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BITTER BEANS

Bitter Beans The Coffee Crisis and its Impact in India 

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An Analysis of the Coffee Crisis in India

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BITTER BEANS

BITTER BEANS

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An Analysis of the Coffee Crisis in India

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BITTER BEANS

BITTER BEANS An Analysis of the Coffee Crisis in India

Shatadru Chattopadhayay d John Pramod

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An Analysis of the Coffee Crisis in India BITTER BEANS An Analysis of the Coffee Crisis in India Shatadru Chattopadhayay Senior Programme Manager, Partners in Change, New Delhi Pramod John Senior Programme Manager -South, Partners in Change, Bangalore Research Coordinator Sjoerd Panhuysen

Project-Coordinator; Dutch Coffee Coalition, The Netherlands

Š 2007, Partners in Change Edition: First ISBN 81-903505-3-6 Published by Partners in Change C-75, South Extension Part II, New Delhi 110 049 Tel: +11-4164 2348-51 www.picindia.org With Support of Dutch Coffee Coalition, ZNF/Koffiecoalitie, The Netherlands www.koffiecoalitie.nl The authors assert moral and legal right to be identified as authors of this work. All rights reserved with the Publisher. Copying and use in any form without express permission of the publisher is prohibited.

Photographs: Pramod John

Cover Design: Argee/WordMakers Printed and bound in India, by National Printing Press, Bangalore

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Table of Contents Preface

7

Foreword

9

Introduction

11

Background and Profile of Indian Coffee Industry Early History

15

Present Status of Indian Coffee Industry

16

Major Coffee Growing Regions in India

17

Area under Coffee

18

Role of Coffee in Indian Economy

21

Different Stages of Coffee Production in India

21

Coffee Board of India

24

Coffee Trade

26

United Planters’ Association of Southern India (UPASI)

27

Workers in the Coffee Plantations

29

The Coffee Crisis and its Impact in India Coffee Workers

34

Small Coffee Growers

39

Effect on Other Major Stakeholders

43

Increasing Numbers of Suicides Situation in Kerala

51

Initiatives by Government

54

Price Volatility

55

Situation in Karnataka

57

Reasons for Suicides

58

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An Analysis of the Coffee Crisis in India

Analysis of Various Factors behind the Crisis International Factors

61

Domestic Factors

67

Social and Environmental Standards in Indian Coffee Sector The Plantation Labour Act of 1951

74

Coffee Board’s Welfare Measures

76

Self-Help Groups (SHGs)

77

Initiatives for Sustainable Coffee in India

78

Fair Trade

79

Organic Coffee

81

Government Support for Organic Production

83

Some Examples of Sustainable Coffee Initiatives in India

84

An Assessment of the Sustainability Initiatives

87

Concluding Observations

93

Recommendations

96

Notes

99

Bibliography

105

Useful Web Links

108

Acronyms and Abbreviations

110

Annexure 1: Inspection and Certification Agencies of India Accredited Under the National Programme for Organic Production (NPOP)

113

Annexure 2: Interview with Mr. Gautam Sircar, Vice President, Hindustan Lever Limited:

115

Acknowledgments

118

Frequently referred units 1 acre 1 Lakh

100,000.00

100 Thousands

10 Lakhs

1,000,000.00

1 Million

1 Crore

10,000,000.00

10 Million

100,000,000.00

100 Million

1,000,000,000.00

1 Billion

10 Crores 100 Crores

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BITTER BEANS

Preface The effects of the fall of global coffee prices to a thirty-year low in 2002, on key stakeholders, especially small-producers, in India has not received the attention it deserves and while there have been several analyses of the global coffee crisis in Latin America and Africa, this is one of the first efforts to understand the impact of the global coffee crisis in the Indian coffee sector. The contribution of coffee in India’s gross domestic product (GDP) is small – a meagre 0.19 percent in 1994-95. However, it is much more important for the economies of the states in which it is grown. Coffee contributes between 3 to 4 percent of the GDP of Karnataka, the largest coffee-producing state of India. An estimated 5 million people, directly or indirectly, depend on coffee in the three southern states of Karnataka, Kerala and Tamil Nadu for their livelihood. There are 178,000 holdings in India, of which 98.4 percent are less than five hectares in size and falls under the category of small holdings as per the Government of India’s definition. Indian coffee farmers, mostly poor smallholders, still sell their coffee beans for much less than they cost to produce. Small-scale coffee farmers and farm workers are still vulnerable to the price swings in the coffee market and the disproportionate market power of local buyers, international traders and multinational coffee companies. There is a valid concern that such a situation could lead to a decline in the quality of coffee produced, which, in the long run, could affect all the actors in the value-chain. At the same time, the challenge is to make the coffee market work for all, even if the global prices further improve. Improved social, environmental and economic practices of the stakeholders across the supply chain can lead to remunerative prices

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An Analysis of the Coffee Crisis in India

for small coffee growers and fair wages to the workers, on the one hand, and better access to markets, reputational benefits, increased workers’ satisfaction and loyalty leading to increased productivity, increased savings through better environmental management and reduction of cost of production, on the other. Partners in Change, along with all its partners, remains committed to this agenda. The present study conducted by Partners in Change, India in collaboration with Koffie Coalitie, Netherlands is an in-depth analysis of the impact of the global coffee crisis on all the coffee industry stakeholders in India and associated social, economic and environmental issues and concerns in the coffee-producing states of Karnataka, Kerala and Tamil Nadu. The study was made possible through the active participation of different stakeholders including the small coffee-growers, curing establishments, exporters, trade unions, civil society organizations and government agencies. I am confident that this study can contribute significant inputs to coffee small holders, civil society organisations, policy-makers, business leaders as well as academicians towards unleashing the immense potential of the Indian coffee industry. Viraf Mehta Chief Executive Partners in Change

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Foreword This study of the coffee crisis in India provides a good starting point for the Coffee Coalition and the Coffee Support Network, platforms in which (Dutch) NGO’s coordinate their efforts to improve quality in the global coffee chain including social and environmental quality. The two platforms developed already experiences in other important coffee producing countries and intend to intensify their efforts in India. In this study the growing share of sustainable/certified quality coffee in India is identified, as well as major buyers in the Indian coffee chain.. The study comes with a list of valuable recommendations. It suggests amongst others that roasters and traders take responsibility in improving the conditions in the coffee value chain. This can be a starting point for NGO’s. NGO’s can cooperate with those roasters and traders prepared to take such responsibility. Longer term contracts can be established between buyers, farmer groups, local training organizations and (donor) NGO’s. The buyers show their commitment by contributing to the costs of those investments in quality and they play a role in communicating consumer quality preferences. Also in India buyers and NGOs can cooperate to establish and maintain a level playing field, where free riders are banned: even if there is ample offer of quality coffee, the buyers will not pay less than a decent price for the required quality, otherwise their own investment in quality coffee will get lost again. Starting from the data in this study a joint planning

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An Analysis of the Coffee Crisis in India

can be made with longer term training programs and commitments towards a level playing field for those buying coffee in India. I would like to thank the authors of this study for their valuable contribution and I hope that they will remain involved in the further improvements programs in coffee in India. Coen van Beuningen Economic Advisor in Hivos (in the Hague NL and Bangalore) Member of the Coffee Coalition and the Coffee Support Network.

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Introduction The global coffee prices came down to a 30-year low in 2002. In recent months, however, the international coffee market has begun to recover, as reflected in higher international prices for coffee. But, the recovery has not led to an end of the coffee crisis. Indian coffee farmers, mostly poor smallholders, still sell their coffee beans for much less than they cost to produce. Small-scale coffee farmers and farm workers are still extremely vulnerable to the coffee market’s price swings and the disproportionate market power of local buyers, international traders and multinational coffee companies. Farmers sell at a heavy loss while branded coffee sells at a hefty profit. With falling coffee prices, exports of Indian coffee went down significantly. In 2000, India exported 253,000 tonnes of coffee, which fell to 219,000 tonnes in 2001. In value terms it was down from Rs. 16.85 billion1 to Rs 11.13 billion. In other words, nearly one-third of its foreign exchange earnings from coffee wiped out. The decline continued in the following two years. Coffee exports fell from 214,000 tonnes in 2002 to just 186,000 tonnes in 2003, representing a fall of 37 percent in a four-year period.. The fall was significant. While exports have gone up in 2004-05, there is no surety that the problems facing the coffee industry in India are over. In the meantime, coffee production in India is rising. Taking 1997 as the benchmark year, India registered a massive growth in production from 2.64 million bags to 3.40 million bags in 2002. Yet, over the same period export earnings “nosedived” 51 percent from close to Rs 20 billion to Rs 9720 million. The Indian coffee industry directly employs 535,000 people, of which 50 percent of are women working in 178,308 coffee holdings. The worst affected by this situation are the small holder-coffee growers and workers in coffee plantations.

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An Analysis of the Coffee Crisis in India

In Kerala, several estates were reported to be closed or on the verge of closure. Again, due to the crisis, many social benefits available to workers were either pruned or withdrawn. Many reports appeared in the media at this time of workers being laid off and plantations remaining unattended. Oxfam estimated that between 2000 and 2002 there was a 20 percent fall in the number of coffee plantation workers in Karnataka. This meant the loss of at least 150,000 jobs in the coffee sector during this period. In Malnad, the small growers are seriously indebted. Most peasants are not able to repay their debts. They have tried to sell their lands, but land rates have fallen to Rs 115,000 per acre from Rs 450,000 before the crisis began. Often this is inadequate to pay off the loans. Suicide deaths have emerged as an annual trend in the rural scene in Karnataka. According to media reports, to date more than 200 small coffee growers have killed themselves, unable to grapple with the crisis. In Wayanad district of Kerala, 94 farmers, trapped in a vicious cycle of mounting loan liabilities, committed suicide between May 2001 and June 2004. The suicides of coffee farmers in Kerala and Karnataka continue unabated. This fact brings to the fore the magnitude of the economic collapse that prevails in the district. Such kind of an alarming situation would lead to fall in the quality of coffee produced and, in the long run, would affect all the actors in the value chain – a fact agreed by the Indian coffee traders as well. However, coffee roasters have been unable or unwilling to take responsibility across the supply chain and, instead, put the responsibility on the Government. The Coffee Board and the Government of India have provided some relief to the farmers but, apparently, that benefited only a small number of growers. There are very few sustainability initiatives like organic or fair trade schemes operational in the Indian coffee industry. If at all in practice, they are restricted to big or medium coffee plantations. While there have been some studies on the impact of low coffee prices on small growers in Latin America and Africa, this is the first attempt to systematically analyse the impact of low prices on small coffee growers in India, the roles of various actors in the coffee value chain and responsible business practices. The study is a collaborative effort between Partners in Change, India (www.picindia.org) and Dutch Koffie Coalitie, Netherlands (www.koffiecoalitie.nl).

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The study has been conducted to:  Provide an account of the coffee crisis in India with special

reference to its impact at the social and economic levels for small-scale producers, cooperatives, plantations and workers.  Critically examine the legislative and policy framework (including

implementation and execution of laws) in the coffee sector.  Undertake a mapping of the coffee industry value-chain to

establish key buyers, and identify key influence points for socially responsible practices.  Evaluate the role of the key players and institutions involved in

Indian coffee trade.  Identify the different quality systems active in the Indian coffee

sector and its impact through the coffee chain in India.  Provide recommendations about various options to improve the

working and living conditions of the most marginalized in the coffee value-chain. The study has covered mainly the Indian states of Karnataka, Kerala and some parts of Tamil Nadu, as more than 90 percent of Indian coffee is produced in these States, and crisis is manifested in its severe form in Karnataka and Kerala. The overall methodology was qualitative in nature and, to a substantial extent, participatory survey and case studies. It included collection of secondary material and statistics, focus group discussions and surveys with coffee farmers and interviews in relevant coffee regulatory agencies, institutions and industry actors. Some of the materials presented in this report have been retrieved from internet sources and coffee trade journals, while some others are based on the findings of two workshops organized with small coffeegrowers in Coorg, Karnataka. From the very beginning of the research small coffee-growers and other grassroots-level NGOs working on coffee issues were involved and contributed significantly to its findings.

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An Analysis of the Coffee Crisis in India

Blooming season – before the berries

Berries and leaves – a riot of green

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Background and Profile of Indian Coffee Industry Early History No one knows how coffee came to India. Legend has it that, back in the 17th century, Baba Budan, a pilgrim travelling to the holy places of Islam, brought back seven coffee seeds from Yemen. These seeds were planted in the hills of Chandragiri, situated in today’s Chickmagalur district of Karnataka. For more than a century after its introduction, coffee was rated low in India, restricted in cultivation and consumption to the Malnad farmers who grew the crop for subsistence and personal consumption. History credits the burst of coffee beyond the hills of Chandragiri to a European.1 Coffee was introduced in Kerala in 1826 and the first coffee plantation in Tamil Nadu was set up in 1840.2 Most coffee planted in the early years was Arabica, mainly the Old Chicks variety that apparently inherited the bean qualities of the original Mokka introduced by the legendary pilgrim, Baba Budan. Coffee was established as a commercially viable commodity by an enterprising manager by the name of J. H. Jolly of the famous trading company, Parry and Company, Madras State. It was he who petitioned the Mysore kingdom for a lease of 40 acres of agricultural land to cultivate and export the crop. The petitioner was duly obliged and it proved to be the turning point for coffee in India. Early on, during his Indian sojourn, Jolly realised the commercial potential of coffee as the bean’s use spread from Arabia to Asia Minor to Europe in the span of a few centuries. Despite the rabid opposition to coffee in some countries (it was termed as Satan’s drink in some places), it slowly gained popularity and came to be consumed in increasing quantities across the world.

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An Analysis of the Coffee Crisis in India

The commercial exploitation of the drink made more and more enterprising and pioneering planters to take to the cultivation of coffee. Over the years small holdings coalesced into larger ones that created bigger coffee estates, almost all of them situated in Coorg district of Karnataka. Given that coffee was a variable berry crop by nature and that its markets were volatile, only the courageous and resourceful survived to reap the benefits of the continuing growth of coffee as a crop in India. As the coffee landscape changed, dominated, of course, by the British, the planters saw the emergence of a host of related services that straddled the entire spectrum of activities in the industry. These included coastal agents who arranged services leading up to the shipment of coffee; managing agents who set up coffee-curing works; transport agents who ensured the transportation of the bean as a bulk commodity and guaranteed its safety en route; and agents who organised the manpower for this labour-intensive industry. The industry was cruising along without many problems till 1930, when the winds of the global economic depression derailed it. For the first time, an industry which had always forged ahead on its own approached the government for succour. This led to the setting up of the Coffee Cess Committee, which funded activities to promote coffee consumption in the country. The body, which later metamorphosed into the Coffee Board of India, was set up in 1936 and was to alter India’s coffee landscape for many decades. Since then, India has cultivated most of its coffee under a welldefined two-tier mixed shade canopy, comprising evergreen leguminous trees. Nearly 50 different types of shade trees are found in coffee plantations. Shade trees prevent soil erosion on a sloping terrain; they enrich the soil by recycling nutrients from deeper layers, protect the coffee plants from seasonal fluctuations in temperature and play host to diverse flora and fauna. Coffee plantations in India are, essentially, spice worlds too - a wide variety of spices and fruit crops like pepper, cardamom, vanilla, orange and banana grow alongside coffee plants.

Present Status of Indian Coffee Industry From the 1950s, most of the coffee trade was taken over by Indian planters. The acreage under coffee plantation has grown from 92,000 hectares during the 1950s to 354,840 hectares in 2004. Production has also gone up from 18,000 tonnes in the 1950s to 292,000 tonnes

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in 2004. Productivity levels have also gone up from 200 kg/ha during 1950s to around 960 kg/ha by 2004 - which is one of the highest productivity rates in the world. Direct labour employment in coffee plantations was about 150,000 in the 1950s, which has gone up to 535,000, 50 percent of them being women. The number of coffee holdings has increased from 30,000 during the 1950s to over 178,308 in 2004. Table 1: Acreage under coffee-1950 to 2004 Year

Arabica

%

Robusta

%

Total

1950-51

67613

73

24910

27

92523

1960-61

70650

59

49670

41

120320

1970-71

80433

59

55030

41

135463

1980-81

109454

53

98815

47

208269

1990-91

127934

47

142887

53

270821

1991-92

126889

46

151742

54

278631

1992-93

141546

49

149465

51

291011

1993-94

143491

49

148976

51

292467

1994-95

142644

49

150465

51

293109

1995-96

145901

48

159252

52

305153

1996-97

143239

47

160582

53

303821

1997-98

143928

47

161974

53

305902

1998-99

160671

49

168567

51

329238

1999-00

168453

50

171853

50

340306

2000-01

167679

48

179037

52

346716

2001-02

165892

48

181103

52

346995

2002-03

170930

48

184172

52

355102

2003-04

170294

48

184546

52

354840

Source: Data Base, Coffee Board of India, July 2005

Major Coffee Growing Regions in India India’s coffee growing regions have diverse climatic conditions, which are well suited for cultivation of different varieties of coffee. Some regions with high elevations are ideally suited for growing Arabicas of mild quality while those with warm humid conditions are best suited for Robustas. The major coffee producing regions in India are Karnataka (210000 tons), Kerala (55700 tons) and Tamil Nadu (21100 tons) during the year 2004-05.

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An Analysis of the Coffee Crisis in India

Figure 1: Major coffee growing regions of India

The major coffee-growing districts in southern India are Chickmaglur, Coorg and Hassan in Karnataka, Wayanad in Kerala, Pulneys and Nilgiris in Tamil Nadu. Karnataka accounts for 57.6 percent of the total coffee plantations in India; Kerala follows with 23.9 percent and Tamil Nadu with 8.6 percent.3 While Karnataka produces roughly equal amount of Robusta and Arabica variety, Kerala and Tamil Nadu produces predominantly Robusta and Arabica respectively. Karnataka produces 71.0 percent of the total coffee produced in India, followed by Kerala with a share of 21.2 percent and Tamil Nadu 6.8 percent.

