The Coffee Board’s initiative to launch warehouse receipt-based electronic spot market for selling coffee in raw form (cherry/parchment of both arabica and robusta ), in partnership with the National Spot Exchange, is set to widen the market for coffee growers.

Traditionally, growers have been dependent on traders to sell their produce at the farm gates. The Coffee Board’s plan to introduce electronic spot market for raw coffee along with cured coffee, has provided another route to growers to sell, apart sale to curers, traders and exporters and through auctions.

According to a memorandum of understanding signed between the Coffee Board and the spot exchange, online auction will be conducted on regular basis in all the coffee-growing regions.

For this, corporate companies, exporters and other stake holders such as coffee curing works and traders are being roped in as members.

“Keeping all past experiments in mind, this spot market has been designed to accommodate both cured coffee as well as fruit (cherry). The market is likely to be operational from October when the new crop year begins,” Jawaid Akthar, Chairman, Coffee Board, told Business Line.

There was limited scope for expanding the existing auction platform. Hence, the Coffee Board initially planned to expand it by opening additional auction centres in Kodagu, Hassan and Chikmagalur.

Looking at the limited availability of coffees offered for sale at auction floor, mainly due to Rule 7B of the Income-Tax Rules, 1962, the new system is planned.

The new mechanism is likely to address the issue of Income Rule 7B of the Income-Tax Rules, 1962, partly and bring in more quantity to the auction platform.

Rule 7B treats the sale of cured coffee by a grower as income derived on the estate.

Introduction of this rule in the Income-Tax Rules has led to a majority of the growers refraining from curing their own coffees and selling it in raw form as cherry. “The Coffee Board roped in the spot exchange and came up with the idea of providing warehouse receipt-based electronic spot market for both regular (cured coffee) and beans (cherry). This mechanism of electronic spot market will offer transparency of prices, lesser cost of intermediaries and above all increase in the sale of coffees,” said Akthar.

“There are lot of benefits for especially for small and medium coffee growers, like better price realisation, farm gate grading and quality assessment, price dissemination through SMS, market linkage and relevant back-end infrastructure, technical and training to growers,” said a senior NSEL official.

According to Akthar, another feature of this initiative is that the Coffee Board will be providing all technical details and farm gate assistance for grading at farm gate.

Exporters are sceptical of the new mechanism, a leading exporter, who did not wish to be named, said: “The NCDEX, MCX, NMCE launched futures in coffee a few years ago, but they did not take off. Now this electronic spot market looks ambitious, we need to study its mechanism and as to how it will be implemented on the field.”

However, the coffee growing community welcomed the move, “As all earlier experiments failed due to quantity and liquidity. This move of the Coffee Board is welcome and seems to be practical by including cherry in the auction system,” said Bose Mandana, a senior coffee planter from Suntikoppa in Kodagu.

“The spot exchange being a national body it brings its strength of more liquidity, warehousing. Where as ICTA was small and it did not make any difference after the Rule 7B of the Income-Tax Rules, 1962, was introduced,” he said.

Sahadev Balakrishna, Partner Netraconda Estate, Chikmagalur, said: “Any attempt to overcome Rule 7 B is a huge incentive and relief for growers to produce quality coffee and sell under their brand name after curing.”

anil.u@thehindu.co.in

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