to a
wholesale distributor and/or an exporter.

II. Other process


Hulling
Once the beans are completely dry, hulling begins. First, the
pergamino is stored in bags, before being mechanically hulled by
special machines. These peeling machines have grooved cast
iron cylinders, inside which the husk of the coffee beans is
scoured away as they rub against one another. At the end of this
process the beans are generally olive green in colour. Some
varieties even have blue beans; these are the high quality so-
called 'blue' coffees.
Sorting and grading
First the coffee beans are sieved to remove any foreign objects
and damaged beans. Next they are mechanically graded
according to size and shape. This is followed by a further
selection process, this time carried out by trained workers. The
coffee is sorted by eye as it passes in front of them on a
conveyor belt into the different quality grades. There are also
machines now that can perform this selection work.
Cleaning and selecting
Finally, the beans are cleaned and then sorted according to size
by mechanically operating vibrating sieves.

Inspection and storage


The sorted coffee is packed in sisal bags each holding 60 kg in
india (70 kg in Colombia). The final stage in the process is
inspecting the coffee. A sample is taken from a large number of
sacks. These samples are then examined, roasted, ground and
separately numbered by expert inspectors before being brewed.
After the experts have examined and tasted the samples, they
deliver their verdict. The bags are given a quality seal and can
then be exported.
Grading standards
Each producing country sets its own standards for grading, and
the criteria used for grading vary from country to country. The
governments of many coffee-growing countries impose strict
grading standards to maintain consistent quality and preserve
the reputation of coffees grown in those countries.
In addition, coffee is sometimes graded by the number of
imperfections (stones, broken or deformed beans, twigs, etc.)
per kilogram. Less than 20 percent of beans are of high enough
quality to be considered speciality coffee.
Bulk transport
The majority of the coffee is shipped direct from the country of
origin to the country of consumption. Previously, the sacks were
piled up one by one in the ship's hold, but nowadays container
transport is used. The newest form of transport is that of bulk
transport, whereby the coffee is stored loose in the container.
Storage period

Once dried, the green coffee can be stored for about a year
without appreciable deterioration in quality. Green coffee of up to
a year old is designated 'current crop'. Longer storage times alter
the quality of the coffee, as the beans become drier. They are
then marketed as 'past crop' or 'old crop'.
2. Production:
Coffee Growing Areas
Coffee grows exclusively in tropical and sub-tropical regions. The present
coffee-producing belt around the globe comprises about 70 countries
involved in cultivation, and lies between the latitudes of 23 degrees north
and 25 degrees south. The ideal growing conditions for coffee trees are an
average of 17 degrees Celsius to 23 degrees Celsius as well as abundant
precipitation and fertile soil.
Altitudes
The altitude at which a coffee is grown plays a major role in determining the
quality of the bean. Because there is less oxygen, coffees grown at higher
altitudes take longer to mature than plants grown at lower altitudes. This
allows the flavours to develop more fully and produces beans that are
delicate and flavourful.
Growing conditions
The coffee plant is selective about growing conditions. Coffee trees can't
tolerate weather that is too hot or cold, or too wet or dry. They need direct
sunlight, but only for a few hours a day - about two hours a day is ideal.
Wild coffee in Ethiopia grows in rain-forest mountains where taller trees
shelter it from the sun's burning rays and low-growing plants serve as mulch.
Farmers try to mimic those conditions by planting fruit trees between coffee
trees to provide shade, mulch and an alternative crop. Other growers build
protective trellises or plant their groves on hillsides that only receive a few
hours of sun per day. Coffee plants thrive in fertile well-drained soil.
Enemies
The most feared enemy of the coffee plant is leaf rust; a mould that infects
the leaf and makes it turn brown and black and eventually fall off. Other
enemies are insects: lice and caterpillars. Another constant threat comes
from the weather conditions: hail, storm, heavy rainfall, drought and frost
can be fatal.
Seeds of coffee cherries that grow on trees in over 70 countries, cultivated primarily in Latin
America, Southeast Asia, and Africa. Green unroasted coffee is one of the most traded
agricultural commodities in the world. Due to its caffeine content, coffee often has a stimulating
effect on humans. Today, coffee is the third most popular drink in the world, behind water and
tea.