Area under Coffee Indian coffee is produced in 178,000 holdings, of which 98.4 percent are less than five hectares in size and falls under the category of small holdings as per the government’s definition. Of the total coffee holdings, 77 percent are small holdings of less than two hectares and these constitute 33 percent of the total planted area of coffee in India. These growers could be, in the true sense of the term, considered as small and marginal farmers.4 Kerala has the largest number of small and marginal coffee growers numbering 63,122 (accounting for 83 percent of the total small holdings), followed by Karnataka 32,305 (60 percent of the total small holdings) and Tamil Nadu 11,488 (35 percent of the total small holdings). The classifications of small coffee growers by Coffee Board are based on the parameters of tea industry. However, the major distinction between small tea- and small coffee-growers is the economic status. A

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Table 2: State-wise Production (2003-04 Post Monsoon estimate and 2004-05 Post Blossom estimate) in tons 2004/05

State/District

2003/04

Arabica Robusta

Total

Arabica Robusta

Total

44,700 29,000

73,700

39,900

27,600

67,500

Coorg incl. Mysore 29,100 77,600 106,700

24,750

68,150

92,900

Hassan

21,000

18,700

6,450

25,150

Sub total

94,800 115,200 210,000

Karnataka Chickmagalur

8,600

29,600

83,350 102,200 185,550

Kerala Wayanad

100 47,700

Travancore

750

6,300

450

1,700

2,150

650

1,550

2,200

1,300 55,700

57,000

1,025

62,825

63,850

Nelliampathies Sub total

47,800

75

54,575

54,650

7,050

300

6,700

7,000

Tamil Nadu Pulneys

8,600

200

8,800

8,200

250

8,450

Nilgiris

2,000

3,900

5,900

650

2,700

3,350

Shevroys (Salem)

4,300

0

4,300

4,300

0

4,300

Anamalais (Coimbatore)

1,600

500

2,100

1,200

450

1,650

16,500

4,600

21,100

14,350

3,400

17,750

4,000

0

4,000

3,000

0

3,000

200

100

300

175

125

300

4,200

100

4,300

3,175

125

3,300

-

-

-

50

0

50

Sub total

Non Traditional Areas Andhra Pradesh & Orissa North Eastern Region Sub Total Non Conventional Areas

Grand Total (India) 116,800 175,600 292,400 101,950 168,550 270,500 1

Data Base, Coffee Board of India, July 2005.

coffee grower with three to five hectares of land would not be fitting the category of marginalised growers and are relatively well-off. Therefore, the study considers less than two hectares as the criterion for small coffee holdings. Section 1(4) of the Plantation Labour Act (PLA) 19515 provides a legal definition for the plantations, as: A plantation is any land used or intended to be used for growing tea, coffee, rubber, cinchona, cardamom which measures 5 hectare or more and in which

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An Analysis of the Coffee Crisis in India

Table 3: Area and share of production of coffee under different coffee holdings in India 2001-2002 No. of Holdings No. Size of Holdings Share

I

% to Total Area (Ha) % to Total

Small Holdings <2

138209

77.5

114546

33.01

2–4

26549

14.9

67155

19.35

4 – 10

10717

6.0

65388

18.84

98.4 247087

71.21

Total II

Number

Area under coffee

175475

60%

Large Holdings 10 – 20

1734

1.0

28808

8.30

20 – 40

537

0.3

14505

4.18

40 – 60

208

0.1

10025

2.89

60 – 80

126

0.1

9136

2.63

80 – 100

61

0.0

5863

1.69

167

0.1

31571

9.10

1.6

99908

28.79

100.00 346995

100.00

Above 100 Total III Total (India)

2833 178308

40% 100%

Source: Coffee Board of India, July 2005. fifteen or more persons are employed or were employed on any day of the preceding twelve months.

Holdings between 10 hectares and 100 hectares may be generally classed as those belonging to semi-feudal landlords. They constitute 1.6 percent of all holdings and carve up 23.5 percent of all land under coffee. Holding size above 100 hectares is generally called as “company estates” by the masses. There is only 0.1 percent or 167 such holdings. Yet, they own around 10 percent of the total area under coffee.6 There are around 178,000 holdings below 10 hectares, representing 71 percent of all coffee areas, which account for 60 percent of the total coffee produced in India.. However, the remaining 40 percent is produced by 2,833 holdings that are above 10 hectares in size. They constitute just 1.6 percent of the total holdings and yet control around 30 percent of all land under coffee.

Role of Coffee in Indian Economy The contribution of coffee in India’s gross domestic product (GDP) is small – a meagre 0.19 percent7 in 1994-95. However, it is much more important for the economies of the states in which it is grown.

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Coffee contributes between 3 to 4 percent of the GDP of Karnataka, the largest producing state of India. An estimated 5 million people, directly or indirectly, depend on coffee in the three southern states of Karnataka, Kerala and Tamil Nadu for their livelihood. While coffee contributed only around 1.5 percent of India’s total export earning, in 2003-04, India’s share in global production was at 4.45 percent and its share in global exports was also near to this level at 4.68 percent. Out of the total 292,000 tonnes produced in India 232,864 tonnes were exported. On an average, more than 80 percent of the coffee produced in India is exported. Of the total production, more than 70 percent is exported to European countries with Italy, Russia and Germany being the largest importers of Indian coffee. The biggest export destination of Indian coffee is Italy (23.5 percent in 2004-05 at the rate of Rs 51,757 per tonne) followed by the Russian Federation (16.27 percent at the rate of Rs. 68,412 per tonne). Netherlands, by that comparison, imports only 3604 MT (1.70 percent in 2004-05 at the rate of Rs. 72,760 per tonne).

Region-wise exports of Indian Coffee

Source: Coffee Board of India, 2005

The Different Stages of Coffee Production in India A green bean germinates 6 to 8 weeks after planting. The first leaves appear between two and four months and the first crop is produced after five years. On an average, a coffee tree lives for 50 to 75 years. A coffee bush flowers once a year. Each tree produces about 30,000 white flowers which smell like a jasmine. The fruit begins to form within 24 to 36 hours of flowering. The cherries are the fruit of the coffee tree,

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An Analysis of the Coffee Crisis in India

Ready for picking

turning progressively from green to yellow to orange and finally bright red on ripening.8 These ripe berries are picked and sent for processing. The berries are pulped to extract the coffee beans, which are then washed and dried naturally under the sun. Both Arabica and Robusta varieties are processed by the wet (washed) and dry (unwashed) methods and are accordingly classified as Plantation (washed Arabica), Arabica cherry (unwashed Arabica), Robusta Parchment (washed Robusta) and

Ripe berries

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Robusta Cherry (unwashed Robusta). After processing, the beans are taken to curing works. The thin parchment skin on the coffee bean is stripped off, revealing the bean, commercially known as green coffee. The hulled coffee beans are graded and sorted and are screened for conformity with different quality standards. Sometimes, the hulling is done at the farms, but, for small coffee-growers in India, there are several private small hulling units who do the work for them. After this, the beans are graded. The primary grades are based on the size of the bean, while the secondary grading is based on the density of the bean. The beans are sized by passing them through a sieve and, then, they are separated by density. Then the beans are manually inspected to remove bad beans the ones that have not completed the processing properly. The operation of curing works includes warehousing, storing, precleaning, de-husking, polishing, grading, and so on. Prior to 1992, the Major Varieties of Indian Coffee Kents:

Kents is the earliest variety of Arabica, selected by an English planter of the same name during the 1920s. This variety remained popular with the planting community till the 1940s, because it was less susceptible to rust. Today, it is grown in a few areas but it is still known for its exceptional cup quality.

S.795:

This is by far the most popular Arabica selection released during the 1940s with high yields, bold beans, superior quality and relative tolerance to leaf rust. This selection was developed using ‘Kents’ Arabica, known for its high quality. Even today, the S.795 is a favourite with the planters and is a widely cultivated Arabica variety. S.795 has a balanced cup with subtle flavour notes of Mocca.

Cauvery:

Popularly known as Catimor, Cauvery is a descendant of a cross between ‘Caturra’ and ‘Hybrido-de-Timor’. Caturra is a natural mutant of the famous Bourbon variety. Thus, Cauvery inherited the high yielding and superior quality attributes of Caturra and the resistance of ‘Hybrido-de-Timor’.

Sln.9:

Selection 9 is a derivative of a cross between an Ethiopian Arabica collection, ‘Tafarikela’, and ‘Hybrido-de-Timor’. Sln.9 has inherited all the superior cup quality traits of Tafarikela.

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An Analysis of the Coffee Crisis in India

curing works served as pooling agents for the Coffee Board. Since then, growers directly interact with the curing works. As service units, they play a key role in managing the supply of green coffee according to the requirements of the domestic and international commodity markets that are governed, to a large extent, by daily and weekly auction prices. Harvested, processed, sorted and graded, the beans then get packed into sacks and are taken to ports for loading into ships for export. The port of Cochin in Kerala handles the maximum number of shipments of coffee from India. Mangalore, Tuticorin and Chennai are the other exit points. Coffee is sold in the domestic market too.

The Coffee Board of India The Coffee Board of India was constituted by Government of India through the Coffee Act of 1942. It is a statutory organization under the Ministry of Commerce. The Coffee Board owes its origin to the Coffee Control Conference that was held in 1940 in India to discuss the serious economic problems faced by the coffee industry during World War II. The Government then recommended that private marketing of coffee in India should be prohibited and that it should be done by a marketing authority - the Coffee Board.9 Producers were obliged to surrender their produce to the Board, which, in turn, sold the coffee through domestic and export auctions. The growers received their remuneration based on average sales realization. The pricing system ensured that exports were competitive, while domestic consumers obtained coffee at controlled prices. In the process, it insulated growers from the volatility of coffee prices and led to a large scale expansion of coffee plantations based on steady return. This nationally regulated coffee marketing system was reinforced by international marketing regulations of the International Coffee Organisation (ICO) in 1960. With the collapse of international quota system in 1989, the move for deregulating of coffee marketing also caught up in India. In 199293, the Government initiated a process by which an Internal Sales Quota allowed growers to sell 30 percent of their output directly to the domestic market. It was increased to 50 percent in 1993-94 and in 1996 coffee marketing was fully liberalized in India. Hence, it meant a major shift in the role of the Coffee Board. Now the activities of the Coffee Board are focused in the areas of research and development, quality control, market information and its dissemination, promotion, extension and free market development.

ď&#x20AC;Ą 26


BITTER BEANS

Table 4: The structure of Coffee Board of India

I.

Members of Parliament

II.

Representatives of Governments of principal coffee- growing States

III.

Representatives of Large coffee growers

IV.

Representatives of small coffee growers

V.

Representatives of Coffee Trade interests

VI.

Representatives of curing establishments

VII.

Representatives of labour interests

VIII.

Representatives of coffee growing states other than principal coffee growing states

IX.

Representatives of consumerâ&#x20AC;&#x2122;s interests

X.

Representatives of Instant coffee manufacturers

XI.

Eminent personality in the field of research / marketing /management/ promotion of coffee

The Board comprises 33 members representing all sectors of the coffee industry. They are nominated by the central government and hold office for a period of three years. The Chairman of the Board is usually an Indian Administrative Services (IAS) officer from deputed from the Government of India. The members comprise three members of parliament, four members each representing principal coffee-growing states and the interests of labour, seven members representing small growers, three members each representing large growers and coffee trade, two members representing curing houses, consumers, interests of non-traditional coffee growing states, one member representing instant coffee manufacturers and one eminent personality in marketing, management or promotion of coffee. The Coffee Board functions through its six statutory committees, namely, Executive Committee, Marketing Committee, Propaganda Committee, Research Committee, Development Committee and Coffee Quality Committee. The headquarters of the Coffee Board is in Bangalore but it has 69 extension offices spread throughout the coffee growing areas of India. The research department has six research stations and labs and the promotion department administers three coffee depots and the famous chain of 11 Coffee Houses all over India.

ď&#x20AC;Ą

27


An Analysis of the Coffee Crisis in India

Coffee Trade At present coffee from the growers is purchased at approximately 40 local buying centres. Many major and small buyers are represented at each centre. Most small growers prefer to sell coffee in the form of dry cherry and parchment. Large growers and estates sell coffee in green and graded form either directly to exporters or through private auctions. As mentioned above, Coffee Board was selling coffee by domestic and export auctions but a vacuum emerged after the dismantling of the marketing function of the Coffee Board. This was filled in by the private sector in the form of Indian Coffee Trade Association (ICTA), which begun conducting weekly auctions (Thursdays) at the Coffee Board premises in Bangalore, from 1993. The sellers in the form of individual plantation companies and the estates offer different lots of green coffee at a certain floor price. The buyers in the form of coffee brokers, export agents and domestic roasters bid for the lots. Once the bid is sealed, the buyer and seller enter into negotiations to lift the stocks, transport the beans to warehouses and thereafter either move the green coffee into the domestic market or ship it to export markets. At present work is also going on trading online through a portal www.CommodityIndia.com As of now, less than 10 percent of the total coffee is sold through auctions, primarily because most small growers prefer to sell their unprocessed crop directly to exporters or roasters. Tracing the reason for this to tax laws, Mr. Arun Bidappa, Managing Director of Karnataka Coffee Brokers, and President of the Coffee Futures Exchange of India Ltd (Cofei), says it is because of the rule which says that 25 per cent of the income from “self-cured” coffee has to be shown as income under the Income Tax Act,10 which is a federal legislation. Growers, who already pay agricultural income tax in the State, do not want the additional hassle of filing returns under the Central income tax Act too, according to Mr. Bidappa. Farmers prefer not to cure the coffee, saving themselves the trouble of filing one more paper. In the process, curing works lose out. They do not get business directly from farmers and can cure coffee only if they buy it. However, this makes them “buyers” and are liable to pay the State sales tax. What is happening is that instead of dealing with the organised sector (the curing works), farmers now have to turn to agents, who may or may not be reliable. The agents buy the green coffee from farmers and cure it for a processing fee at curing works and sell it. The

 28


BITTER BEANS

arrangement leaves the auctions out of the action. Direct selling goes through different processes:11  Export directly from the plantation, after curing and grading. Many plantation companies offer their produce directly to large exporters who have established channels overseas with long term associations with importers and roasters.  Sell directly to the domestic roasters, soluble manufacturers or exporters.  Hold coffee under the growers own title at a curing works after processing and then sell through channel of one’s choice.  Submit the coffee to the curing works and warehouses for marketing through auctions.  Tendering a lot of 600 kg of graded Plantation A or Robusta Cherry AB into the domestic futures market. The major coffee traders in India are Allanasons Limited, General Commodities Limited, Hindustan Lever Limited, Amalgamated Bean Coffee Trading Company Limited and Tata Coffee Limited. Major buyers are Harrisfreeman, Coca Cola Far East Limited, MT Treieste UK. Table 5: Major coffee exporters of India Sl. No.

Name of the Exporter

Arabica (M.Ton)

Robusta (M.Ton)

Total (M.Ton)

1

Others

8867

25231

34098

2

Allanasons Limited

6695

4302

10997

3

General Commodities Ltd

2041

7744

9785

4

Hindustan Lever Ltd

4136

4692

8828

5

ABCL

2732

6034

8766

6

E.Com Gill

449

4842

5291

7

Tata Coffee Ltd

508

4525

5032

8

Ramesh Exports

1833

2477

4311

9

ITC LTD IBD

2152

1966

4119

1309

2452

3762

30722

64265

10 LMJ International Ltd Total

94989

Source: www.plantersnet.com, July 2005.

United Planters’ Association of Southern India (UPASI) UPASI was founded in 1893 and is the apex organisation of the producers of tea, coffee, rubber, and spices. The membership of the

29


An Analysis of the Coffee Crisis in India

association comprises proprietors of small and large holdings as well as representatives of corporate bodies. Three state planters’ associations from Karnataka, Kerala and Tamil Nadu along with various district associations are affiliated to UPASI. Table 6: Major foreign buyers of Indian Coffee (In Tonnes) Sl no

Name of the Foreign Buyers

Total

1

Others

64737

2

HarrisFreeman

9367

3

Coca Cola Far East Limited

4644

4

MT TREIESTE UK

4639

5

Olam International

2990

6

Louis Dreyfus Trading Co

2189

7

Complete Coffee Ltd

1787

8

Coffyhandles

1637

9

Lilli cafe SPA

1553

10

Tea House Grand-Russia

1446

Total

94989

Source: www.plantersnet.com, July 2005.

During 1860s, the plantation industry had become an important player in the economy and several district planters’ associations were formed in Wayanad, Coorg, North Mysore, Travancore, the Shevaroy Hills and Kolagheny Hills of southern India. However, these organisations were working independently and had no central organisation. In1893 it was decided to form the United Planters’ Association of Southern India (UPASI). Membership was restricted to the District Planters’ Associations and there was no provision for individual membership. However, members felt that various influential proprietors and firms from southern India should also be incorporated in UPASI so that it could play a major role with regard to policy-making in the plantation sector. Eventually, in 1936, it was decided to convert UPASI into an association of proprietors, firms and district associations, divided by products into sections.12 UPASI was reorganised in 1947 after India’s independence. During this time, many Indian planters joined the association.13 UPASI went through another reorganisation in 1955. The member-associations from Madras, Travancore-Cochin, Mysore and Coorg took over the responsibility of dealing with labour-related issues along with other

 30


BITTER BEANS

general planting problems within their own geographical territories. This reduced the role of UPASI to a coordinating and advisory body.14 At present, an elected Executive Committee (EC) manages the affairs of the association. This Committee accords representation to all crops, size-groups and states. There are nominated members as well in the form of representatives from state planters’ associations, legal advisers and co-opted members. The EC forms various independent committees to focus on one particular commodity. The present committees look into matters related to:  Tea  Coffee  Rubber  Spices  Labour Liaison  Tea Technical  Rubber Technical  Taxation and Finance

The President, Vice President and the immediate Past President are the trustees. They oversee the working of the Secretariat, Research Institute and advice the Executive Committee on various aspects of the functioning of UPASI.  Some of the major functions of UPASI include:  Economic and statistical research on commodities.  Scientific and technological research.  Advise to members on scientific research, taxation, labour and management.  Assistance in procuring estate supplies.  Raising awareness of the public about the plantation industry.  Rural development schemes.  Training and management development programmes.  Small growers’ development schemes.  Voluntary labour welfare schemes.

