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M.R. Subramani

Chennai , Jan. 20

THOUGH coffee prices have begun to look up on smaller crops in Vietnam and Brazil, the growers still feel disappointed.

"There are a couple of issues that still worry us despite the surge in prices," said plantation industry sources.

Currently, arabica contracts in New York have topped 95 cents to a pound (Rs 89 a kg). This is way above the 20-year low of 45 cents a pound (Rs 45 a kg) it hit in 2003 and 65.75 cents (Rs 65) last year.

In the domestic market, arabica parchment is quoted at Rs 3,750-3,800 for a 50-kg bag at the farm gate against Rs 2,500 last year.

"Nearly 75 per cent of the arabica arrivals are over. The quality of the arrivals have been good," said Mr Bose Mandanna, former vice-president of Coffee Board.

Arabica production has been projected to be 1.16 lakh tonnes by the Coffee Board during 2004-05 year (October-September), while robustas are expected to make up 1.76 lakh tonnes. However, the grower industry expects it to a little lower in view of the white stem borer affecting the plants. "Robustas are yet to arrive. There may be only a slight rise in its prices," Mr Mandanna said.

Arabicas are looking up in view of a fall in other milds coffee in the global market. Columbian milds and Brazil and other naturals make up the other two grades of arabicas.

"One of our main problems is the reschedule of loans. No doubt, it gave us time to pay our debts. But the interest rates are still higher," the grower sources said.

Under the Special Coffee Term Loan, the banks charge the growers 11 per cent interest. "The interest rate can be a bit lower, say 9 per cent," they said.

"We are urging the Government to either lower the interest rate or give us some waiver," Mr Mandanna said.

"Though we were given time, the interest and principal have all built up that we will have to pay back in lump at one go," the grower sources said.

The other issue is payment of income tax by growers if they cure coffee. In a landmark judgement, the Supreme Court had ruled that coffee curing was a manufacturing process and therefore, the manufacturers are entitled to pay income tax. As a result, 25 per cent of the income from "self cured" coffee has to be shown as income under the Central Income Tax.

This has resulted in farmers opting out of curing, as it saves them from filing returns.

Curing works, in the process, lose out as they will have to await the buyers/exporters to give them the order.

"Then, there is issue of the value-added tax. As per the Government's proposal, coffee will attract 12.5 per cent levy once VAT comes into effect," the sources said.

On the other hand, exporters have to contend with domestic roasters, who are willing to pay higher prices for coffee.

"It is one of the reasons why our farm gate prices are higher than the rates in the global market," the sources said. In the international market, the arabica parchment is quoting Rs 3,550 for a 50-kg bag.

Roasters have hiked coffee powder prices twice in the last six months and have indicated that there could be further increase.

According to coffee powder manufacturers, the prices are up due to other factors such as inflation and rising labour costs.

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