2.1 Production centers:


The non-traditional coffee producing regions in India are: -
• Andhra Pradesh
• Orissa
• Assam
• Manipur

India stands at the 6th position in the list of coffee producing countries. The production of coffee
in India fell drastically in 2002-03 like in the other countries of the world. But it has started
recovering from that downfall and the production increased slightly in 2003-04. The areas
having a good altitude are indulged in cultivating coffea arabica and the low-lying areas having a
hot climate cultivate coffea robusta. Robusta coffee production contributes to about 62-65% of
the total coffee production whereas Arabica contributes to 35-38%. Karnataka has the maximum
cultivated area i.e. 53%.

3. Domstic industry
3.1 Domestic produced coffees:
1. Variety Coffee :Important Varieties grown in India are Kents, S.795, Cauvery, Sln.9
2. Decaffeinated Coffee: Caffeine removed artificially, health consciousness consumers
3. Organic coffee: without using chemicals and pesticides, Great demand in the developed
countries
4. High Grown Coffees : Grown at higher elevations i.e. 4000 ft , high quality with dense
beans.
5. Estate Coffee/Specialty Coffees: Variety, cultural practices and special processing
techniques. Famous for the distinct identity in terms of flavour and aroma
characteristics.eg. Monsooned Malabar AA, Mysore Nuggets Extra Bold, Robusta Kaapi
Royale
• Specialty coffees include:
• Monsooned coffee – This coffee is very much popular in the world. Earlier when there
were less resources available for transportation, the coffee from India, in transit to
Europe, faced humidity and that turned the color of the coffee to pale yellow and the taste
also. This was the birth of a new variety i.e. the Monsooned coffee.Even today, through
out the months of monsoon, the coffee is left in an open warehouse to make it
‘monsooned’.

• Mysore nuggets extra bold – This type of coffee have extra large beans, greenish in
color and have quite strong fragrance. Unlike the other varieties produced in India,
mysore nuggets has a good acid content.

• Robusta Kaapi Royale - Robusta Kaapi Royale is a smooth, less acidic coffee made
from Robusta Parchment AB class of coffee. The coffee beans are round in shape and
grayish in color.
• The Indian consumption of coffee is also increasing with time. India consumes around
30% of the total quantity produced. Before liberalization, the Coffee Board controlled
coffee marketing in India but after liberalization that interference of the board was
completely removed.

3.2 Production of coffee in India


India accounts for about 3 to 4 per cent of world coffee production and the industry provides
employment to six lakh people. Among the coffee growing states, Karnataka accounts for 60 to
70 per cent of country's total coffee production, followed by Kerala (22 per cent) and Tamil
Nadu (7 per cent). Europe accounts for about 70 per cent of India's coffee exports.
If we are talking about production, both Arabica and robusta in India, production figures (in MT)
are below:
According to the provisional data available on coffee board’s annual report,the Production of
Arabica and Robusta coffee in Percentage terms, during 2007-08 to 2009-10 are below.

3.3 Major trading centers of coffee

• New York (Coffee, Sugar and Cocoa Exchange)


London
Uganda
Kenya
Brazil (Brazilian Mercantile and Futures Exchange)
Singapore (Robusta coffee)
• It is also traded at the Indian commodity exchanges like National Commodity &
Derivatives Exchange ltd and National Multi Commodity Exchange of India ltd
4. Coffee and export:

• India exported over 440,000 pounds of coffee in the 2005-2006 season, slightly less than
in 2005 and nearly 5 percent less than 2004. Over a quarter of the India's coffee exports
go to Italy. Russia is a distant second place, importing nearly 15 percent of India's exports
• Indian coffee growers are closely linked with global markets as the country exports more
than 80 percent of its output.
• Coffee is an important export commodity, it is exported to 74 countries. However, the
major destination of India’s coffee export is Europe. Coffee exports from India witnessed
a 10-year low in 2009, exporters believe the trend would change and exports will pick up
in 2010 because of good output

4.1 Coffee exports from India

4.2 Coffee production and exports : India’s share


4.3 Export destination
4.4 Major Competitors in the global market

Brazil is the world's largest coffee producer. On average it produces around


28 percent of the total world output. vietnam follows second with about 16
percent, third lies Indonesia with around seven percent, and fourth Mexico
After that a number of countries follow that only contribute between three to
four percent and less than one percent to world coffee production.