The Workers in the Coffee Plantations The total number of permanent and casual labourers that works on coffee gardens/plantations is estimated at 535,000. This estimate, made by the Coffee Board, does not include the contribution of family labour, which is significant. However, institutions such as UPASI, estimate the total labour force that toils to produce India’s coffee at one million.15

31


An Analysis of the Coffee Crisis in India

Most of these plantations are situated in remote and uninhabited areas, where crops have not previously been grown. Hence, plantation workers are mostly migrants. These labourers are often provided housing in the estates itself along with facilities for shops, services and community activities such as recreation and cultural expressions.16 These big plantations focus solely on the production of coffee to benefit from economies of scale. They are mainly situated in the Coorg region of Karnataka. These big plantations are often part of a chain of plantations owned by large corporations. These plantation structures have often been termed as “enclaves”, alien and inward-looking and cut off from all links with the surrounding people and economy.17 Labour is hired from outside, given housing and incorporated into a new form of society, the pattern of which is dictated by the management of the plantation and designed solely to suit the needs of the plantations. Some observers have noted that the owners of the plantations were also the rulers of their principalities.18 Table 7: Average employment of workers in the coffee plantations State/Dist 04 *

1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03

2003-

Karnataka 1. Chickmagalur

105480

106180

134310 134980 142741 128520 131620 131620

2. Coorg

208100

209890

211680 215320 219318 197550 202928 202941

3. Hassan

86490

88800

92580

93051

96968

87300

88416

88146

4. Mysore

810

810

810

810

810

729

744

744

Total

400880 405680 439380 444161 459837 414099 423438 423451

Kerala 1. Wayanad

34470

34460

34520

34646

34721

31249

31393

9060

9360

9930

10107

10484

9436

9506

9506

278

2780

2780

2780

2780

2502

2515

2515

46310

46600

47230

47533

47985

43187

43415

43415

1. Pulneys

19940

19820

19940

19940

19940

17946

18029

18159

2. Nilgiris

3640

3640

3630

3630

3830

3447

3466

3471

2. Salem (Shevroys) 3830

3830

3830

3830

3830

3447

3466

3471

2. Travancore 3. Nelliampathies Total

31393

Tamil Nadu

Coimbatore (Anamalais) Total Non-Traditional Area Grand Total (India)

2260

2260

2260

2260

2260

2034

2044

2049

29670

29550

29660

29660

29660

26694

26830

26960

9870

9870

10200

13802

14295

12866

33857

33605

486730

491700

526470 535156 551777 496845 527540 527431

* Note 1: Tentative * Note 2: Does not include family labour Source: Database, Coffee Board of India, 2005.

 32


BITTER BEANS

The coffee industry is one of the largest employment providers in Karnataka, Kerala and in parts of Tamil Nadu. Most of the workers are adivasis (indigenous people) or dalits (socially oppressed) from the Nilgiri belt.

ď&#x20AC;Ą

33


An Analysis of the Coffee Crisis in India

Hulling in process

Heaped up beans ready for packing for export

ď&#x20AC;Ą 34


BITTER BEANS

The Coffee Crisis and its Impact in India Coffee industry in India has witnessed a major crisis caused by falling coffee prices. The average price of Arabica variety of coffee has come crashing down from 130.18 US cents per pound in 1997 to 39.61 US cents in 2002, to recover marginally to 54.46 US cents in 2004. However, the dramatic fall in Robusta prices which is grown widely in India has created a major crisis. Robusta prices fell from 76.3 US cents per pound in 1997 to 22.08 US cents in 2002 to marginally recover to 30.03 US cents in 2004.1

Figure 2: Fall in Coffee Prices in India 1998-2004 (In US cents per LB)

Source: www.indiaonestop.com, August 2005.

ď&#x20AC;Ą

35


An Analysis of the Coffee Crisis in India

The fall in coffee prices means small and medium sized coffee plantations having to close down production, one after another. The plantations being enclave economies, thousands of coffee workers are losing their jobs. Their wages are not paid and they do not have any income, otherwise, to purchase food and clothing. Their children stop going to school and begin to work along with them to augment family income. Workers are also denied medical care. Marginal and small coffee-growers, owning less than two hectares of land, are on the verge of a major crisis as well. These marginal coffee-growers comprise 77.5 percent of the total coffee holdings which is around 33 percent of the total land under coffee cultivation in India. Many small growers are debt-ridden due to falling prices and some several have committed suicides. It is in this context that the present section looks into the impact of the crisis in Kerala, Karnataka and parts of Tamil Nadu.

Coffee Workers Former UPASI President, Mr. I.J.J. Rebello estimates that coffee plantations in South India faced a revenue loss of Rs. 1,960 crores (19.6 bn). He says that the status of the plantation sector is “precarious and, unless prices improve, the entire industry will close down.” “Some estates are unable to pay wages and provident fund dues or meet payments due to their suppliers,”2he said, echoing his class interest.

Off to work in the inclement weather

 36


BITTER BEANS

It appears most of the job losses are related to the casual or temporary workers. “The first to be hit in such a crisis is labour,” says N.K. Pradeep, General Secretary of the Karnataka Growers’ Federation. “But growers are deeply in debt and are unable to make repayments to financial institutions. Many planters have actually abandoned their estates.”3 Pradeep had a labour force of 50 to manage his estate but now it is reduced by 30 percent. Today, his losses are between Rs.10,000 and Rs.15,000 per acre.4 This kind of a situation was visible to this researcher during visits to Wayanad in Kerala. Mr. K.A. Asokan,5 the trade union leader from Bharatiya Mazdoor Sangh (BMS) and member of the Coffee Board in Wayanad felt that with the fall in coffee prices many coffee plantations in Wayanad have closed down. In places where coffee plantations are still working, the employers have cut down the number of workers in a major way. According to him, before the crisis there were 55,000 workers; it is now down to 40,000. Majority of the workers who are affected are tribals - mainly from the Pania community, who primarily work as plantation workers and don not own agricultural lands. He also felt that children are working to augment family income. While discussing about wages, he maintained that bonus has not been paid to workers in operational estates for the past couple of years and that workload has increased significantly. Mr. Asokan, along with other major trade union leaders like Mr. Kunji Kannan of Centre of Indian Trade Unions (CITU), Mr. B.K. Gopalan of Indian National Trade Union Congress (INTUC), Mr. Kareem of Swatantra Trade Union (STU), represents one of the four biggest trade unions in the region. They are working together in a forum styled “Trade Union Action Committee” on the issue of job-loss of farm workers and for payment of bonus dues. Some coffee estates that closed down in Wayanad are:6 Mailadi Estate, Padinatara Panchayat

200

Minakshi Plantations, Vythiri Panchayat

170

Fringford Estate, Tavinal Panchayat

150

Makimalla Estate (Coffee Division), Tavinal Panchayat

100

Saroja Estate, Tavinal Panchayat

200

Kallumalai Estate, Mepadi Panchayat

100

Ranimalai Estate, Mepadi Panchayat

150

Brhmagiri Estate, Tirumelli Panchayat

65

37


An Analysis of the Coffee Crisis in India

Elumbelary Estate (Coffee and Cardamom unit), Mepadi Panchayat Baby Estate, Thariode Panchayat

60 60

Mr. P.T. John, a trade union leader, said that it was relatively easy for planters to close down coffee garden compared to tea gardens. Tea gardens usually have their factories located within the garden with very expensive machinery, which the owners cannot leave behind easily. However, there are no such factories in small and medium coffee gardens. Secondly, coffee-plucking takes place only once a year unlike tea; therefore, the employers can afford to close work for months without incurring heavy losses.7 The workers of the closed-down plantations are desperately looking for jobs in other regions. This kind of a situation has led to a series of strikes and major movements led by coffee workers. An estimated 360,000 workers of the rubber, tea, coffee and cardamom plantations in Kerala went on a strike demanding de-freezing of their dearness allowance (DA) and revision of wages, pending since 2002.8 Later, the unit of All India Kisan Sabha (AIKS) in Wayanad along with Agricultural Workers Union (KSKTU), Adivasi Kshema Samithi, CITU, and DYFI, had gone on a series of agitations. The main demands were:  Write-off the loans to farmers.  Provide them interest-free long-term credit facilities.  Reverse the import policy and put adequate tax on imports to

safeguard the price of agricultural produces in the domestic market.  Procure produces by declaring minimum support price (MSP).  Institute agro-industries in the government and co-operative

sectors.  Provide free land to landless adivasis.9

One of the demands of the agitation was payment of compensation to the bereaved families of workers who committed suicide. An indefinite hunger strike in front of the district administrative offices in Wayanad lasted 11 days in March-April 2004. In the background of mounting suicides this agitation actually shook the entire state of Kerala. The media also played a positive role and helped to create awareness among the public about the gravity of the agrarian crisis. The

 38


BITTER BEANS

Government responded by negotiating with the agitators and to pay a compensation of Rs. 50,000 to the bereaved families. The government declared a one-year moratorium for all agriculture loans and waived interest for one year. It was also forced to provide free ration to all adivasi and poor families.10 AIKS decided to advance the agitation in order to force the central and state governments to find a solution to the agrarian crisis. Conventions of farmers suffering from indebtedness were organised at district and village levels in which thousands of farmers participated. A joint delegation visited the prime minister and agriculture minister at New Delhi and submitted a memorandum in the first week of July.11 They have also conducted a march of 562 persons who travelled more than 500 kilometres from Wayanad to Thiruvananthapuram, the State capital, and staged a public meeting in front of the legislature on 19 July 2004. In Karnataka, most of the organized coffee workers are located in Coorg in Kodagu District. The fall in coffee prices has led to lesser days of employment for the workers, but there are no major reports of closures of the estates. The trade union movement is weak in this region, and the fact wages were fixed in 1999 under tripartite agreement involving the Government , the Karnataka Planters’ Association and the trade unions is an evidence of this. The wages were then fixed at Rs 70.10 per day equated at 2491 points in the State Average Consumer Price Index and the rate of variable dearness allowance (VDA) was fixed at 3.5 paise per point over 2491 points. As per this agreement, the total wages at present would be Rs. 78.66 per day.12 However, in the agreement between Karnataka Planters’ Association and the trade unions on 20 April 2005, due to the crisis in the coffee sector, it was agreed to nominally increase the wages to Rs. 71 per day equated to 2703 consumer price index points and VDA at the rate of 2.75 paise per point per day per worker over and above 2703.13 However, the Karnataka Industrial and Plantation Labour Union (KIPLU) refused to sign this agreement. Mr. M.G. Aiyappa, the General Secretary of the union has sent several notices to the Karnataka Planters’ Association and to the Labour Commissioners, mentioning that the plantation workers are losing Rs. 1.83 per day from 1 April 2004. As per his calculations the wages should be 72.83 per day and is willing to challenge the present settlement in the court.14 The Communist Party-affiliated CITU organized a major conference in Chickmagalur district of Karnataka in December 2002. The union

39


An Analysis of the Coffee Crisis in India

came up with the following demands: 1) Immediate opening of all closed gardens; 2) Proper implementation of the Plantation Labour Act and amendments to the Act in favour of the workers; 3) No wage cuts and freezing of dearness allowance (DA). Ensure implementation of all existing benefits. Appropriate wages to ensure decent living conditions for the plantation workers; 4) Restoration of the interest rate on PF to 12 percent; 5) Formation of Complaints Committees against sexual harassment in all gardens as per the guidelines of the Supreme Court; 6) Immediate negotiations with all trade unions of plantation workers on their long-standing demands and conditions in the industry, and 7) Increase taxes to big plantations and provide relief to small and medium growers.15 However, other trade unions were not part of these demands. In Tamil Nadu, there are 320 estates which come under the estate system of coffee production. Out of that, 214 are between 10 and 20 hectares.16 Tamil Nadu, being a predominantly tea producing state, coffee is grown alongside tea. Therefore, during the coffee crisis, the workers were accommodated in the tea plantations. Some of the exclusive coffee estates have converted themselves into tea estates in the Nilgiris like Glenburn Estate. Some of the estates have left only one division for coffee and concentrating on tea like Maruwalla estate, Kilkotagiri estate, Kuttada Estate, Houkal Estate, Singara Estate in Kotagiri, Nilgiris.34 There are some exclusive coffee estates in Gudalur region of Tamil Nadu like Sengel Estate which has 800 acres of coffee but there is no union representation there. The trade union leaders pointed out that there are other estates in Tamil Nadu like Anipallam, Korangamudi and Mauar which are inaccessible as they are situated in remote areas and trade unions have limited access to these estates.17 In Gudalur, the trade union leaders felt that the workers have been less affected because the tea agreement that is entered between trade unions and employers also governs coffee workers. However, according to trade union leaders, the majority of the coffee grown in Tamil Nadu is by small holders and the wages are Rs. 54 per day.18

ď&#x20AC;Ą 40


BITTER BEANS

Small Coffee-Growers The impact of the crisis on the small coffee-growers could be assessed as following:  First Category: Coffee farmers who had sufficient liquid funds

could face the crisis and continue to maintain the holdings without postponing the required agricultural practices to keep the estate running. . These farmers certainly will benefit once global prices increase. But their numbers are very small.  Second Category: Farmers who did not have liquid reserve funds

and not much loans from banks and other financial institutions. They could maintain their estates by annual crop hypothecation Terms of Settlement As Per the Memorandum of Settlement under Section 18 (1) of the Industrial Disputes Act, 1947 arrived at Coonnor on 8th July 2005 1. On and from 1.1.2005, the fixed D.A. paid to the workmen as at 31.12. 2004 will be merged with the wage and the consolidated wage payable to the permanent workmen will be fixed as under: a. From 1.1. 2005 – Rs 74 consolidated b. From 1.4.2005 to 31.12. 2007 Rs 75 consolidated 2. Attendance bonus will be increased to Rs 3 per day for the days worked by the individual workmen provided he or she has not actually worked for less than 85% of the working days in a month. Fraction of a day will be rounded to a day in favour of the workman. The attendance bonus shall not be taken into account for calculation of PF, Bonus, Gratuity or any other benefit/allowance. 3. Dearness Allowance: On and from the quarter beginning 1.1.2006, the workmen will be paid a D.A. at the rate of 30 paise per day. Thereafter the D.A will be enhanced at the same rate every quarter until the quarter October/December 2007. 4. Plucking incentive: The plucking incentive structure will be modified as follows from 1.1. 2005-09-15 Yield Class Base Kgs GL/YLD/Ha/Month

Incentive Slabs 1st slab 2nd slab 3rd slab

1-400 Kgs

15

16-18

19-34

35 & above

401-800 Kgs

22

23-28

29-48

49 & above

801-1600 Kgs

27

28-42

43-57

58 & above

1601 kg andabove

32

33-47

48-67

68 & above

Incentive Rates: 1st Slab: 50 ps per kg, 2nd Slab: 65 ps per kg, 3rd Slab: 90 ps. Per kg

41


An Analysis of the Coffee Crisis in India

and survived for three to four years. But, gradually they are also being drawn into the debt trap. ď&#x20AC;Ą Third Category: These are coffee farmers who do not have liquid

funds, have borrowed heavily from banks and other sources and are deeply in debts. This category of coffee farmers was adventurous in nature. In anticipation that the coffee boom period would continue for some more years, they started expanding their land-holding, invested a lot on purchasing machineries, upgradation of infrastructure facilities, etc. They are now in deep trouble. Even if the coffee prices shoot up to the level of boom period, their survival seems to be a big question mark. The only hope and expectation is that the government would take necessary bail-out steps and that the coffee boom period would last for a longer period of time. Even though the impact is not uniform on all coffee farmers, 80 percent of them are drawn into debt trap, with 60 percent of them being severely affected. The majority of small and marginal farmers is in this category. As we have seen earlier, most of Indian coffee is produced by small coffee growers. The highest numbers of growers owning less than two hectares of land under coffee are in Kerala, numbering 63,122, followed by 32,035 in Karnataka who are severely affected by the fall in coffee prices. The majority of small coffee-growers in Kerala are situated in Wayanad district in three Grama Panchayats - Nenmeni, Sulthan Bathery, and Noolpuzha. In these three panchayats, coffee is the predominant commercial crop and the major source of livelihood for farmers. Coffee is cultivated on 1500 hectares in Sultan Bathery, 2900 hectares in Noolpuzha, and 1200 hectares in Nenmeni. The Wayanad colonisation scheme was implemented mainly in these three panchayats under which two hectares of land were distributed to each settlerfarmer and ex-serviceman. Around 49,000 hectares of land were thus distributed during the early 1950s and all those plots were converted into coffee gardens. Through inheritance and sales, these lands have undergone subdivision and fragmentation. Hence the area has the largest concentration of marginal and small farmers.19 Coffee cultivation is the largest provider of employment to the people of Wayanad. The 114,000-strong tribal population of Wayanad particularly depend on coffee cultivation for their livelihood, mainly

ď&#x20AC;Ą 42


BITTER BEANS

Table 8: Area wise distribution of coffee in Wayanad (in Hectares) Grama Panchayat

Area

Grama Panchayat

Area

Meppadi

5562

Poothady

2050

Vythiry

1560

Pulpally

550

Pozhuthana

1290

Nenmeni

1200

Kottathara

1216

Mullenkolly

Thariode

50

920

Panamaram

605

Padinjrathara

1762

Vellamunda

1660

Vengappally

680

Edavaka

Kaniymabetta

800

Mananthavady

1760

Ambalavayal

2400

Thirnelly

1262

Noolpuzha

2900

Tavinjal

200

Sulthan Bathery

1500

Thondaranadu

440

Menangadi

1316

Malpetta (Municipality)1638

431

Source: Coffee Board of India

because coffee provides employment in all seasons. Weed control measures are taken during the rainy season. At the outset of the southwest monsoon, the soil is prepared by upturning. The first doses of manure and fertilisers are also applied during this time. The second weeding is done during October and November. Post-monsoon fertilizer application is done during this period. Harvesting starts in the month of December and comes to a close by the end of January. Pruning is done in February and March. Control measures against pests, insects, and diseases are taken in the month of April. Pre-monsoon manuring is done in May.20 In Wayanad, most of the work in coffee gardens is done by women. The services required of women workers per hectare of coffee plantation are:21 1. For cutting and removing weeds using sickles - 12 women workers. 2. For applying manure (mostly cow dung) - 10 women workers. 3. For application of chemical fertilizers - 10 women workers. 4. For plucking coffee fruits during harvesting -12 women workers. The involvement of domestic labour at all stages of coffee cultivation is strong among marginal and small farmers. Members of the household, both men and women, perform a sizeable proportion of the agricultural activities in coffee cultivation. It is estimated that 16 percent of the

ď&#x20AC;Ą

43


An Analysis of the Coffee Crisis in India

work in the holdings of marginal farmers and 10 percent of the work in the holdings of small farmers are carried out by household members. During harvesting season, even school-going children in the family engage themselves in beans-plucking to earn some pocket money. It was stated that the involvement of domestic labour made it possible for marginal and small farmers to produce coffee at a low cost. There is a strong presence of migrant workers as well, mostly from the neighbouring state of Karnataka. A majority of them are from Chamaraja Nagar, H.D. Kote areas of Karnataka. The main reason behind their moving to Wayanad was the attractive wage structure prevails in the plantation economy of Wayanad. In 2000, the average wage of labourers was Rs. 125 per day. It was reported that during the corresponding period wage rates in Karnataka were only Rs. 35 per day.22 Ironically, with the onset of the crisis, thousands of people from Wayanad are crossing border into Karnataka and Tamil Nadu every day looking for work. Local people mention that most of the workers

Story of Bimala (Begur Colony, Wayanad, Kerala) Bimala wakes up everyday at 4 a.m. “I have two children and a husband down with tuberculosis,” she explains. She has to finish cooking, cleaning, washing and get things ready for the children to go to school. “And I have to leave by 7 a.m. to reach here (Kutta, Kodagu in Karnataka) in time for work. Here, the sahucar’s vehicle will pick me and others up to take us to his estate.” There, Bimala will earn Rs. 50 for her weeding work, which keeps her bending for eight hours in the sun. But she will lose Rs.15 each day on bus tickets. She takes her food from home. “At the work place we get nothing. Not even a cup of tea.” At home, where she reaches after 7 p.m. there’s still much to be done. Including trips every two or three days to Kattikulam (bus fare Rs.3.50 each way) to buy provisions. Since Bimala has very little cash in hand at any given moment, she cannot buy enough at one time and thus reduce the number of trips she makes. So, this often cuts further into the Rs.35 she scrapes out of her trips to Nathayal. On whatever is left she looks after two young sons (in the 8th and 9th standard) and a sick husband who cannot work. Bimala sleeps at ten p.m. or after, most nights. The family survives and runs on her 16-18 hour workday and the Rs.25-30 it leaves her with. “Our Begur colony has 60 families and all are in the same condition,” she explains. “Most come here like me, seeking work. I’ve done this for four years. The only thing is, I hardly ever see the children awake.” Wayanad’s already marginalised adivasis have been pushed deeper into debt and penury by a crisis that has sharply reduced any employment they could get. (The Hindu, 27 Dec 2004)

 44


BITTER BEANS

who are adivasis go for work in Kodagu district at half the wage they used to get in Wayanad. “When there was work in Wayanad,” says Mani, “I got a daily wage of up to Rs. 120. Now I work for Rs. 80 a day in Kolikuppa. My bus fare to the place is Rs. 34 one way.” Mani tries coping by doing the journey only three times a week and staying over the other days, leaving very little time to spend with his family.23 To sum up the impact of the crisis, coffee growers are trying out desperate measures to hold on to their farms. The first impact is environmental, as the growers are selling off the shade trees in their gardens to survive. This coffee crisis has forced the farmers to postpone much-needed cultural operations. That has resulted in losing almost 10 percent of their Arabica farm due to severe Arabica coffee stem borers (pests and diseases). In the absence of any remedial measures from the government to combat the crisis, small growers are trapped in the clutches of moneylenders with heavy interest-bearing loans. They are forced to borrow at unreasonable and unsustainable levels of interest, thus eroding their very base in a few months’ time. In this process some of them have lost their precious small holdings. It is a well-known fact that whenever a war erupts or a crisis develops, the first persons to be psychologically affected are the women and children. This crisis is no exception. Here, children are being betrayed quality education for want of adequate resources. The cordial relations between workers and various market players developed over the decades are gradually eroding. This has resulted in a decline in workers’ output and confidence of market players in planters.

