Coffee exporters decry export benefit cut

The coffee sector, facing hard times because of volatile global prices, is upset over the reduction of export benefits in the Foreign Trade Policy announced on Wednesday.

The five per cent export incentive extended to green coffee under the Vishesh Krishi Gram Udyog Yojana (VKGUY) has been cut to three per cent in the new trade policy. However, the DEPB (duty entitlement passbook) scheme has been left untouched at 1 per cent.

As a result, exporters will stand to lose with the value of their inventory coming down to that extent, said Ramesh Rajah, President of Coffee Exporters Association.

“It is a double whammy. Prices are low and shipments are slow,” Rajah said. “Even growers, who were holding on to their coffees, will stand to lose as prices will come down immediately,” Rajah said. As a result of reduced incentive, there will be an immediate impact on prices of Arabica Parchment to an extent of ₹300 per 50-kg bag, Rajah said.

Exporters are sitting on huge inventory as shipments had a slow start in the current calendar year. Also, growers are holding back their produce anticipating better prices. Coffee prices have been volatile in recent months tracking the global trend, and had seen a sharp decline in recent weeks. Prices of Arabica parchment are now ruling at around ₹9,600 per 50-kg bag against ₹10,500 in mid-December. Similarly, Arabica Cherry prices are now hovering between ₹4,600 and ₹4,800. Robusta parchment prices have now come down to ₹5,450-5,650 against ₹7,130-7,350 a year ago.

“Two per cent is a big thing in commodities trade. There will be a big impact on prices, both for growers and exporters holding on to their coffee,” sources at a multinational trade house said. “It is customary to make forward sales in coffee and the incentives are taken into consideration while the costing is done.”

“While exporters will take a one-time hit, there could be a long term impact on growers,” Rajah said. There is unlikely to be any renegotiation of contracts, he added.

Rajah said exporters will soon approach the Commerce Minister in this regard.

Coffee exports for the financial year 2014-15 were down in volumes, but saw a marginal increase in value on higher per unit realisations.

Export volumes were down at 2.84 lakh tonnes against 3.10 lakh tonnes during the corresponding period a year ago. In dollar value terms, the exports were up marginally at $803 million as against $788 million last fiscal.

In rupee terms, exports grew 3.7 per cent at ₹4,905 crore against previous financial year’s ₹4,728 crore. The unit value was higher at ₹1.72 lakh per tonne as against ₹1.52 lakh in the previous year on higher realisations.

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