5.Provisions in India’s Foreign Trade Policy


In Exim policy 2009-14 With a view to continously increasing percentage share of global trade
and expanding employment opportunities, certain special focus initiatives have been identified
and many continued for Market Diversification, Technological Upgradation, Support to status
holders.
Agriculture, Handlooms, Handicraft, Gems & Jewellery, Leather, Marine, Electronics and IT
Hardware manufacturing Industries, Green products, Exports of products from North-East,
Sports Goods and Toys sectors. Government of India shall make concerted efforts to promote
exports in these sectors by specific sectoral strategies that shall be notified from time to time.
• Export and trading house status scheme : Merchant as well as Manufacturer Exporters
shall be eligible for status.

Merchant as well as Manufacturer, Exporters, Service Providers, Export Oriented Units


(EOUs) and Units located in Special Economic Zones (SEZs), Agri Export Zones
(AEZs), Electronic Hardware Technology Parks (EHTPs), Software Technology Parks
(STPs) and Bio- Technology Parks (BTPs) shall be eligible for status.
Applicant shall be categorized depending on his total FOB (FOR - for deemed exports)
export performance during current plus previous three years (taken together) upon
exceeding limit below. For Export House (EH) Status, export performance is necessary in
at least two out of four years (i.e., current plus previous three years).

• MAI Scheme (Market Access Initiative) on promotion of Indian coffee exports to Russia
and CIS countries and a manual on coffee retailing.
Under MAI scheme, Financial assistance is provided for export promotion activities on
focus country, focus product basis. Financial assistance is available for Export Promotion
Councils (EPCs), Industry and Trade Associations (ITAs), Agencies of State
Government, Indian Commercial Missions (ICMs) abroad and other national level
institutions/eligible entities as may be notified.

A whole range of activities can be funded under MAI scheme. These include, amongst
others,
i. Market studies/surveys,
ii. Setting up of showroom / warehouse,
iii. Participation in international trade fairs,
iv. Displays in International departmental stores,
v. Publicity campaigns,
vi. Brand promotion,
vii. Reimbursement of registration charges for pharmaceuticals and expenses for carrying
out clinical trials etc., in fulfillment of statutory requirements in the buyer country,
viii. Testing charges for engineering products abroad,
ix. Assistance for contesting Anti Dumping litigations etc.
Each of these export promotion activities can receive financial assistance from
Government ranging from 25% to 1 00% of total cost depending upon activity and
implementing agency.

• MDA Scheme : Market Development assistance


Under MDA Scheme, financial assistance is provided for a range of export promotion
activities implemented by EPCs and Trade Promotion Organizations on the basis of
approved annual action plans. The scheme is administered by DOC. Assistance includes,
amongst others, participation in:
i. Trade Fairs and Buyer Seller meets abroad or in
India, and
ii. Export promotions seminars.
iii. Financial assistance with travel grant is available to exporters traveling to focus areas,
viz., Latin America, Africa, CIS region, ASEAN countries, Australia and New Zealand.
In other areas, financial assistance without travel grant is available.
MDA assistance is available for exports having an annual export turnover as prescribed
in MDA guidelines.

Coffee board is getting benefit under these schemes.(see below table)

• Vishesh Krishi and Gram Udyog Yojana

Under foreign trade policy 2009-14,Objective of VKGUY was to promote exports of :


(i)Agricultural Produce and their value added products; (ii) Minor Forest Produce and
their value added variants; (iii) Gram Udyog Products; (iv) Forest Based Products; and
(v) Other Products, as notified from time to time.

Coffee is one of the product from the Appendix 3 7A of HBPv1 of the VKGUY scheme.

Duty Credit Scrip benefits are granted with an aim to compensate high transport costs,
and to offset other disadvantages. Exporters, of products notified in Appendix 37A of
HBPv1, shall be entitled for Duty Credit Scrip equivalent to 5 % of FOB value of exports
(in free foreign exchange) for exports made from 27.8.2009 onwards. However, for
exports made w.e.f 2 7.8.2009, some Flowers, Fruits, Vegetables and other products, as
listed in Table 2 of Appendix 3 7A shall be entitled to an additional duty credit scrip
equivalent to 2 % of FOB value of exports; over and above the 5 % or 3 % VKGUY
reduced rate entitlement available as per Para 3.13.3 below.