Effect on Other Major Stakeholders Hulling Units and Curing Works

As discussed earlier, the curing units used to serve as pooling agents for the Indian Coffee Board but after the elimination of pooling in 1992, there has been a proliferation of hulling and curing units. The hulling units only procures the coffee and removes the husk from the bean and grades them, whereas the bigger curing houses also plays the role of warehousing, storing and advanced level of curing. The All India Coffee Curers Association (AICCA) is the sole representative body of the coffee curers and is based in Karnataka. The Association has played a vital role in rationalising the activities of the curing works in different states, including fixing indicative curing charges and other related costs.

45


An Analysis of the Coffee Crisis in India

The Association also looks after the quality parameters of the coffee and interacts with other associations and central and state governments on issues of interest to the curers.24 Since 1992, there was a great demand for hulling units as small growers began selling their coffee directly to private agents. However, with the fall in prices, many of the hulling and curing units are also going through a crisis. There are similar stories everywhere in Karnataka. The hub of curing works is Kushalnagar where, out of 38 curing works, only five are reportedly functioning at present. Some of the curers have reportedly begun compromising on the quality of coffee to make up for the fall in prices by mixing sand.25 However, the majority of the curing work is done by big players like ABCL and Tatas, who cure one-third of the total Indian coffee crop. Roasters and Big Companies

While the coffee crisis has affected all the smaller players, the big players have remained relatively unaffected during the peak crisis period of 1998-2002. Tata Coffee owes its origin to two companies — Coorg Coffee Company Limited, London and Pollibetta Coffee Estates Company Limited, London, both managed by Matheson & Co. They were amalgamated to form the Consolidated Coffee Estates Limited, Edinburgh in 1892. In 1943, the Edinburgh enterprise formed an Indian company called Consolidated Coffee Estates Limited with its head office at Pollibetta, Karnataka. In June 1967, the name of the company was changed to Consolidated Coffee Limited (CCL) and in 1990-91, Tata Tea acquired a controlling interest in CCL through an open offer to CCL’s resident shareholders. In September 1999, Asian Coffee Limited, Coffee Lands Limited, Veerarajendra Estates Limited and Charagni Limited were merged with CCL, making it the largest integrated coffee company in Asia. In August 2000, its name was changed to Tata Coffee Limited. Today the company controls 25 estates in Coorg, Hassan and Chikmagalur in Karnataka.26 At present the Tatas have a coffee-curing capacity of over 32,000 tonnes per annum which cures one-eighth of all coffee produced in India. In addition to coffee it produces on its estates, it also roasts and grinds coffee in three plants in different locations in South India.27

 46


BITTER BEANS

Table 9: Audited financial results of Tata Coffee INCOME & DEVIDEND ETC

2000-01

2001-02 2002-03 2003-04

2004-05 Rs. x 100,000

Sales Value of Coffee and Estate Produce and Gross Income from Service rendered, etc. 21,193.64 Profit before Tax

1,462.60

As percentage of sales Profit after Tax

7 1,357.56

17,826.57 16,823.33 18,522.24 1,317.38 2,026.24

20,256.64

2,199.10

3,111.83

12

12

15

914.24 2,019.89

7

1,710.36

2,870.23

6

5

12

9

14

As percentage of Net Worth (Shareholders’ Fund)10

7

14

1

16

93

88

88

89

As percentage of Sales

Expenses as percentage of Income

93

Current Assets / Current Liabilities

3.2:1

3.1:1

2.2:1

3.6:1

3.2:1

Debt/Equity Ratio

0.45:1

0.53:1

0.38:1

0.51:1

0.32:1

81

80

69

62

54

10.89

7.33

16.20

13.72

23.02

4.00

3.50

5.00

5.00

6.50

Fixed Assets / Net Worth (as percentage) Net Profit per Equity Share Dividend Distributed

Source: http://www.tatatea.com/tata_coffee_finance.htm

In early 2005, Tata Coffee, along with Turner Morrison, purchased equity worth Rs. 500 million in the Mauritius-based Barista Coffee International. Barista Coffee International is, in fact, a subsidiary of the New Delhi-based Barista Coffee Company. With this, Tata Coffee obtained a 34.3 percent stake in Barista. Barista sells coffee at kiosks to high income customers. With the infusion of Tata investment, Barista plans to set up 300 retail coffee outlets in India by end of 2006, upping its present position from 150. Barista’s retail sales are slated to touch Rs 8000 million by then.28 Due to all these strategies, Tata Coffee maintained its profits even during the crisis period. In fact, most of Tata Coffee growth has taken place during 1998-2002. Similarly, around the same time some major companies like

47


An Analysis of the Coffee Crisis in India

Amalgamated Bean Coffee Trading Co. Ltd. (ABCL) went on an expansion drive and have showed constant profits. According to reports in the press this year, Naresh Malhotra, Director of ABC Trading Co., “plans to expand the land under coffee plantation were being pursued by the company.”29 ABCL has also expanded its curing business becoming one of the largest curers in India handling 75,000 tonnes in 2001. It has also expanded the retail sale of its coffee. Coffee Day Xpress filled the slot between the traditional café and the vending machine, thereby providing for fast, hygienic food and beverage at very convenient locations. Coffee Day Xpress serves the coffee that ABCL grows on its 5,000 acres of coffee estates. Similarly, others such as Hindustan Lever Limited, a subsidiary of Unilever, have recorded double-digit growth in coffee brands, Bru and Green Label. According to Mr. Ms. S. Banga, Chairman of HLL, the foods division of HLL has shown a gross margin of improvement of about 13 percent during 2001-04.30 HLL’s Green Label and Bru are leading players in the filter and instant coffee segments of the domestic market. Latest industry figures suggest that Green Label has a retail value in excess of Rs. 1000 million and accounts for nearly 56 percent of the value-share in the filter coffee segment. The instant variant, Bru, also has a sizeable presence in its category with a retail value estimated at around Rs. 1900 million.31 Meanwhile, HLL is likely to galvanise Bru to tap the increasingly attractive out-of-home liquid coffee retailing segment. Currently, HLL, through Bru, operates about 10,000 vending machines in both institutional and retail segments and expects this figure to double in the next two to three years.32 According to Mr. Gautam Sircar, Vice President of HLL, the roasters and traders have remained, to a great extent, unaffected by the fall in prices which is a cyclic phenomenon. However, he acknowledges that if prices remain low, the small coffee-growers would be forced to compromise on quality, which will eventually affect all players in the supply chain. HLL’s suggestions to deal with the present scenario are: a. The small coffee-growers need to be organized and work for improving quality. The rights of coffee workers need more attention. b. The Coffee Board should levy a cess on coffee exports to create a separate fund for coffee workers and small growers in crisis. c. Small coffee-growers should go for inter-cropping to ensure that

 48


BITTER BEANS

their livelihood is not affected if prices of one of the commodities crash.33 International Trade Group (ITG)

Coca-Cola India (CCI) set up an International Trade Group (ITG) to purchase products from India, for which it pays in hard currency. Since 1998, the unit is based in Bangalore, and today, green coffee from India accounts for 90 percent of ITG transactions. The annual turnover is in the range of 14,000 to 18,000 tonnes, making CocaCola Far East, the entity that effects the purchase, one of the top overseas buyers of Indian coffee. Ecom Coffee Group

Another recent entrant is the Ecom Coffee Group, part of ECOM Agroindustrial Corporation of Switzerland, a vertically integrated commodity origination and processing firm. Ecom accounts for over 8 percent of the global trade in coffee and ranks as the third largest player in the coffee sweepstakes worldwide. Ecomâ&#x20AC;&#x2122;s global business model relies on a decentralized, entrepreneurial mode of operation suited to the specific business environment in each country. Its India operations, Ecom Gill Coffee Trading Pvt. Ltd., based in Bangalore, maintains a direct relationship with growers, offering high-end risk management services and has its own green coffee processing unit in Mysore district. The company serves its international roaster clients on a round-theyear basis through its unique vendor managed inventory system. Olam International

Yet another global commodity major, Olam International, headquartered in Singapore, has significantly increased its purchases from India in recent months and now ranks amongst the top ten foreign buyers of Indian coffee. Olam International Limited (Olam or the company) supplies raw and processed agricultural commodities, grown mainly by community and SME producers in developing countries to well-established regional and international clients. It is a fully integrated company that engages in itself sourcing, primary processing, transport, warehousing and distribution of a broad range of commodities, including cocoa, rice, timber, cashew, cotton, coffee, sugar, sesame, cashew nuts, and spices. It is the largest shipper of Robusta coffee in the world. In India, it operates through Olam Exports (India) Ltd., with its principal office located in Quilon, Kerala, and having branch offices in Bangalore, Delhi, Mumbai, Chennai and Ahmedabad.

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49


An Analysis of the Coffee Crisis in India

Nedcommodities India Pvt. Ltd.

The latest actor on the scene is Amtrada Holdings BV based in Amsterdam, The Netherlands, which has a 100 percent stake in Nedcommodities India Pvt. Ltd. Having taken over the Kodagu Coffee Curing Works in Kushalnagar, Coorg, the company is currently in the process of installing new equipment to enhance capacity and upgrade the facility for commercial operations, slated to start from June 2004.34 illycaffè S.p.A.

The other company active in the Indian coffee sector is illycaffè S.p.A., the world’s leading roaster of Espresso coffee from Italy, synonymous with fine coffee. It awarded prizes to the winners of its prestigious contest, the Third India Coffee Quality Prize for Espresso, at a function held in Bangalore. illycaffè is the single largest buyer of Arabica beans from India, having sourced over 40,000 bags of green coffee beans from the country last year. As per Andrea Illy, head of illycaffe, it is interested in developing the market for gourmet coffee in India. The University of Coffee, a centre of excellence established in Trieste, Italy, to spread Italian coffee culture internationally, plans to conduct a series of training courses in different cities in India, both for the trade and consumers. This would be in addition to the work being conducted by illycaffè technologists with the Indian coffee growers’ community to improve methods of harvesting, curing, processing and packaging.35 Comark

Comark – the Indian Coffee Marketing Cooperative Ltd, which was started in 2001 – offered a long-term solution to the crisis by suggesting the development of the Indian domestic market for fresh coffee through a link-up between Comark and a cooperative marketing institution. “If coffee has to reach the Indian middle class, it has to be through a marketing cooperative with a good network. There is huge potential here,” D.S. Raghu, Chairman of Comark, said.36 Comark has been talking to Amul as a possible marketing and retailing cooperative in this venture. The initiative would need an initial financial support of around Rs. 500 million. However, Dr. Radhakrishna, Deputy Director of the Coffee Board of India pointed out that Comark today is going through a major crisis and is making huge losses.37 There are some major players in India who accept the fact some

 50


BITTER BEANS

realistic steps must be taken for sustainability and that the ideal approach for this would be to put in place some clear, credible and verifiable standards. This suggestion has emanated from a few established players and has not found support across the sector.

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51


An Analysis of the Coffee Crisis in India

The forlorn look of a small farmer â&#x20AC;&#x201C; what about gen-next?

This picture tells the sordid story of a tribal farmer who owns two acres of coffee garden

ď&#x20AC;Ą 52


BITTER BEANS

Increasing Numbers of Suicides by Small Coffee Farmers and Workers Situation in Kerala Between May 2001 and June 2004, 120 farmers committed suicide in Wayanad, 24 of them in the last six months alone. Trapped in a vicious cycle of mounting loan liabilities, they opted to resort to the ultimate step. This fact brings to the fore the magnitude of the economic collapse that prevails in the district. For every acre of land in Mullankolly-Pulpally Panchayat of Wayanad there is a debt of Rs. 200,000 to 300,000. The price crash has made repayment of loans impossible. Growing debt has forced many to fell trees on their lands to sell the timber damaging the ecologically fragile zone. The crisis has affected the children as well. Many of the young children have dropped out of schools and have begun working in the fields of Kodagu, Karnataka. Parents are not in a position to pay the tuition fee of the children. However, it has to be noted that the government does not admit more than 50 distress suicides during this period.3 The officials of the Coffee Board Liaison office, when asked about the suicides, also denied

The fate of Maria Kutty with her 1.5 acres in Irulam, of E.D. Vasu with 75 cents in Edavaka and of Mohammed Ali with 58 cents of coffee land in Porunnannur of Kerala is no different. These were just three of the many farmers sunk by the price of coffee and pepper. Their debts rose as farm-gate prices fell. They, and some 120 others like them, committed suicide during 2004 in Wayanad of Kerala. “Maria took her life after a local bank sent her a notice,” says a neighbour.1

53


An Analysis of the Coffee Crisis in India

Ms. Clara Johny of Merakkadabu village, Pulpally, Wayanad district, Kerala “The coffee we are producing gets sold for no price, but we have to buy even our coffee from the market at a huge price. Where does the profit go?” Without knowing the complexities of the global coffee value chain, Clara, the wife of Johny T.T., a small coffee-grower who had committed suicide was able to raise a very pertinent issue. The Johny family had been growing coffee in their one-acre plot for some time. They had borrowed Rs. 25,000 from the bank in late 1990s when the coffee prices were very high. However, with rapid fall in prices and draught in Wayanad, Johny saw no option of surviving and committed suicide. Clara now works in a nearby coffee garden so that she could raise her 3 children and also repay the loan. However, she wonder with the Rs. 70 per day she gets when she goes for work, how would she be able to repay the loan. There are several stories like Clara’s in the vicinity where reportedly there 65 such cases taken place in last two years.2

that there are such large numbers of distress suicides.4 However, A.C. Varkey, Chairman of Farmers’ Relief Forum (FRF), one of the largest farmers’ organizations in Kerala with a membership of around 150,000 families mentioned that the banks provided huge loans on liberal terms when the coffee prices were good, but as the prices fell, the banks began to mortgage the lands of small farmers leaving them with no alternative but to commit suicide.5 According to Varkey, more than 600 distress suicides have taken place in Wayanad between 2000 and 2005. “Everyday I am taking dead bodies from the small growers’ families to the cemetery or to the crematorium.”6 FRF has launched some militant actions on farmers’ issues and plans more. Varkey says: “Whenever news comes of the bank trying to mortgage farmers’ land, we reach the spot along with thousands of other farmers and try to

 54


BITTER BEANS

resist it. This has led to around 67 cases being filed against me. However, we look at it as a political struggle and not as an act of desperation.” If we examine the Kerala government’s figures, it indicates that rates of suicides have gone up tremendously during the 1995-2002 period. As per the statistics of 2002, Kerala has the highest suicide rate (30.8 per 100,000 population) among all states in India. The national rate is only 11.2 per 100,000, while Global rate is 14.5 per 100,000. The total number of suicides reported in Kerala during 2002 is 9810, that is, 27 each day of the year or one per hour. The majority of the people who committed suicide were farmers and the most-affected areas are the tea- and coffee-producing regions.7 Table 9: District wise suicidal data per 100,000 population District / Year

2001

2002

2003

Idukki

49.2

49.7

50

Kollam

33.9

43.6

43.8

Wayanad

39.8

40.6

47

Thiruvananthapuram

41.4

38.5

33.3

Source: The Hindu, 15 October 2005

What is interesting to note is that in Kerala, Idukki and Wayanad districts show the highest numbers of suicides. Idukki district is a predominantly tea-producing area and most of the tea plantations have closed down. Wayanad, on the other hand, is predominantly a coffeeproducing area. It is also interesting to observe that the rate of suicides increased by almost 20 percent in Wayanad during 2003, the year after the worst crisis in the coffee sector. Although there has been some decline in the number of suicides in Idukki and Wayanad, (in Wayanad it went down to 38.02 per 100,000 population in 2005),8 it is still way ahead of the national average of 11.2 per 100,000.

