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Commerce Ministry for scrapping export cess on coffee

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Mr S.N. Menon, Commerce Secretary, and Ms Lakshmi Venkatachalam, Chairperson, Coffee Board, at the Coffee Export Awards function in Bangalore on Tuesday. G.R.N. Somashekar
Mr S.N. Menon, Commerce Secretary, and Ms Lakshmi Venkatachalam, Chairperson, Coffee Board, at the Coffee Export Awards function in Bangalore on Tuesday. G.R.N. Somashekar

Our Bureau

Bangalore, Jan. 11

THE Union Commerce Ministry will make a strong plea for removal of export cess on coffee in the current Budget, according to the Commerce Secretary, Mr S.N. Menon.

Exporters should also separately lobby for it, he said, at the annual coffee export awards presentation here on Tuesday.

Mr Menon said the Centre plans to gradually lower customs duties to ASEAN levels in two to three years.

With exports growing, customs duties are declining towards South-East Asian levels and will fall significantly in the coming year or two, Mr Menon said.

The Government is putting in place measures to improve export competitiveness. The integrated electronic interconnectivity system is an important step towards seamless export-related communication, he said. This system will be nearly completed in six to 12 months and will help reduce procedural and transaction costs.

Other efforts for global competitiveness: According to the Coffee Board Chairperson, Ms Lakshmi Venkatachalam, a recent study on logistics and cost competitiveness by the board through Miebach Logistics showed that Indian coffee lags behind Vietnam and Brazil in supply chain costs. Vietnam was almost twice as competitive with logistics cost of Rs 2,600 per tonne compared to Rs 5,500 for India. Although Brazil was comparable, it had an edge in the service levels. Arabica's supply chain cost would be Rs 5,300 a tonne against Brazil's Rs 5,600.

"We have identified various constraints and will be working closely with the Ministry of Commerce on these in the ensuing months," Ms Venkatachalam said at the awards ceremony.

Coffee exporters have been clamouring for easing customs duty from the current Rs 500 per tonne. Brazil and Vietnam do not have such a levy and have proved to be globally competitive.

The Coffee Exports Association President, Mr Ramesh P. Rajah, of Ramesh Exports, said duty cuts would go a long way in improving the country's coffee exports at a time when they were becoming visible in the global market.

While coffee production needs to be restored in non-traditional areas such as Andhra and Orissa, Ms Venkatachalam cautioned that this should not be nullified by "a fresh surge of reckless production" as in the recent past. Exports should also be sustained at optimum levels of 2.3 - 2.4 lakh tonnes.

According to Ms Venkatachalam, 2005 has opened on an optimistic note. Citing a World Bank report, she said though demand in major importing countries had slowed down, this was offset by new markets with growing demand, especially for cheap and soluble coffees.

Domestic consumption had grown to 70,000 tonnes from a stagnant 55,000 t in 2003.

(This article was published in the Business Line print edition dated January 12, 2005)
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