Duty Credit Scrip benefits under VKGUY scheme shall be granted only at a reduced rate
of 3 % of FOB value of exports in such cases where exporter has also availed
benefits of: (i) Drawback at rates higher than 1%; and/or (ii) Specific DEPB rate (i.e.
other than Miscellaneous Category – Sr. Nos. 22 C & 22 D of Product Group 90); and/or
(iii) Advance Authorization or Duty Free Import Authorization Import of inputs (other
than catalysts,
consumables and packing materials) for the exported product for which Duty Credit
Scrip under VKGUY is being claimed.

• Price Stabilization Fund Scheme of Govt. of India to the growers of coffee, tea, rubber
and tobacco.
• Objectives of this scheme is To provide financial relief to the growers when prices of
these commodities fall below a specified level.Sustained, long-term support to growers in
place of adhoc interventions during crisis and To alleviate the hardship faced by the
growers due to low prices and to safeguard their interests.
Initially, the Scheme will cover a total of about 3.42 lakh growers of tea, coffee, natural
rubber and tobacco, being the most needy amongst those having operational holdings of
upto 4 hectares.

A uniform band of 40 per cent for all the four commodities will be adopted with a price
spectrum band of +/- 20% from the seven years moving average of international prices.

The Price Stabilisation Fund will be established with a corpus of Rs. 500 crores which
shall include Rs.482.88 crores as a one time contribution by the Central Government and
Rs. 17.12 crores as a non-refundable initial contribution by the participating growers @
Rs. 500 per grower. The corpus of the Fund will be kept in the Public Account of the
Government of India. The interest on the corpus Fund will be benchmarked to the interest
rate as is applicable on the GPF, SDS and similar Funds in Public Account. The corpus
Fund would remain undisturbed and interest earnings alone will be utilized for
operationalising the Price Stabilisation Fund Scheme. The annual interest accruing on
this corpus would be released to the Trust Fund to be administered by the NABARD.

he Scheme is operational from April 2003 onward, initially for a period of ten years. The
Scheme will be reviewed after 5 Years.

• Rainfall Insurance Scheme for Coffee growers.

Rainfall Insurance Scheme – Coffee (RISC) is a unique rainfall insurance product


specially designed for the coffee growers of Karnataka, Kerala and Tamilnadu. This
product is designed in consultation with Coffee Board, Central Coffee Research Institute
and the Coffee Growers of these states. RISC is expected to provide effective risk
management aid to those coffee growers likely to be impacted by adverse rainfall
incidence. The most important benefits of RISC are:
1. Trigger events like adverse rainfall can be independently verified and
measured.
2. Parameters considered in designing this insurance product are relevant,
appropriate and to a large extent captures the rainfall induced risks affecting
Coffee production.
3. Allows for speedy settlement of indemnities, within 45 days after the
indemnity period.
The policy compensates the insured, against the likelihood of diminished coffee
output / yield resulting from shortfall / excess in the actual rainfall (as the case
may be) for different coverage options within a specific geographical location and
specified time period, subject to a maximum of the Sum Insured specified in the
policy under each of the coverage options.
• Export awards under Coffee board that functions under Exim policy : In order to
encourage coffee exporters the Board has instituted eight Export Awards every year
commencing from 1999-2000 for the top most exporters of Indian Coffee in terms of
quantity

Awards have been instituted in categories: Green Coffee ,Specialty Coffee Instant Coffee
and for region-wise exports : USA, European Union, Russia and CIS Countries, Far East
Region, Middle East Countries.

• Scheme of support for coffee processing


A new scheme on Export Promotion of Coffee and the scheme on Support for Coffee
Processing have been approved by the Government of India with a total financial outlay
of Rs.45 crore on April 10, 2008.

• Coffee development programme for non traditional areas of Andhra pradesh and
orissa state
The Government of India has approved the Development Support Scheme for coffee
sector with a total financial outlay of Rs.310 crore during the month of March 2008.