Initiatives to address the situation The small growers’ associations have formed a Joint Action Committee in Wayanad and conducted several demonstrations to provide relief to small coffee-growers. Mr. K.J. Devasiya, President, South Indian Coffee Growers’ Association (SICGA) and the Convener of the Joint Action Committee feels that a Delhi-based coordination committee should be initiated for better coordination with the government and other civil society organizations.. 9 SICGA has conducted several demonstrations including a picketing of the

55


An Analysis of the Coffee Crisis in India

collectorate of Wayanad in March 1999 and several picketing of Coffee Board offices.10 The Indian Farmers’ Movement (INFAM) has also been active in taking up the issue of indebtedness of coffee-growers. On 13 April 2004, over a thousand farmers under the banner of INFAM organised a siege of the lead bank at Kalpetta and declared that the farmers of Wayanad were “on their own writing off their bank loans.” INFAM has claimed that, with over 650 units and nearly 11,000 active members in the districts, it would spread the message that the farmers of Wayanad need not bother about their debt burden any more. They declared that, beginning April 13, they would consider all loans as closed and would fight any kind of recovery measures collectively. This is the only way, INFAM believes, they can save the small growers from committing suicide.11 The coffee growers in Wayanad lost nearly Rs 1.2 billion due to the fall in coffee prices, during 1995-2000. The effect of such loss of income is visible in the economy of the entire district.

Initiatives by the Government The Government of India approved a 169,786.9-million rupee rehabilitation package for farmers in the predominantly suicide-prone districts of Andhra Pradesh, Karnataka, Kerala and Maharashtra in September 2006 . Of this, Rs.10,579.43 crore will be subsidy-cum-grants, and Rs.6,399.26 crore will be provided as loan. The package comprises loan rescheduling and interest waiver, and specific schemes for watershed development, seed replacement, horticulture and extension services, and for subsidiary income through livestock, dairying and fisheries. It also includes an ex gratia of Rs.15.5 crore from the Prime Minister’s National Relief Fund to the families of farmers who committed suicide in these States. The package would be implemented over three years in 31 suicideprone districts – six each in Vidharbha and Karnataka, 16 in Andhra Pradesh and three in Kerala. For Karnataka, the package is Rs. 2,689.64 crore, including an interest waiver of Rs. 209.81 crore. The Kerala package of Rs.765.24 crore encompasses an interest waiver of Rs. 360 crore.12

Price Volatility The Convener of the Small and Marginal Farmers’ Association

 56


BITTER BEANS Year

Production (1000 tonnes)

Price (Rs. per Kg)

Difference (In Pirce)

Loss (In Income)

1996

34.63

82.31

44.50

154.42

1997

33.26

80.50

46.31

177.18

1998

39.15

81.59

43.01

168.30

1999

48.18

67.63

59.27

485.57

2000

51.29

30.13

96.80

496.49 1231.86

Source, C.V. Joy, 2004.

(SMFA), Mr. P.T. John, informed that SMFA, the Spice Trust of India, FEMARK and Wayanad-based NGOs such as Solidarity, have come together to intervene in various ways. The interventions they have planned are at three levels: a. Market-level for better prices. b. Lobbying and advocacy with the government and policy-makers. c. Facilitating changes in agricultural practices at the farm-level. The SMFA has contacted the Central Food Technological Research Institute (CFTRI), which has developed the technology to make coffee decoction concentrates with a shelf life of six months. Initial experiments done by SMFA show that one unit can produce 70 litres of coffee decoction in a day using 200 kg. of coffee beans. SMFA has contacted the industrial department and tribal welfare department of the Kerala government for support and has secured 50 percent subsidy for tribal units. SMFA is planning to raise the balance amount from banks. It plans to procure the coffee beans from the tribal small coffeegrowers from different villages and roast it centrally. SMFA is also planning to approach the Kerala Infrastructure Development Agency (Kinfra) for providing land at a subsidised price. It also aims to tie up with the Milk Marketing Cooperative of Kerala which has got 7720 outlets all over the state to market the coffee decoction. This government cooperative is already selling tea and coffee at their outlets and SMFA seeks to urge the cooperative to buy coffee from them on a preferential manner which will be sold at a lesser price than established brands like Nestle or Bru or Tata Coffee, all owned by multi-national corporations. SMFA has organised several meetings and consultations to unite the small coffee-growers of Karnataka, Tamil Nadu and Kerala. In March 2005, it organized a three-day conference of small coffee-growers in

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57


An Analysis of the Coffee Crisis in India

Kushalnagar of Kodagu district in Karnataka and adopted a resolution demanding a debate on their problems in the parliament and implementation of planter- and grower-friendly policies. The resolutions adopted at the conference include growing high-quality coffee to counter the challenges posed by MNCs, creating awareness among people on profit-making initiatives and persuading the government to treat the problems of the planters and the workers without discrimination.13 The resolutions also took note of the need to create a market for the produce through co-operative associations. Apart from this, coffee should be sold under different brands in the local market through these co-operatives, it was decided. The conference also decided to introduce locally grown coffee using organic methods.14 A.C. Varkey of Farmers’ Relief Forum has taken the other route of contesting to the state legislative assembly. The major demands of the Forum are:  Improve medical facilities for workers in the plantations.  Support production of value-added coffee by small growers by

way of putting up a processing unit which would be run by growers’ cooperatives.  Write-off loans to small and marginal farmers.15

In a consultative workshop held in Wayanad, Kerala16 with the coffee farmers the following points emerged as their major problems:  No marketing support for coffee farmers.  The farmers do not have any say on fixing the price or regulating

the market.  No proper information on coffee cultivation in the department

of agriculture.  Less internal consumption of coffee.  Old and obsolete technology.

Some of the major suggestions mentioned to come out the problems include:  Farmers need to consider cheaper ways of value addition.  There should be national and international networking between

small coffee-growers to learn from each others’ experiences.  Coffee Board should explore ways and means to increase

 58


BITTER BEANS

domestic coffee consumption.  New web-enabled information centres/kiosks related to coffee

cultivation and trade must be set up.  More awareness on coffee must be created through the self-help

groups.  Introduce modern technology in coffee cultivation.  Provide credit and insurance to coffee farmers for their crops.  Capacity-building and training programmes to be introduced.

Situation in Karnataka The situation of the small coffee-growers of Karnataka is not different from their counterparts in Kerala. Most of the small coffee-growers are indebted and have even begun working in larger plantations as casual labourers on lesser wages. In the Malnad region, the coffee growing peasantry is seriously indebted. Most peasants are not able to repay debts and have tried to sell their lands. But land rates have fallen to Rs 115,000 per acre from Rs 450,000. Often, this is inadequate to pay off the loans. Suicide deaths have become a regular feature in rural Karnataka. To date more than 200 peasants have reportedly committed suicide, unable to grapple with the crisis.17 The situation reached such an alarming proportion that the Government through the Zilla Panchayats and officials from different departments have initiated meetings with the small coffee-growers to discuss different ways prevent the growers from taking the extreme step.18 Thammaiah of Sakleshpura taluk in Hassan district of Karnataka Thammaiah had built a concrete-roofed house when the going was good. He owns one acre of coffee. Now with prices hitting rock bottom, he finds himself working as a casual labourer at wages that are 35% less than normal. His declass profession has kept him going. But it has been of no help in clearing the debts he has accumulated. (Peoples March, December 2003)

M. Dinesh of Nittor, Kodagu District Thirty one year old M. Dinesh, a resident of Nittor near Ponnampet and a small coffee farmer committed suicide by firing himself on 12 May 2001, following heavy debts. Sources said that Dinesh had told his mother he would go to his estate, but never returned until dawn. However, on searching he was found dead in his estate.

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An Analysis of the Coffee Crisis in India

Reasons for suicides Karnataka Government set up the Veeresh Committee in 2000 to investigate the high numbers of suicides. The Committee’s findings noted that that most of the 147 people who committed suicide in Karnataka, although eligible for government compen-sation, have not done so because of agricultural losses, but due to personal reasons or lack of money to repay private loans. The committee was set up after Chief Minister of Karnataka, Mr. S. M. Krishna, told the assembly that government compensation had become an “incentive” for farmers to commit suicide. The compensation given to the family of a farmer who has committed suicide is Rs. 100,000 (approx. 1800 Euro).19 In order to draw attention to the crisis that has hit the industry, the 26 growers’ associations in Chickmagalur, Hassan and Coorg districts that the Karnataka Growers’ Association represents decided to take to the streets and sat on a dharna (picketing) in front of the head office of Coffee Board in March 2002. They had put up several bail-out demands before the Government of India which included a petition to defer the repayment of loans taken by small growers for eight to 10 years and to waive interest repayments and sought fresh loans. The proposal has been accepted by the Government. However, investigations done by leftist groups in Chickmagalur Major Trade Unions in Coffee district of Karnataka in 2001 Sector of Karnataka showed a huge impact on the small 1. Thota Karmikara Sangha growers due to the fall in coffee (INTUC) prices. Rural indebtedness stood 2. Karnataka Estate Labour Union (INTUC) at an average of Rs 14,687 for each 3. Karnataka Planters Trade Union peasant household. Only 30 Congress (INTUC) percent of these were from 20 4. United Plantation Workers institutional sources. The rest Union (AITUC) were from landlords. Hence, 5. Karnataka Industrial and government measures to coffee Plantation Labour Union producers such as debt 6. Sahyadri Plantation and rescheduling and temporary General Workers’ Union downscaling of interest rates are 7. Karnataka Estate Coffee Curing not helpful to the small and and Hotel Workers Union marginal farmers as they are to the medium and big coffee planters who draw all their loans from banks.

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Currently, against the input cost of Rs. 63 a kg for Arabica, the small coffee-growers are getting only around Rs. 40. For Robusta, they are getting Rs. 22 against an input cost of Rs. 30. Moreover, small growers pay interest rates ranging between 14 and 15 per cent for the loan they avail of.21 NGO such as Coorg Organisation for Rural Development (CORD) based in Kushalnagar, Kodagu district of Karnataka, in association with Kerala-based agencies has taken up several activities in the region as well. Their main is to prepare coffee decoction after procuring coffee from the tribal coffee-growers who are in distress and then market it locally.22 A preparatory meeting was held in Bangalore recently to bring all coffee growers of the country on one common platform. The small coffee growers’ associations of Karnataka, Kerala and Tamil Nadu met Bangalore in August 2004 under the banner of South India Coffee Growers’ Associations’ Co-ordination Committee. They have decided to form a Coffee Growers’ Associations’ Federation, a national-level organisation involving coffee growers’ association representatives from all over the country.. The objective of the Federation is to fight locally as well nationally on issues related to small coffee-growers. An action committee was also formed to formulate rules and regulations, to give a final framework for the Federation and to the proposed national convention in consultation with various coffee growers’ associations.23 However, the Federation is dominated by leftwing groups and does not have the cooperation and participation of all key players. C.T. Medhappa of Major’s Coffee Curing Work, Kushalnagar, Karnataka

Mr. Medhappa after retiring from the Indian Army put all his savings (Rs. 800,000) into a basic curing unit and took a loan of 900,000 rupees from the Karnataka Government. In the beginning he was getting good returns but from 1998-99, the prices started falling and he gradually lost his business. Today, his outstanding loan is Rs 2.5 millon. Medhappa does not know how to repay the loan as his curing unit is sealed by the government. He has only one question, “Can you help us?”

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An Analysis of the Coffee Crisis in India

In a workshop organised by Partners in Change and Koffie Coalitie in Coorg, Karnataka, the small coffee-growers pointed out that they need training in organic farming, an understanding of the coffee valuechain, and inputs on crop diversification and use of modern irrigation methods. The small growers also felt that NGOs should come forward to support them in moving up some steps in the coffee value chain so that they could get better prices.24

No cure â&#x20AC;&#x201C; closed works

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Analysis of Various Factors Behind the Crisis Although the major factor behind the crisis is the sudden fall in coffee prices, leaving the small and marginal coffee-growers in a debttrap, there are other factors, both domestic as well as international, which led to this crisis that is now threatening the livelihood of over a million people in India whose livelihood is dependent on coffee.

International Factors According to the Oxfam report “Mugged - Poverty in Your Coffee Cup” published in 2002, there are 25 million coffee producers worldwide. It is estimated that around 70 percent of the world’s coffee is grown on farms of less than ten hectares. In many countries prices do not even cover the costs of production by small coffee-growers. Yet, coffee prices have fallen by almost 50 percent in the past three years.1 Consequently, the producers are selling at a heavy loss while branded coffees are sold with significant margins.2 A point to be noted is that ten years back, the producer-country retained one-third of the value of the coffee market,3 but today, they retain less than ten per cent.4 This point is stressed by the head of the ICO, Nestor Osorio: The coffee industry in developed countries is generally perceived as prosperous and uncontroversial. But, although coffee business is booming in consuming developed countries, current rock-bottom prices are causing immense hardship to countries where coffee is a key economic activity, as well as to the farmers who produce it.” The crisis led “to low price levels in recent years and a high degree of price volatility (…) (this is an obvious) problem, particularly to the millions of small holders who depend on coffee for their livelihood.5

The global coffee trade is controlled by a handful of big coffee roasters, namely, Kraft, Nestle, Procter & Gamble and Sara Lee, and, to some extent, Tschibo. Together, they buy almost half the world’s

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An Analysis of the Coffee Crisis in India

Figure 1: Fall in global (green) Coffee Prices, 1997-2002 (in US cents/lb) 200.00 180.00 160.00 140.00 120.00 100.00 80.00 60.00 40.00

Jan Jul 97 97

Jan 98

Jul 98

Jan 99

Jul 99

Jan 00

Jul 00

Jan 01

Jul 01

Source: ICO, http://www.ico.org/documents/globalcrisise.pdf

coffee beans annually. In today’s market, there exists a clear division between a booming coffee business led by the roasters and a declining coffee sector paid for by some of the poorest people in the world. According to some sources in the Global Exchange, the coffee crisis was “a bonanza for multinational companies.” 6 Mr. Brett Inder, spokesman for People for Fair Trade, said, “all the power lies with the multinationals that actually control the industry.” The main cause of the price decline, he said, was not the glut of coffee beans, but the processors’ use of market power. Kraft’s flagship brand is Maxwell House. Other Kraft brands include Yuban and General Foods’ International Coffees. Sara Lee’s brands include Douwe Egberts, Hills Brothers, Chock Full o’ Nuts, and MJB. Procter & Gamble’s brands are Folgers and Millstone. Tchibo is sold mainly in Germany. While its competitors concentrated on ground coffee, Nestle focused on powdered, soluble coffee, sold under the brand name of Nescafe.7 The End of International Coffee Regulations and the Collapse of International Coffee Agreement

After World War II the coffee prices rose. They peaked in 1955. Then prices crashed. This created instability in the poor coffeeexporting countries. This could have affected the stability in many the developing countries which primarily depended on coffee exports. During this period the US government took initiative in forging an International Coffee Agreement (ICA). Third World countries favoured

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it since it provided price stability and appeared as the only insurance against price collapse.8 The first International Coffee Agreement (ICA) was signed in 1962 and included most producing and consuming countries. The International Coffee Organization (ICO) was created in order to implement the ICA. It is an inter-governmental organization established by the United Nations in 1962, and set up in London in 1963. The ICO has administered six Coffee Agreements since the inception of ICO. 9 Its members include coffee-exporting and importing countries and it functions through the International Coffee Council, the Executive Board, a private sector Consultative Board, the executive director and a small secretariat.10 Under the ICA regulatory system, between 1962 and 1989, a target price for coffee was set and export quotas were allocated to each producing country. When the indicator price rose over the set price, quotas were relaxed. When it fell below the set price, quotas were tightened. If a significant increase in coffee prices occurred, quotas were abandoned until prices dropped to the set price. Although there were problems with this system, most analysts agreed that it was successful in increasing coffee prices. ICA collapsed in 1989 due to

The Success of the ICA First of all, the participation of consuming countries in the workings of the quota system. Secondly, the existence of producing countries as ‘market units’ where governments were in control of decisions concerning exports helped in stabilizing the regime. Also, because of Brazil’s acceptance of a shrinking market share that resulted from successive ICAs. And, at last, to a common strategy of import substitution in producing countries, which required maximum mobilization of export earnings (therefore high commodity prices).

The Problems The ICA system was undermined by free-riding and squabbling over quotas. 1. by the increasing volume of coffee traded with non-member importing countries (at lower prices). 2. by the fragmentation of the market and the increasing heterogeneity of development models (as Brazil and Indonesia moved towards a more export oriented industrial strategy). 3. And the rigidity on the supply side worried roasters, who feared that competitors could get access to cheaper coffee (from non-member countries). This undermined their cooperation within the ICA system. (Stephano Ponte, 2004. Standards and Sustainability in the Coffee Sector. A Global Value Chain Approach. Danish Institute for International Studies. May 2004)

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An Analysis of the Coffee Crisis in India

systemic shortcomings, largely as a result of the withdrawal of US support.11 The combined result of these changes led to the failure to renew the ICA in 1989. The change in regime did not occur overnight. It is important to emphasize that in 1985 only 15 producing countries out of 51 had their domestic coffee markets run by the private sector. All other producing countries had different systems of regulation, which were divided into variable schemes based on a system controlled by the state (from marketing boards to stabilisation funds or quasigovernmental coffee producer associations and coffee institutes). It is therefore evident that the end of the ICA regime has severely affected the balance of power in the coffee chain. From a balanced context, market relations shifted to a dominance of consuming-country-based operators over farmers, local traders and producing-country governments. As the head of the ICO, Nestor Osorio, highlights, “in the last decade consensus was replaced by the new doctrines of liberalization. This proved to be a serious blow to producers of coffee and other tropical products and their vulnerability was clearly exposed.”12 The first post-ICA attempt to organize the coffee market was in 1993 with the establishment of the Association of Coffee Producer Countries (ACPC). It was an attempt initiated by the producing countries who wanted to reimpose some control over supply flows through an export retention arrangement. Some of the major producers did not join in, and other member countries withdrew in 1998-99. Finally, during the same season, Brazil exceeded its quota by six million bags, and the whole arrangement collapsed.13 In May 2000, ACPC undertook a new retention plan that came into operation on October 1, 2000. However, just like the first attempt, it also was not successful.14 The ICO has also taken a few initiatives to resolve the “coffee crisis” although it lacks adequate regulatory power to do so. First, the ICO drew up a new ICA in September 2000, which was adopted by the Council in by a resolution (number 393). This six-year Agreement was designed to strengthen international cooperation among producing and consuming countries. It includes a number of new objectives which are to encourage members to develop a sustainable economy by promoting coffee consumption, a better quality of coffee, and provide a forum for the private sector.15 But the most high-profile initiative in this sector started in September 2001, when the ICO established a Quality Committee with a mandate to recommend standards and

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procedures for the withdrawal from the market of “low quality” coffee.16 This new global Coffee Quality Improvement Programme identifies a number of ways in both the supply and demand side by which the coffee crisis can be addressed through international cooperation.17 The ICO also launched coffee promotion activities in new markets and negotiated the elimination of tariffs and other barriers to all forms of coffee within the framework of the WTO negotiations.18 It is important to stress that the US were reincorporated into the ICO. The “Return of the US” will probably give more legitimacy to the ICO. There were also some attempts at forming regional producer groupings. In January 2002, the Asian coffee-growing countries Vietnam, Indonesia and India - met in Hanoi to form a body of the three leading Robusta coffee-producing countries of the world in order to regulate Robusta sales so that global prices could be manipulated to their advantage. But such regional initiatives proved poor starters. Variations in Global Demand and Supply

According to ICO, the total production in coffee year 2001-02 (October-September) is estimated at around 113 million bags (60-kg. bags) while world consumption is just over 106 million bags. On top of that, world stocks amount to some 40 million bags. Coffee production has been rising at an average annual rate of 3.6 percent, but demand has been increasing by only 1.5 percent. At the origin of this coffee glut lies the rapid expansion of production in Vietnam and new plantations in Brazil, which are harvesting bumper crops in the current season. Three reasons explain why supply and demand have got far out of line. First, it is the collapse of a managed market governed by the ICA.19 Second is the penetration of two coffee giants, Brazil and Vietnam, into the global coffee market, Vietnam produced around 1.5 million bags in the early 1990s. By 2000, it had become the second largest producer in the world with 15 million bags, produced mainly on small farm-holdings. Brazil, on the other hand, is not a newcomer; it has long been the world’s largest producer, but production has recently been boosted by changes in how and where coffee is grown. And, third, a lagging demand. While coffee production has grown rapidly, demand for coffee in the developed world has seen sluggish growth although newer markets, such as Eastern Europe, show greater promise. The big coffee companies spend millions of dollars on advertising each year, but they have failed to stop rich consumers turning to alternative

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An Analysis of the Coffee Crisis in India

drinks.20 All these create a structural imbalance between supply and demand for coffee. To these one may add other factors such as price volatility, which is basically due to climate variability but worsened by reduced cooperation at the international level, increased speculative activity by large fund houses in the commodity market, and deregulation of national markets. Fluctuating International Prices

London and New York are the two main markets where coffee is quoted. These two centres exert a strong influence on world coffee prices.21 London is dedicated to Robusta and New York to Arabica. There are two markets for coffee - the cash market and the futures markets. The cash market is the market for immediate delivery. It is the price one would pay for coffee that would be instantly delivered. The futures market is used to help determine the price for future deliveries. It is used to purchase a contract for guaranteed future delivery. However, it is used to help protect against major fluctuations that occur due to market variations. The price is determined by arbitratists meeting on the floor of the New York and London coffee exchanges, where an open bid occurs. Arbitratists place bids to buy or offers to sell coffee until the buyer and the seller agree on a price. This is how price is fixed and explains the fluctuations. Trading takes place at certain hours22 and deliveries occur only a few months a year.23 The prices are extremely volatile. They fluctuate ever day depending on factors such as the size of coffee stocks worldwide, the weather, political conditions and so on.. Over 90 percent of the world coffee traded is green (which means unroasted) coffee beans.24 A basic price is defined. Called “the basis,” it represents the difference between today’s price and the futures price for the nearest delivery month. The quality of coffee also affects the price. Premiums or discounts are paid according to what category or what classes the coffee sold can be ranked (coffee quality can be classified according to a scale of five different ranks).25 Because of its market share, an old saying goes, regarding coffee prices, “Brazil rules”. It means the moment of truth may come with the advent of the Brazilian harvest beginning in May. Prices, while now relatively high when compared to the past few years, are still well below historic peaks.26

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Non-Tariff Barriers

The rules of international trade ensure that farmers and countries growing coffee for export can never make the most of their crop. Developed countries use escalating tariff structures, that is, systems whereby import duties increase as a product is refined or manufactured. These prevent coffee exporting countries from developing their coffee industries to the full. The same applies to other important crops. For example, import tariffs on raw cocoa are set at one level by importing countries, but import tariffs on processed cocoa powder are set higher, and chocolate higher still. In effect, it becomes not worthwhile for cocoa-producing countries to add value to their crop by turning it into chocolate, even though they can sell chocolate at a higher price than raw cocoa. The tariffs cancel out any financial gain. In some developed countries these tariffs reach a peak of 350 per cent or more. The same dilemma applies to coffee-producing countries. It is no accident that while import duties on unprocessed coffee are low and those on processed coffee are considerably higher, the largest and most profitable coffee roasting and processing industries are in the developed world. This system helps prevent developing countries from building up value-added industries and thereby increasing their export earnings.27 Similarly, the existence of import duties offers the possibility of granting tariff advantages to particular coffee-exporting countries. This is a popular instrument in the EU. For example, within the framework of the Lom Convention (an agreement between the EU and former colonies in Africa, the Caribbean and the Pacific), coffee from these ACP countries has free access to the EU market. Also the Least Developed Countries (LDCs, which, to some extent, overlap with the ACP countries) are exempt from import duties on processed and unprocessed coffee. The same goes for four South American countries (Bolivia, Colombia, Ecuador and Peru) and a number of Central American countries (Panama, Costa Rica, Honduras, Nicaragua, El Salvador and Guatemala). These are temporarily exempt from import duties to prevent coffee producers from succumbing to the temptation to switch to production of cocaine.28 Effectively, this puts countries like India, Vietnam and Indonesia in a disadvantageous situation.

Domestic Factors Increased Production

India has a very limited coffee market but its production went up from 228,300 tons in 1997-98 to 300,600 tons in 2001-02. This was

ď&#x20AC;Ą

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An Analysis of the Coffee Crisis in India

also the time when prices were falling but the fall in prices did not lead to a fall in production. The supply of green beans was actually increasing. Increased Imports

Most of the planters and small growers complain that import of coffee from countries such as Vietnam and Indonesia at a cheaper rate has led to excess availability in India. While only small amount of the coffee imported are coffee essence and other extracts, the bulk of it is in the form of unroasted green coffee. Some major trade unions like the All India Agricultural Workersâ&#x20AC;&#x2122; Union and the All India Kisan Sabha have sent appeals to the Finance Minister and Commerce Minister of India to restrict import of coffee into India.29 Similar apprehensions were shown by senior coffee planters as well.30 Low Domestic Consumption

Coffee consumption in India is mainly concentrated in southern India at about 42,000 tons. The highest coffee-consuming state is Tamil Nadu, followed by Karnataka, Andhra Pradesh and Kerala. There is very little coffee consumption in the rest of India. However, coffee consumption has shown an increase - from 50,000 tons in 1997-98 to 68,000 tons in 2002-03 in absolute terms. But, in terms of percentage Table 2: Total Coffee Availability and Coffee demand in India 1997-2003 (In tons) Year

1997-98

1998-99

1999-00 2000-01

2001-02 2002-03

Production

228300

265000

292000

301200

300600

275275

Imports

2297.45

2880.37

2352.13

4212.73

2768.56

5613.48

Total availability 230597.5

267880.4

Exports

294352.1 305412.7

303368.6 280888.5

179059

211623

244941

246908

213586

207333

Domestic consumption 50000

50000

55000

60000

64000

68000

Total Demand 229059

277586

275333

261623

299941

306908

Total Accumulated Coffee Stock 1538.45 7795.82

2206.95

711.68

Arabica Prices (In US cents per LB) 130.18 99.47

67.44

63.75

43.82

39.61

Robusta Prices (In US cents per LB) 76.3 75.62

57.61

35.87

23.44

22.08

Source: Computed from Data Base, Coffee Board of India, 2005

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of coffee consumed, vis-à-vis the total availability in India, coffee consumption has remained in the range of 19 to 20 percent in the period between 1997 and 2003. The Coffee Board does not see the expansion of the domestic market as a safeguard against fall in prices. However, the Coffee Board is going ahead with a major consumer survey in 2006 with a view to increase coffee consumption in India. The Coffee Board also feels that it is going to take a lot of time before domestic consumption increases. Even Brazil, the largest consumer among producing countries, took ten years to double its consumption level and, significantly, this was entirely by initiatives from the industry.31 Excess Coffee Stocks in India Following the symptoms of global coffee industry, there is more coffee available in the country than it could export or consume (see Table 2). The excess coffee stock available in the Indian market went up from 1538.45 tonnes in 1997-98 to 32049.72 tonnes in 2002-03. Such availability of a huge amount of excess coffee (11.4 percent by 2002-03) brought down the price further. Withdrawal of Coffee Board of India from Marketing Coffee

Small and big coffee growers had, for long, protested the removal of coffee-pooling by the Coffee Board. They complained that the Coffee Board was not providing them the true global prices in spite of making huge profits. Coffee is now procured (since 1992) by private agents and the small coffee growers feel that these traders are not giving them fair prices. Although traders are in a position to offer a higher price to growers, many take advantage of the small growers’ lack of knowledge of the global factors. While the traders claim that world prices regularly published in newspapers, the farmers are aware about the relationship between world price and the price they expect to receive. Although, some of the small farmers were aware of the global price movement, the marginal tribal farmers holding less than one acre of land had very little knowledge of the prices and rely on hearsay and on the trader who fetches the coffee from the farm gate. Even if small growers are aware of the prices only the better-off growers can afford to store their cherries for several months and choose when to sell. The majority of marginal coffee-growers, desperate for cash, often have to sell as soon as the cherries are harvested. In a weak bargaining position, they often receive much less than other growers. The private trader system has also led to long dealer chains. Coffee is traded up a line of dealers before it is exported.

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An Analysis of the Coffee Crisis in India

Inability of Indian Small and Medium Coffee Growers to bypass the MNCs While more than 80 percent of Indian coffee is exported, it is virtually impossible for the small and medium producers to reach the Western consumers directly. This is because green unprocessed coffee can be stored while processed coffee has a relatively short shelf-life. It is therefore preferable to locate the processing units as close to the consumers as possible, both in terms of time and distance. Secondly, blending requires a thorough knowledge of (varying) consumer preferences. Thirdly, trading and processing are strongly dominated by a small number of transnational companies (TNCs), making it almost impossible for newcomers to enter not only the global market but also the Indian market. Mr. Bose Mandana, a leading coffee-grower from Karnataka, mentions his company developed a new brand, ‘Planters Gold’ and tried to sell at a competitive price in Andhra Pradesh and Tamil Nadu. But, the big players forced the retailers not to stock and sell Planers Gold. As a result, Mandana suffered big loss.32 Deteriorating Quality of Small grower Coffee

The small coffee-growers, mostly debt ridden and in difficulty, are trying to survive by plucking green beans and selling them to local traders at whatever price available. This kind of situation is leading to a gradual fall in the quality of coffee. Although there are several schemes offered by the Coffee Board for improving coffee agricultural practices, not many marginal farmers seem to have benefited from these. The small growers have no inkling of what the consumer market requires and are completely dependent on the information provided by the traders. Limited Capacity of the Small Coffee Growers’ Associations

Although there are several small growers’ organizations in all the coffee-producing states, also represented in the Coffee Board, their impact has been limited. Many of the marginal coffee-growers owning one or two acres of land are not members of these associations or they do not have a voice. Moreover, the activities of the associations have been focusing on seeking debt relief from the government and there is hardly any instance of direct marketing attempted. The small growers’ associations have also remained fragmented unsuccessful in uniting growers from the major coffee producing states. The efforts by the AIKS - the left-leaning farmers’ association - to form an All-India Coffee Industry Action Committee have been questioned by groups

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affiliated to Karnataka Growers’ Federation.33 Other representative bodies of the growers such as the Codagu Planters’ Association, the Karnataka Planters’ Association, and the United Planters’ Association of South India have been working separately on issues of interest to growers since the coffee crisis began.

Office of the Kodagu Planters’ Association, Coorg

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An Analysis of the Coffee Crisis in India

Scenic Coorg, where most of the coffee produced in Karnataka is grown

Mixed crops – Coffee among shade-giving trees

One of the estates of Tata Coffee in Karnataka

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Social and Environmental Standards in Indian Coffee Sector The social and environmental standards in the food sector have perhaps attracted the biggest attention of different groups - from consumers to campaigning NGOs. By some accounts, the first instance of certified coffee being offered to consumers was the certified organic coffee in 1982, followed by the launching of ‘Fair Trade’ coffee in 1988 by the Max Havelaar Foundation of the Netherlands.1 This was followed by labels such as ‘bird-friendly’, and ‘shadegrown’. Ecologicallysound coffees were developed in a complementary fashion to those based around Fair Trade and organic themes. However, as the quality consciousness of consumers (in developed countries) started increasing since more and more information about food and related matters became available, there was a heightened apprehension. Whereas, previously, consumers’ concerns were limited only to the “visibles” such as underweight contents, size variations, misleading labelling or poor quality, they now embraced a fear of the “invisibles” such as micro-organisms, pesticide residues, environmental contaminants and food additives, as well as a broader interest into the way products were grown and processed. In response to these fears and interests, food packaging materials displayed more and more information.2 The history of labour standards goes back to the creation of the International Labour Organization (ILO). The ILO is a tripartite organization that brings together representatives of governments, employers and workers in its executive bodies. The first annual International Labour Conference, in October 1919, adopted the first

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An Analysis of the Coffee Crisis in India

six International Labour Conventions, which dealt with hours of work in industry, unemployment, maternity protection, night work norms for women, minimum age and night work of young persons in industry. A few years later, the International Court of Justice declared that the ILO’s domain extended also to international regulation of conditions of work in the agricultural sector. In 1948, the International Labour Conference adopted Convention No. 87, on freedom of association and the right to organize. However, almost all the standards first talk about observing the national law and then look into what more is needed. Hence, the chapter begins with an analysis of the major act in the plantation sector (which includes coffee sub-sector) of India.

The Plantation Labour Act of 1951 A number of laws, both Central and State, govern various aspects of coffee and tea production in India. The most significant legislation governing labour standards and working conditions in plantations is the Plantation Labour Act of 1951. The other relevant legislations are the Factories Act of 1948, Workmen’s Compensation Act, Industrial Disputes Act, 1947, Minimum Wages Act of 1948, Employers’ Provident fund Act, Industrial Employment Act, Payment of Bonus Act, Maternity Benefits Act of 1961, and the Employers’ Social Insurance Act. Among these, the Plantation Labour Act regulates employment, working conditions and working hours, and forms the principal basis of legal entitlement of the workers. The Plantations Labour Act, 1951 (PLA) applies to any land used or intended to be used for growing tea, coffee, rubber, cinchona or cardamom or any other plant which measures 5 hectares or more and in which 15 or more workers are employed on any day of the preceding 12 months. Although most of the provisions related to workers’ welfare are already present in the PLA, 1951, it remains silent on two key aspects - environmental issues and occupational heath and safety norms. It also legalizes working of adolescents (between the ages of 14 and 18 years) at a cheaper rate than adult workers. Yet, the PLA has been a big achievement of the trade unions immediately after India’s independence with the help of a supportive socialist government. But, the fact remains that many of the provisions of PLA have never been implemented or only partially implemented in the big company-owned plantations.5 However, with the onset of the crisis in the coffee industry,

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Key provisions of Plantation Labour Act, 1951 (Summary of different sections under concerned heads) Health 

Drinking water arrangement to be made by the employer for the workers (Sec-8)

Accessible and clean toilets and urinals for male and female workers at the gardens (Sec-9)

Medical facilities for workers and their families (as prescribed by the state government) have to be maintained and made available by the Employer (Section 10).

Welfare 

Plantations employing one hundred and fifty workers or more and to make rules for the working and maintenance of canteens. (Section 11)

Crèches: The employer must provide and maintain suitable rooms for children where the number of workers is more than fifty or the number of children of women workers is twenty or more (Section 12). Good sanitary conditions should be maintained in the crèches and should be run by trained women.

Recreational facilities should be provided for workers and their children by the employer (Section 13)

In every Plantation where the children- of the workers between the ages of six and twelve exceed the number twenty five, the employer is under obligation to provide educational facilities as may be specified by the State Government (Section 14).

It is the duty of the employer to provide and maintain necessary housing accommodation for every worker and his family (Section 15).3

provide the workers and umbrellas, blankets, rain coats or other like amenities for the protection of workers from rain or cold (Section 17)

Hours and Limitation of Employment 

Forty-eight hours a week for Adult workers and twenty seven hours a week for adolescent or child workers (Section 19).4

No worker shall work for more than five hours before he/she had an interval for rest for at least half an hour (Section 20)

The notice of period of work has to be displayed and correctly maintained in every plantation (Section 23).

No Night for women and children (Section 25)

No child or adolescent will be allowed to work in the plantation unless the employer has a certificate of fitness from the Certifying Surgeon (Section 26& 27).

The workers are entitled for annual leave with wages-1 leave for every 20 days work (Section 30 & 31)

Every worker is entitled to sickness allowance, provided this is certified by a qualified medical practitioner. Women workers are entitled to maternity allowance and benefits under the Maternity Benefit Act, 1961 (Section 32).

The Employers are under obligation to maintain a register of accidents and notify the authorities of any accident where a plantation Worker suffers death or body injury and he is unable to report for work for forty eight hours or more (Section 32). Source: Tea Act of India, 1951, Government of India

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An Analysis of the Coffee Crisis in India

violations have become quite regular. According to Mr. Aiyappa, leader of the KIPLU, organising workers in coffee plantations of Karnataka is quite difficult as there are more workers available to do casual work called “chengoly”. If the unions try to organise them, the employers promptly terminate them from service. Moreover, very often, the workers do not get wage slips which are mandatory under the Payment of Wages Act. It is considered a legal document and serves as necessary evidence for workers to avail their Provident Fund.6 He further points out that while there are 202,941 coffee-workers in Coorg district alone as per the figure given by the Coffee Board, not even 60,000 workers have provident fund accounts. He points out that the medical facilities are lowest in the medium estates (non-company estates) and, where they exist, they are often mere dispensaries manned by unqualified or semi-qualified doctors. As a result, workers’ with serious illnesses have to get themselves treated in private referral hospitals like IndoAmerican Hospital in Ammathi and they have to bear the major portion of the medical bills.7 One of the primary reasons of inefficacy in implementing the PLA is the penalty imposed for violation of the provisions, which is a fine of Rs. 500 and/or three months’ imprisonment. For subsequent or continued violations the fine is Rs. 1000 and/or imprisonment of six months. Under these circumstances, employers find it convenient to pay the fine. During the crisis in the coffee sector, which coincided with the crisis in the Indian tea sector, the planters made various representations to the Government to dilute the statutory responsibilities under PLA. Their major demand was that the government should bear the bulk of the responsibilities in plantations.8 No consensus decision has emerged on this issue as yet.