6.Quality Standards
The Quality Control division (QCD) of the Coffee Board has set specifications for the
processing, grading and garbling of specialty coffees to ensure the quality of coffees.
1.Processing specifications of the different varieties of specialty
coffee.
Process of Monsooning:
Monsooned coffees are prepared at the curing factories situated on the west
coast. Only whole crop Arabica Cherry and Robusta Cherry coffees are
selected for monsooning. In order to ensure the quality of monsooned coffee,
only ’A’ grade of both Arabica Cherry and Robusta Cherry are subjected to
monsooning.
The Process of monsooning is carried out from June to September of a year
when the south-west monsoon is very intense on the west coast. The cherry
coffee is evenly spread in thick layers in airy godowns, open on all sides and
raked frequently.
The coffee is packed loose in gunny bags and stacked in piles with sufficient
space between rows for the monsoon air to circulate freely around the bags.
The cherry coffee absorbs moisture from the humid monsoon atmosphere.
The beans swell up to nearly double the size and the colour of the beans
change to pale yellow/straw colour.
The coffee is bulked and repacked at frequent intervals or poured from one
bags to another to prevent mould growth on the beans and to ensure
uniform monsooning. The monsooning process is completed in 12 to 16
weeks.
At the end of monsooning, the coffee is polished and graded, based on the
size of the beans, as per the standards laid down by the Board. The
monsooned coffees are fumigated to prevent weevil attack.
Processing of Specialty Coffees
Utmost attention is paid while preparing majority of the specialty coffees
both at primary and secondary processing level.
Primary processing: Selective harvesting is done with special attention to
careful hand picking of just ripened berries. Natural fermentation is a must
for flavour development and a high standard of quality. Soaking the washed
beans under fresh water over night is essential for the development of colour
and flavour in the bean. Slow drying is absolutely necessary under natural
lights lights.
Secondary processing: Grading of coffee beans at curing level involving
separation of beans according to size, shape and density followed by
meticulous garbling improves the quality.
2. ICB - grading standards ding standards
Coffee Board issues Export Permits for export of coffee only to the Specified Types and Grades
of coffee
To give this grade they are using screen system
Grade 1: Specialty Grade Coffee Beans: no primary
defects, 0-3 full defects, sorted with a maximum of 5%
above and 5% below specified screen size or range of
screen size, and exhibiting a distinct attribute in one or
more of the following areas: taste, acidity, body, or aroma.
Also must be free of cup faults and taints. Zero quakers
allowed. Moisture content between 9-13%.
Grade 2: Premium Grade Coffee Beans: Same as Grade 1
except maximum of 3 quakers. 0-8 full defects.
Grade 3: Exchange Grade Coffee Beans: 50% above
screen 15 and less than 5% below screen 15. Max of 5
quakers. Must be free from faults. 9-23 full defects.
Grade 4: Standard Grade Coffee Beans: 24-86 full defects.
Grade 5: Off Grade Coffee Beans: More than 86 full
defects.

3. QMS or logo scheme


QMS or Logo scheme has been framed in order to protect the Image and Quality of Indian
Coffee in the International Market and to gain the confidence of the overseas buyers

Anamalais (Tamil Nadu): Wildlife sanctuaries in this region are the


abode of spotted leopards,while the plantations are home to fine,
high-grown Arabicas,including the exotic Kents.
Bababudangiris (Karnataka):Bababudan brought seven ‘magical’
beans from Yemen and planted them in the lofty hills of this
region. Deer is often spotted here, grazing alongside plantations
abundant with full-bodied Arabicas.

Biligiris (Karnatka/Tamil Nadu): Besides full-bodied Arabicas,


this region is noted for the sambar - the largest Indian deer with
huge antlers.

Chikmagalur (Karnataka): Chikmagalur’s forests and


wildlife sanctuaries are abundant with beautiful
peacocks, India’s national bird. The peacock loves to
show off its colourful feathers, especially during its
elaborate courtship dance.

Coorg (Karnataka): Lush coffee plantations are bustling with


honeybees which yield the delicious Coorg Honey, collected by
nimble-footed tribals.
Manjarabad (Karnatka): Gentle sloping terrain with small streams
and coffee plants provide a natural habitat for the jungle fowl.This
yellow-headed bird with a red comb and multi-coloured plumage
is generally seen in pairs, close to the coffee plantations.

Nilgiris (Tamil Nadu): Wildlife sanctuaries in this region are the


abode of spotted leopards,while the plantations are home to fine,
high-grown Arabicas,including the exotic Kents.

Pulneys (Tamil Nadu): A well-known feature of this region is the


bright, bluebell-like Kurinji flower that makes a dramatic
appearance, once in 12 years. The high-grown Arabicas however,
are a predominant sight, year after year.