Coffee Board’s Welfare Measures The Coffee Board is purportedly implementing a scheme called “Labour Welfare Measures” for the benefit of workers in coffee plantations and coffee-curing works spread over the entire coffeegrowing areas/states including North-Eastern region every year. In 200304, the Board reportedly implemented a scheme granting educational stipends, meritorious awards and financial assistance, besides giving some donations. An amount of Rs. 2.1 million was spent on this count, while an amount of Rs. 9.40 million was spent for purchasing furniture, library books, laboratory equipments for educational institutions.9 However, none of the workers interviewed had any knowledge or

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awareness of the programmes initiated by the Coffee Board. Many planters are also not aware of the labour welfare measures of the Board. Under labour welfare measures for 2004-05, provision has been made to help girl children of the laborers working in coffee estates/ coffee works, who dropped out from class 7 or above to continue their studies. In order to empower women, educationally and financially, the Coffee Board is providing vocational training for women plantation workers under the Human Resources Development scheme to hone their skills to generate additional income and for improving their overall socio-economic status. In 2004-05, the Board has chalked out a plan to provide vocational training for 500 women plantation workers through ICAR institutions such as the Krishi Vigyan Kendra.

Self Help Groups (SHGs) The Coffee Board constituted 42 regular Self-Help Groups (SHG) in 1999-2000 and claims that the concept and tasks of these groups are different from other self-help groups. The concept was largely based on the linking up like-minded small coffee-growers in potential areas, registering them under the Karnataka Societies Act or the Act governing cooperative societies. The groups enrol a maximum of 50 small growers belonging to a contiguous area. They adopt the requisite bye-laws, constitute administrative committees, elected from among members, and follow all norms stipulated by the relevant Act under which they are registered. The general bodies of these SHGs are empowered to take policy decisions and vested with overall administrative powers. Some of the activities envisaged by SHGs in facing the challenges confronting the coffee industry are enshrined in its declared objectives. Objectives of Self-Help Groups

1. To act as nuclei for transfer of technology. 2. To encourage group/community approach or collective action to tackle multifarious problems connected with agriculture, irrespective of whether it is agricultural or commercial crop. Group approach or collective action is essential for adoption of post-harvest technology, promotion of infrastructural development and multiinstitutional approaches/linkages and coordination with government /private agencies (NGOs), pest and diseases control, promotion of value-added and high quality produces, marketing, integrated farming

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and sustainable agriculture. 3. To act as training centres to upgrade the skills of members in agriculture, relating to agricultural as well as commercial crops. 4. To promote and extend the scope for gender participation (i.e. womenâ&#x20AC;&#x2122;s empowerment) in decision-making on vital issues connected to self-sustainability/-reliance. 5. To promote common action programmes interacting with other groups, government and private institutions/agencies for technical expertise/support as well as financial requirements. 6. To promote viable investment packages for optimum returns per unit area. 7. To promote a cost-effective delivery system. 8. To promote cost-effective technology for viable cultivation of crops as well as betterment of socio-economic status. 9. To promote team-building and problem-solving skills. Out of the 42 self-help groups formed in Karnataka (20 in Chickmagalur, nine in Hassan and 13 in Kodagu), only 32 have availed of the one time grant of Rs. 200,000 offered by the Board. As for utilization of this grant, only 15 Groups have utilized it fully, while 17 have utilized it only partially, to carry out activities as approved by the Board. The Board plans to increase the number of SHGs to 250.10 There are, however, effective civil society organisations working at the grassroots level with coffee farmers like the Coorg Organisation for Rural Development (CORD) in Karnataka and the Highland Development Agency (HiLDA) in Kerala. The Coffee Board schemes experimented through SHGs had only a limited impact and benefited only a few. A majority of the distressed farmers have been left out of this support scheme. The Board should work together with civil society actors to reach out to the most vulnerable and marginalised coffee growers.

Initiatives for Sustainable Coffee in India There is no clear definition of sustainability applied to market coffee. Still, it is important to emphasise that sustainability is a dynamic continuum and can best be perceived as an ongoing process rather than a static achievement. Sustainability has been defined in several ways but the term generally accepted by the international development community, states that

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BITTER BEANS in order to achieve sustainability long-term environmental, social, and economic needs must be met in an integrated manner without compromising the ability of future generations to meet their own needs.11

Another useful definition states that “a sustainable producer shall meet long-term environmental and social goals while being able to compete effectively with other market participants and achieve prices that cover his production costs and allow him to earn an acceptable business margin.”12

Fair Trade Fair Trade’s origins can be traced to the 1940s when churches in North America and Europe provided relief to refugees and povertystricken communities by selling their handicrafts to northern markets. In 1988, the Max Havelaar convention in Holland established international standards as to what constitutes a liveable wage, and what constitutes safe and healthy working conditions. This created the Fair Trade Labelling Corporation, an international non-profit organization that certifies farms and growers as “Fair Trade.” Fair-Trade workers receive no less than a fixed liveable wage and work in a regulated healthy environment. Consequently, almost all Fair Trade certified farms are organic and sustainable. Although the FairTrade movement and the promotion of fairly traded goods such as coffee have grown steadily in Europe and the United States, the overall market share of products that have been produced as FairTrade in a responsible manner is generally only 1 to 4 percent; sometimes, it is less and, very occasionally, it is more. Around 95 percent of the coffee trade is traditional commerce.13 Total global sales for 2002 were in excess of 1.1 million bags of coffee. With average sales growth many times greater than conventional coffees, these are among the fastest-growing market segments because they appear to be attuned to the emerging consumer demands, increasing corporate responsibility, and heightened risk management along agricultural supply chains.14 On the other hand, Fair Trade trade in coffee is administered through labels such as Max Havelaar, Fair Trade Labelling Organization (FLO), Café Direct and Transfair International, owned and managed by nonprofits in Europe and North America. It is designed for small growers and cooperatives, assisting them in gaining access to markets and buyers willing to pay a fair price, thus ensuring that benefits flow back to growers.

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An Analysis of the Coffee Crisis in India

Insights from Tea Industry: The Samyukta Vikas Cooperative- A Fair-Trade Success Story Residents of three remote hill villages located on a former tea plantation are now successfully exporting organic Darjeeling tea to U.S. consumers. The new tea enterprise has helped the villages of Harsing, Yankhoo, and Dabaipani become economically self-sufficient. Tea income has allowed residents to construct a community drinking water supply, and the villagers are developing plans to add ginger, cardamom, and oranges to their organic exports. Life for the villages’ 483 families, all of Nepali descent, has improved significantly in just eight short years. Since the tea estate they inhabit was abandoned in 1952, the isolated communities had survived on subsistence farming. Their soil’s high acidity, the result of intensive tea cultivation, led to very low productivity. Local deforestation had also contributed to soil erosion, landslides, and the loss of forest products. Most families lived a precarious existence, surviving on less than 12,000 rupees per year (US$275). A 1996 survey by a local development NGO, the Darjeeling Ladenla Road Prerna (RCDC), reported that the villagers “have very low self-esteem and display an attitude of despair.” All this changed in 1997 when RCDC persuaded the villagers to form the Samyukta Vikas Cooperative and use their own resources to improve their livelihoods. Three community members were chosen as “animators” and trained by RCDC in participatory decision-making and co-op management. Once the cooperative was functioning, RCDC linked the villagers with Tea Promoters of India (TPI), a Calcutta-based, family-owned company that manages four organic tea gardens, all run according to Fair Trade standards. Tea-leaf production from the villages has grown steadily since the first collection for TPI in May 1998. Tea collectors are selected from the community by each hamlet committee, and paid a wage by TPI. Other co-op members transport the leaves to TPI’s nearest tea garden, where they are processed and blended for export. Samyukta Vikas Cooperative is the first non-plantation, cooperative tea supplier established in Darjeeling. Since 1999, organic English Breakfast, Earl Grey, and green tea sourced from its family-owned plots has been exported by Tea Promoters of India to the Fair Trade company Equal Exchange, based in Massachusetts. While it remains a small-scale enterprise, the successful collaboration between community-owned farms in Darjeeling, local Fair Trade exporters, and overseas Fair Trade importers demonstrates one route by which global markets, when combined with fair prices and local governance over use of natural resources, can benefit poor producers in developing nations. 15

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In India there have been only very limited efforts on Fair Trade Coffee. There are some efforts by groups like “Elements,” a business initiative from Kerala established in 1999, which seeks to bridge the gap between farmers and the conscious consumer. Elements has established Kerala’s first green store in Calicut, selling certified organic food, homestead organic food and other environmental products. It is playing a catalyst’s role in the spread of organic farming in Kerala and is spearheading the organised foray of Kerala farmers into Fair Trade concept as partners of Fair Trade Alliance of Kerala. Elements primarily deals in fairly traded cashew, coffee and spices. However, the volume of organic Fair Trade coffee handled by Elements is still very low (300 tons).16

Organic coffee The development of organic agriculture was mainly influenced by Rachel Carson’s book, Silent Spring, which, in 1962, exposed the hazards of the pesticide, DDT. It had a great impact on the wider public’s awareness of the negative aspects of intensive agriculture methods in general and the dangers of uncontrolled pesticide use, in particular. As the organic sector developed, organic farmers’ associations wrote their own standards, more to communicate what they had learned rather than to codify what constitutes “organic farming.”. The need to codify the parameters of organic farming only became necessary when consumer demand for organically-grown products increased. Organic products became available in conventional food outlets and price premiums provided incentive for fraud. Other, more recent, environmental labels on food include the Rainforest Alliance Certified label (formerly ECO-OK), the Smithsonian Institute’s Birdfriendly coffee label, and various declarations of the use of “integrated production methods” and integrated pest management. Also, the International Organization for Standardization (ISO) has developed an environmental management systems standard, ISO 14001.17 There are some natural advantages of organic coffee production in India. They are:  Coffee is mainly grown in deep fertile jungle soil under well-

defined mixed shade consisting leguminous and non-leguminous trees.  Majority of the coffee holdings are dominated by small and tribal

growers with low or zero inputs or synthetic inputs with

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sustainable yields, which are ideally suited for conversion to organic farming without any serious setbacks in yields.  Majority of small and tribal holdings are following traditional

farming practices such as cattle manure, composting, manual weeding, recycling of organic wastes, which are prerequisites for organic coffee production.  Coffee, in principle, is mainly grown under high degree of mixed

cropping under shade with sustainable income. Although, India’s share in the $150-million global organic coffee market is hardly one percent,18 the coffee-growers are approaching the question of sustainability from an environmental perspective at present by focusing on organic coffee. In short, organic coffee is coffee that has been produced without the use of pesticides and herbicides.19 The idea underlying this concept is an approach that views the farm as an ecosystem. These organic standards are devised by government authorities, international organizations (FAO/WHO, Codex Alimentarius) and the International Federation of Organic Agriculture Movements (IFOAM). In India, the National Programme for Organic Production (NPOP) defines organic agriculture as “a system of farm design and management to create an eco-system, which can achieve sustainable productivity without the use of artificial external inputs such as chemical fertilizers and pesticides.”20 In south India, the United Nilgiris Tea Estates Co. and the Bombay Burmah Trading Corporation (BBTC) were among the first companies to convert some of their tea and coffee estates to the organic method of cultivation. More recently, some areas under Tata Coffee and the IBC Group estates have been converted. The Poabs Organic Estate in Kerala, growing coffee and tea, is certified organic since 2002; it is now identified as the single largest multi-crop organic plantation in the world.21 Interestingly, some of these estates brought in internationally renowned organic and bio-dynamic consultants to advise them. While Tadeu Caldas of Ecotropic (www.ecotropic.com) assisted Ambootia and BBTC, Peter Proctor of Biodynamic Outreach, New Zealand, was an inspiration at the training programmes of the Bio-Dynamic Association of India (BDAI). Each of courses bring new converts to organic farming. Currently, several South Asian consultants are active in the field, including Natura Agrotechnologies (www.naturaagrotechnologies.com) that uses techniques that bridge biodynamic and Vedic agricultural processes.22

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Government support for organic production The Coffee Board has also initiated several steps to promote organic coffee production in the country through its “Promotion of Organic Coffee Production in India,” taken up as a project in the Ninth Plan period (1997-2002). It main objectives are standardizing a package of practices for production of organic coffee, creating awareness among growers by organizing training/workshops/seminars/education campaigns, identifying potential zones for production of organic coffee in the coffee-growing regions of India. Based on the outcome of the surveys and case studies, it was felt necessary to extend certain incentives, besides technical support, in order to promote organic coffee production. The project has been extended into Tenth Plan period (2002-07). Initially, the Board decided to extend developmental assistance by providing financial assistance towards cost of inspection and certification of organic coffee estates. As a result, various modalities and norms were drawn up. National Programme for Organic Production has identified the Coffee Board of India is an Accreditation Agency (AA) for the development and promotion of organic coffee in the country. In this capacity, the Board accredited three inspection and certification agencies under the National Programme for Organic Production, namely, IMO, SKAL, APOF, all of them located in Bangalore. The Coffee Board is also providing financial assistance (grant) to organic coffee-growers to defray the cost of inspection and certification of organic coffee. The eligibility norms for providing financial assistance are:  The grower/growers’ association/SHGs having to produce organic

coffee as per the National Standards of Organic Production (NSOP).  The Coffee should have been certified by an accredited

inspection and certification agency recognized under National Programme for Organic Production.  In case they are self-help groups, growers’ associations/

cooperatives or NGOs, they should have been registered under the Cooperative Societies Act or the Societies Registration Act of their respective state.23

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An Analysis of the Coffee Crisis in India

Some Examples of Sustainable Coffee Initiatives in India Utz Kapeh Certified Coffee

Amalgamated Bean Coffee Limited (ABC Ltd) has got its 19 coffee estates certified by Utz Kapeh. Utz Kapeh (good coffee in a Mayan language) is an independent foundation established as a partnership between coffee producers, roasters and non-government organizations.24 Originally set up with the support of the Dutch company Ahold, one of the world’s largest retail chains, it is now an independent initiative. It has developed a code of conduct for growing sustainable coffee on the basis of the “good agricultural practices” of the European Retailer Group (EUREP-GAP).25 Utz Kapeh Code of Conduct sets criteria for socially and environmentally appropriate coffee-growing practices and efficient farm management. Combined with a traceability system and chain of custody, Utz Kapeh provides assurance for responsible coffee sourcing. Utz Kapeh’s goals are to guarantee access to basic social services, guide producers to match standards for growing sustainable coffee, and provide assistance in implementing these standards. The foundation registers interested producers and provides the code of conduct. It establishes contact with an independent certification agency, which performs inspections and grants the certificate if standards are met. Roasters pay a $0.01 per kilogram as fee to the foundation. Certifications were first achieved in 2002. As of March 2004, Utz Kapeh had certified around 108 farms and groups of cooperatives in sixteen countries. Most of the demand for Utz Kapeh coffee, until very recently, came from Ahold Coffee Company, a roaster controlling about 12 percent of the Dutch market and sourcing all its homebrand coffee as Utz Kapeh certified. As mentioned above, in March 2004, Sara Lee announced that it will be buying 7500 tons of Utz Kapeh coffee in 2005 with a promise of increasing it steadily. Another 40 roasters are buying Utz Kapeh coffee, but in smaller quantities. It is clear that this certification scheme is growing fast and has reached a substantial size. The Utz Kapeh certified coffee estates in India are ABC Group, Tata Coffee Limited, Ottumani Estate, BCK Plantations, B. Shettigeri, S. Kodagu, Bombay Burmah Trading Corporation Limited and Manamboli-Savamalai Estate. The Utz Kapeh certification is given by the Indian subsidiary of the Netherlands-based SKAL International. Apart from Utz Kapeh, SKAL provides many other certifications for the farmers. Some of the key coffee plantations certified by SKAL are.

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BITTER BEANS 1. Amalgamated Bean Coffee Trading Company Ltd. Mr. Rajeev Gupta # 321 , Raheja Chambers, 3rd Floor, 12 Museum RoadBangalore – 560001 Tel : 080 – 5589581/ 0881/5594648 / 4649 Fax: 080 - 5580535 Email: exports@abccoffeeday.com

UTZ KAPEH

2. Chinnappa K.M T.Shettigeri village & post, South Kodagu, Karnataka, India Tel No: 08274246264

Coffee, Pepper, ginger, paddy Cinnamom, Clove, Nutmeg,Cardamom NSOP, EU & NOP

3

Coffee, pepper

Chitrabail Estate – II Mr. N.A Madappa Yadoor Village , Ammathi Vantiangadi Post P.B. 127 South Coorg – 571211 Tel: 08274- 452176

Coffee

NSOP & EU

4

Hanchikad EstateMr. Sibi Pual P.B. No. 71, Pollibetta Post South Coorg – 571215 Tel: 08274 - 451467 Mobile: 9448217391 Email: sibipaulose@rediffmail.com

Coffee, pepper, oranges

5

Korana Estate Mr. Leelakanth K. P Post Box No: 58, Suntikoppa, North Kodagu - 571237 Tel: 08276 – 262425 , 9845192102 Email: orgariquq_caffa@hotmail.com

Coffee

6

7

NSOP & EU

NSOP & EU

Lakshmiswara Estate Mr. P.R. Gandhi Rao Arvathoklu Village & Post Gonicoppa – 571213 South Coorg Tel: 08274 – 447347

Cardamom,Pepper, Coffee, Orange, Arecanut

NSOP & EU

POABS Groups Mr. Thomas Jacob Seethargundu P.O, Nelliyampathy Palakkad District 678 511 Kerala, India. Tel: 04923-246333, 246555,246223,246554 (samraj) Fax: 04923-246555 Email: mail@poabsorganic.com , poabsons@satyam.net.in

Tea, Pepper, Coffee, orange, Cardamom, Ginger, turmeric, marigold, Basil, Arecanut NSOP, EU, NOP, DEMETER, Bio Suisse & Naturland

8. Tata Coffee Coffee Source : Interview with Mr. Narayan Upadhyaya, Skal International, Bangalore *NSOP (Government of India), NOP (United States Department of Agriculture)

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An Analysis of the Coffee Crisis in India

Tata Coffee

One of the biggest coffee producers in India, Tata Coffee has also successfully implemented the Social Accountability System (SA 8000:2001) in their plantation division, the curing division and roasting and the grounding unit at Kushalnagar and received a certificate issued by the Det Norske Veritas.26 Apart from this, Tata Coffee is involved in activities through the Coorg Foundation, a charitable trust established by the company. It has been in operation for the past one decade and promotes welfare activates. During the year, the Foundation made contributions towards treatment of individuals afflicted with serious illnesses and made donations to medical institutions for conducting free medical camps. The Foundation also conducted a domestic nurse training programme for the unemployed rural women in association with the Rural India Health Project Hospital , Ammathi. The Conscofe General Public Charitable Trust under the auspices of CCL (now Tata Coffee Ltd.), registered in 1986, has the declared objective of “adopting Pollibetta or any of the surrounding villages or any other village in Kodagu district or anywhere in Karnataka State for the purpose of development and the provision of public utilities and amenities.” Tata Coffee has also been engaged with the small coffee-growers through its Small Growers’ Development Scheme, started in 1985. It proved to be a big boon for 140 small coffee growers who have been the beneficiaries of this scheme. Under the scheme, the small growers are helped to maximise their returns from their land with timely advice along scientific lines of cultivation and free supplies of high-yielding, disease-resistant Arabica and Robusta coffee plants, pepper cuttings, silver oak seedlings and fertilizers. Their holdings have now been fully planted with coffee and subsidiary crops/timber such as pepper and silver oak. The yield of coffee and pepper has improved through this intervention. To strengthen the bond further with its employees, Consolidated Coffee (Tata Coffee Ltd) has launched Conscofe Employees’ Welfare Trust to take care of the housing, education/scholarships, pension benefits, etc. of its employees. This has benefited a large section of the employees of Tata Coffee. Market Data