Sheveroys (Tamil Nadu): The magnificent Gaur or Indian bison is


an embodiment of vigour and strength, much like the boldsized
Arabicas grown here. This massive animal with its huge head and
sturdy limbs grazes on the lower hill tracts of this picturesque
region.
Travancore (Kerala): The national flower of India, the lotus
symbolises purity and beauty. These bright, fragrant flowers with
floating leaves and long stems, grow in shallow waters in this
region noted for its Arabicas and Robustas.

Wayanad (Kerala): Wayanad is home to the Indian tiger, India’s


national animal - a symbol of valour and courage.

Araku valley (Andhra Pradesh): Home to


colourful parrots, it is not unusual to see a flock
of chattering red and green birds, darting
through trees in this scenic valley.
Brahmaputra:The mighty Brahmaputra which flows
through the North Eastern states is the lifeline of this
region which is home to the one-horned rhinoceros. This
sturdy animal is found in large numbers at the Kaziranga
National Park in eastern Assam
Logo for the specialty coffees

7.Problems / Challenges faced by the exporter


 The government’s Coffee Board pegs 2009/10 coffee production at 289,600 tons (4.83
million bags of 60 kg) tons, which included 94,600 tons Arabica and 195,600 Robusta,
lower than the Post-Blossom estimate of 306,300 tons, due to adverse weather
conditions during bean maturing and harvest stage. Furthermore, rains also
reportedly caused some quality problems, particularly in the Arabica variety.
 Labor costs, which accounts for almost 65 percent of the coffee cost of cultivation,
continue to escalate. With off-farm employment opportunities increasing, coffee planters
have started experiencing shortages of skilled labor, which could become a major
problem in coming years. Higher price realization for coffee is now helping growers to
some extent mitigate the higher labor cost. The Indian government’s National Rural
Employment Guarantee program and a highly subsidized rice and wheat distribution
program have further exacerbated the labor shortage in the plantation sector. Although
limited mechanization is taking place in some coffee plantations, large-scale
mechanization is difficult in India because of uneven plantings and small sized holdings.

 Although the coffee planting and bearing area in India has generally shown an upward
trend, mostly due to some expansion of coffee cultivation in non-traditional states such as
Andhra Pradesh and Orissa, coffee production, especially Arabica, has been declining
due to diminishing yields . Coffee productivity in the non-traditional areas, mostly
Arabica coffee, is reported to be much lower than in the traditional belt, which pulls
down overall yield.
Out of 220,000 coffee holdings in the country, 218,000 holdings belong to small farmers
having less than 10 hectares, which account for 70 percent of coffee production. Coffee
cultivation is mainly confined to southern states of Karnataka (70%), Kerala (20%) and
Tamil Nadu (7%). With a view to expand coffee cultivation, the Coffee Board has been
implementing developmental programs for coffee development in the North Eastern
Region and Non Traditional areas. During the 11th Five Year Plan, the Coffee Board had
proposed to support a coffee expansion program taken up by the Integrated Tribal
Development Agency on 24,000 ha in Andhra Pradesh and on 850 ha in the North
Eastern Region.
 In the U.S. market, India also has to compete against Vietnam, Indonesia, Kenya, and
Uganda -- the "middle-level suppliers," as they are called -- besides the "big league"
suppliers Brazil and Colombia. The four "middle-level suppliers" export much more
than India because they started "tapping the export markets much earlier and more
aggressively" than India.

 Also, Coffee growers are likely to face working capital issues with the onset of the
harvest season, on account of confusion and delays over the implementation of the
Coffee Debt Relief Package (CDRP).

 AMONG the major exports of India, the main sectors facing non-tariff barriers
(NTBs), according to a preliminary report prepared by the Economic Division of the
Ministry of Commerce, are the agricultural sector (including cereals, coffee, tea, spices,
edible fruits and nuts), fish and related items, chemicals including pharmaceuticals,
footwear and tanning & related items, certain engineering items like iron & steel,
vehicles and residues and waste from food industry. On specific barriers, though strictly
not a NTB, faced by Indian exporters in the area of gems & jewellery, it is pointed out
that Thailand enjoys GSP benefits, and China, a non-WTO member, gets MFN status by
US, which puts Indian exports at a distinct d is advantage. In the case of coffee, the EU
has fixed a new ochrotoxin limit of 5 ppb with a tolerance of 40 per cent for import
of coffee. The coffee rejected in one EU country is taken at a discount into other
countries, thus resulting in loss of foreign exchange. It is pointed out that in certain
grades of coffee, the European trade uses this threat to drive down prices at origin.

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