Some companies have initiated innovative ideas of building the capacity of its stakeholders. ITC is one among them. It is ranked as

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the ninth highest exporter of coffee beans. ITC has procurement centres at Coorg and Chickmagalur, the heart of the Indian coffee growing land. ITC today annually exports around 8000 tons of the entire range of washed and unwashed Arabicas and Robustas from India. ITC echoupal model provides agri-business with an e-solution. It facilitates small growers to use the internet to leverage transmission capabilities and access market data. They have a dedicated website www.plantersnet.com which provides information on coffee price and other technical information related to coffee. The information could be accessed by the small growers at the ITC trading houses.27

An Assessment of the Sustainability Initiatives To assess the impact of the sustainability initiatives discussed earlier, one has to look into the additional income generated through the premiums offered by each of the initiatives. At current market prices, the highest premium is offered in Fair Trade certification. The Fair Trade premium for mild Arabica coffee is almost four times of what can be obtained for organic coffee and nine times larger than what would have been paid by Utz Kapeh had they applied their 2003 premium system. In the case of Robusta, the gap is even higher - the premium is seven times of what is offered for organic.28 While observation of such standards in the forms of codes of conduct has gained some acceptance in India, very few agencies currently operate in the ecology/environment/social standards space for the small coffee growers. This is mainly because, in the period from 1942 to 1996, it was mandatory for coffee to be pooled with the Coffee Board, which marketed these them through auctions. As a result, estate names lost their significance. Moreover, there was a fixed market for the producers in the form of the Coffee Board; so many growers did not bother to look into the aspects of social and environmental concerns. Most of the small coffee-growers interviewed for the purpose of this study mentioned that there is a need to assess the costs to be borne by farmers (in terms of cost of certification to changes in farming practices) to meet these standards in comparison to the extra income earned from premium. Also, the yields come down in a major way in the initial period if a non-organic coffee garden is converted into organic garden. Government bodies such as the Coffee Board of India have not been favorably disposed towards various codes of conduct which exist in the industry.30 Their main critiques of the codes are: First, the industry views most of the codes as having a ‘top-up’

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An Analysis of the Coffee Crisis in India

Table 5: Major Coffee Companies and Sustainability Standards: Processes of Engagement since 2000

2001

2002

2003

2004

2005

Adoption of ‘alternative Firm-specific supplier standards Collective private coffee’ lines by the standards General Codes of Specific coffee majors Conduct procurement policies Sara Lee ‘Supplier Starbucks introduces Selection Preferred Supplier Guidelines’ Scheme Nestle ‘Corporate Business Principles’ P&G begins purchasing Kraft Code of fair trade coffee and Conduct; introduces RA - certified P&G ‘Our Values line; Our Policies’ Kraft introduces RA certified lines; Starbucks begins selling fair trade coffee Sara Lee Begins purchase of Utz Kapeh-certified beans

Nestle begins purchase of fair trade coffee

Starbucks introduces Coffee and Farmer Equity (C.A.F.E.) Practices Scheme

Establishment of EUREP-GAP protocol for gree coffee based on Utz Kapeh protocol. Field-testing of the Common Code for the Coffee Community (4C)

Source: Neilson and Pritchard (2005)29

approach and that they are not based on grassroots realities. The codes are not adapted in a participatory process to understand the unique local situations. “A ‘common denominator’ homogenizing tendency is in-built into its ‘checklist’ compliance methodology, which ill-fits the holistic approaches generally adopted in the Indian coffee industry. This philosophical objection rejects outright the assumption that foreign standards, and an audit approach, are somehow superior to endogenous knowledge systems and participatory involvement of stakeholders.”31 Second, it is also felt that the cost of compliance for small producers is still very prohibitive. Lakshmi Venkatachalam, former Chairperson of the Coffee Board of India puts it down like this: If such standards are confined to the domain of niche markets, there is perhaps less cause for concern. A real danger however rises when such standards move out of niche market to the mainstream market. In the absence of effective regulation mechanisms, inevitably all compliance costs and risks are pushed to the producers.32

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The cost of getting the holdings of small growers certified is indeed a prohibitive factor, particularly at a time when the prices are low. The certification from SKAL international requires around 50 to 60,000 rupees and INDOCERT, the other organic certifying agencies is reportedly charging more than 100,000 rupees. These charges do not include the cost of improvement, which has to borne by the small growers. The small growers reported to this study team that, in spite of going organic, there is no adequate return for it. There is hardly any organic market in the country and most of the demand for organic coffee is from the Western countries.33 However, some small growersâ&#x20AC;&#x2122; groups like the Small and Marginal Coffee Farmersâ&#x20AC;&#x2122; Association of Kerala demonstrated a keen interest in going for organic and Fair Trade certification. They are also aware that the conversion increases cost of production and that local traders will not pay any higher price. Therefore, they suggest, at the first level, contact with importers is necessary and, on the second level, there has to be an assurance by the importers that they ill not import cheaper coffee after the small growers have opted for the improvement programme.34 The curing works reported that big companies like Nestle or HLL do not go for high-priced high-quality coffee but go for cheaper varieties because high-quality coffee is not required for instant coffee. The overall income impact of sustainability standards on producers depends on the balance between the extra costs of matching these standards (including labour costs and the cost of certification) compared to the extra income earned from the premium plus or minus the impact of changing farming practices on yields and quality. No estimates are available for Utz Kapeh certification yet. In the case of organic gardens, yields and quality tend to increase in areas where agro-chemicals were not used prior to conversion. In other cases, quality is still likely to improve, but yields may suffer in the short term. However, the fact remains that the costly upfront input investments of intensive, chemically-supported cultivation are often not available to farmers and when calculated with the costs of borrowing for these inputs can, in some cases, make such intensive production methods less competitive. Application and contamination risks should also be considered especially when inexperienced family labour is used. Sustainable production methods eliminate the risks inherent in not only the upfront investment but can also reduce the dangerous dependence on a single crop.

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The balance sheet for Fair Trade is invariably positive, since farmers do not pay for certification, the premium is very high and the necessary changes in farming systems fairly limited. However, these impacts may be hard to maintain in the future in the Fair Trade system - as oversupply continues and pressure for prices to descend increases. As for shadegrown certification, on the one hand, the impact on yields in the short term is negative and labour inputs increase; on the other hand, coffee quality often improves, weeding becomes cheaper, soil fertility improves, and coffee trees tend to live longer. Small farmers can join FairTrade if they have formed organisations (as cooperatives, associations or any other) which are able to contribute to the social and economic development of their members and their communities and are democratically controlled by their members. However, most of the marginal small farmers have less than one acre or two acres of land and the movements to form farmersâ&#x20AC;&#x2122; cooperatives have not been much of a success. Small coffee-growers also have very limited understanding of the codes of conduct and environmental and social standards. The study

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did not come across any NGO providing training programme on environmental and social standards. Most of the codes of conduct and standards are developed in global North to suit the requirement of their consumers. However, increasingly, it was felt that the traditional top-down CSR strategies are not achieving improved CSR implementation and not sustainable in the long run. There is a need to adopt different codes available through a process of genuine multistakeholder dialogues in India taking into account the unique sociopolitical and economic environment of India.

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An Analysis of the Coffee Crisis in India

Small farmers chalking out a plan of action

Linking farmers â&#x20AC;&#x201C; PIC and Coffee Coalition understanding the crisis

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Concluding Observations 1. Although there are some unique examples of responsible business practices as far as the roasters are concerned, there are not many examples of traders taking responsibility across the value-chain. There are exporters who are willing to engage with small coffee growers but due to inefficient or non-existing small holders’ associations, they are unable to do so. The small coffee growers, in order to survive, are plucking green beans and are also avoiding all sorts of necessary agricultural practices required to keep coffee plantations productive. This will lead to fall in coffee quality leading to lesser profits in the long run and there is a business case for the roasters and exporters to engage with the small growers. 2. The coffee crisis in India has severely affected the lives and livelihood of the workers and small coffee-growers. Hundreds of thousands of small coffee growers are debt-ridden. This kind of situation has led hundreds of workers and small growers to commit suicide. On the recommendation of the Coffee Board and the Ministry of Commerce, the Reserve Bank of India had agreed, in May 2001, to re-phase all loan accounts in coffee that are likely to fall under sub-standard categories, and to extend fresh crop loans. According to the Coffee Board, the number of rescheduled loans was around 14,500, accounting for approximately Rs. 4 billion by September 2001. However, most of the farmers’ associations has demanded that interest on loans taken by small and marginal growers from banks and cooperatives should be waived and repayment of the principal in instalments spread over a long period facilitated. The government also needs to take immediate steps to check the exploitation of small growers by private money lenders who are charging them abnormal interest rates.

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3. Women and children are particularly affected by the crisis. Women are leaving their homes in search of elusive jobs in other states. Many children have dropped out of schools as their parents could not afford the school fees and have begun doing odd jobs to augment the family income. The government and other CSOs should ensure that children are not taken out of schools. In the closed estates women workers are also suffering due to closure of primary health centres, particularly during pregnancy. The medical facilities need to be restored or augmented in the gardens. 4. The coffee industry of India directly employs around 550,000 workers. Many of these workers (some report suggest 20 percent, meaning around 110,000) have become jobless. Many of the provisions of the Plantation Labour Act are not adhered to in the estates with some noted exceptions. Most of the workers who lost their jobs are casual workers without any rights. As per trade union leaders, workers are thrown out if they try to join a union. As a result, only minimum unionization has taken place in the coffee sector. The plantation owners are duty bound to provide basic facilities to workers as per the PLA. In case of failure on the part of the employers, the Central and State Governments should initiate a process of penalising the defaulting employers. Also the capacity of the coffee trade unions vis-Ă -vis different laws and codes of conduct needs to be built up. 5. At the moment, local stakeholders, like small growers, trade unions and non-governmental organisations, see codes of conduct covering labour issues, while they have not been consulted during the development stage of the labour-related standards. The knowledge of these organisations and familiarity with the local context, as well as an understanding of the technical, social, cultural, political and economical characteristics of the area is important to bring about positive social change. Multi-stakeholder involvement is essential to create a sense of ownership and ensure the credibility and effectiveness of any code of conduct. Local stakeholders should be engaged more directly in developing, implementing and monitoring of code compliance. 6. There is also a need to develop the capacities of small coffee growersâ&#x20AC;&#x2122; associations and grassroots-level NGOs to enhance their understanding of the codes of conduct and other critical issues. The codes of conduct are new tools available for the marginalized segments in the value-chain to protect their interests.

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7. In the marketing of coffee, the withdrawal of the Coffee Board led to the emergence of intermediaries in the trade. Middlemen sell the coffee they collect directly from farmers to wholesalers who in turn export it. At present, no agency exists to co-ordinate or give directions to coffee marketing. The influence of the Coffee Board has weakened considerably after the pooling system was abolished. Distress sale of the produce by small and marginal growers is reported to be widely rampant. The growers are even selling the output well in advance of the harvesting season at prices much lower than those prevailing in the market in order to tide over their financial difficulties. This is mainly because of the lack of capacity of small growers’ associations to market the coffee they produce. One of the principal challenges of small-scale farmer organizations is competition with exporters who have the finance, the infrastructure, risk management tools, extensive market knowledge, and existing contracts. This combination of capital, infrastructure and experience allows exporters to reduce their cost of goods and achieve economies of scale. Hence, there is an urgent need for building the capacities of small and marginal coffee growers. This should be done in association with other stakeholders like the traders and the roasters. 8. There are new attempts by small growers’ cooperatives to bypass the middlemen and directly reach out to the consumers such as by using new technologies to produce coffee decoctions with long-shelf life as a means of controlling the product which the small growers produce. Such initiatives should be supported by the government and international donor agencies.

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Recommendations Indian Government

1. Provide immediate relief to the small coffee growersâ&#x20AC;&#x2122; families where suicides have taken place since 90 percent of the suicides have been committed by male members leaving the dependent female members and children helpless. 2. Reschedule the loans on softer terms for the marginalized small growers and desist the banks from taking over the coffee holdings. 3. Provide technical and marketing assistance to small and marginalized farmers. 4. Provide credit schemes and debt management services. 5. Ensure that in the large plantations the labour laws are not violated and the standards laid down by the ILO on decent work are maintained. 6. Strengthen the social security mechanism of coffee estate workers. For this, special agencies, an implementation mechanism and a fund must be created. The trade unions should be involved in the implementation and monitoring stages,. 7. Provide incentives and encouragement for small growers to go for alternative market intervention practices. 8. Make preferential procurement of coffee for different government departments, which adheres to acceptable codes of conduct and provide incentives for such companies that adheres to such codes. 9. Create a separate department within the Coffee Board dedicated to small and marginalized coffee farmers. 10.Support the ICOâ&#x20AC;&#x2122;s Coffee Quality-improvement Programme and other quality projects as a means of improving consumer appreciation and consumption of coffee in India.

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Non-Governmental Organisations

1. Technical assistance and other commercial-oriented support including quality improvement training, sales, and marketing skill building, support of participation in trade shows could be provided by the NGOs. 2. Training for coffee small growers on social, economic and environmental aspects to improve their understanding of the coffee value-chain. 3. Adapt codes of conducts to the local realities of India through a participatory process. 4. The small and marginal farmers owning between one and five acres of land often goes either unrepresented or do not have any voice in the powerful small growers’ associations. These marginal farmers need to be organised where they don’t have organisations and strengthen the existing ones so that their ability to compete in the market place improves. 5. Support broad-based rural development including the development of local processing capacity and producer-associations, and measures to improve credit and risk management facilities. 6. Help the small and marginal farmers enter into regional and international alliances. 7. Encourage coffee roasters and traders to implement an effective code of conduct. 8. Support market intervention efforts of small coffee growers. 9. Initiate counselling centres for the distressed coffee farmers. Roasters and Traders

1. Take responsibility for conditions in the entire coffee value-chain, particularly where they have in a position to influence. 2. Pay remunerative prices to small coffee growers and provide support. 3. Provide support to small coffee growers through technical and marketing assistance. 4. Engage in comprehensive dialogue with representatives of marginal coffee growers’ forms and CSOs working with them. 5. Initiate a disintermediation process by purchasing as much as possible directly from the small coffee growers and provide additional price for the coffee produced in a sustainable process.

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6. Do not lobby to dilute the social protections available to coffee estate workers. 7. Conduct multi-stakeholder monitoring and verification of social and environmental standards in coffee estates from where coffee is procured. International Coffee Organisation

1. The ICO should work with member-governments, private sector and civil society groups to stimulate access to credit for small producer-organisations and establish risk-management facilities and tools suitable for use by under-resourced small farmers. 2. Expand coffee consumptions in non-traditional markets and maintain consumption levels in traditional markets through quality maintenance, developing niche markets and disseminating positive and objective information.

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Notes Background and Profile of Indian Coffee Industry Tea and Coffee Asia, February-March 2004. Coffee Board of India, “Coffee Profile of India,” 2005. 3 Data Base, Coffee Board of India, July 2005. 4 ‘Tiny growers’ is the term used in The Connoisseurs Book of Indian Coffee (2004), p. 15. 5 The PLA of 1951 was enacted by the parliament to provide for the welfare of and regulate the conditions of plantation labour. 6 Coffee Profile of India, Coffee Board of India, 2005. 7 Coffee Profile of India, Coffee Board of India, 2005. 8 The Connoisseurs Book of Indian Coffee (2004), Macmillan, India. 9 Coffee Profile of India, Coffee Board of India, 2005. 10 The Business Line, 14 January 2003. 11 The Connoisseurs Book of Indian Coffee (2004), Macmillan India. 12 Parcival Griffiths, The History of the Indian tea Industry, London, Weidenfeld and Nicolson, 1967, p544-55. 13 Like ITA in the Northern tea plantations, UPASI remained mainly a European association until India’s independence. 14 S. Muthiah, A Planting Century: The First Hundred Years of The United Planters’ Association of Southern India (Coonoor, 1994), pp. 265-68. 15 Coffee Profile of India, Coffee Board of India, 2005. 16 Edgar Graham & Ingrid Floreing, The Modern Plantations in the Third World (London, Croom Helm, 1984), p.25. 17 Graham & Floreing, pp. 33-35. 18 G. E. Beckford, Persistent Poverty: Under-development in Plantation Economies of the Third World. (London: Oxford University Press, 1972), p. 75. 1 2

The Coffee Crisis and its Impact in India Figures compiled from www.indiaonestop.com, August 2005 and from Database, Coffee Board of India, 2005. 2 Business Line, 26 July 2002. 3 Frontline, March 2002 4 Frontline, March 2002 5 Interviewed by the researcher in Waynad, Kerala, 8th August 2005. 6 As per the description of Mr. Asokan and Mr. P.T. John, independent trade union leader from Waynad, Kerala 7 Interview with P.T. John, independent trade union leader from Waynad, Kerala, 8 th 1

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An Analysis of the Coffee Crisis in India August, 2005 8 The Business Line, 16 June 2002. 9 Peoples’ Democracy, 5 September 2005. 10 Peoples’ Democracy, 5 September 2005. 11 Peoples’ Democracy, 18 July 2004. 12 Codagu Planter’s Association, Quarterly News Letter, Madikeri, (Vol. XXI, Issue 2), 2005. 13 Memorandum of Settlement Under Section 18 (1) of the Industrial Disputes Act, 2005. 14 Interview with Mr. M.G. Aiyappa, General Secretary, KIPLU, Kodagu District, Karnataka, 19 August 2005. 15 Working Class, February 2003. 16 Database, Coffee Board of India, 2005. 17 Interview with Mr. V.K. Raju, General Secretary, Nilgiri District Estate workers’ Union and workers’ representative in the Coffee Board, 6 August 2005 18 Interview with Mr. K.P. Muhammad, President of NDEW Union (INTUC) and Mr. Balan, General Secretary of NDEW Union, Gudalur, Tamil Nadu, 7th August, 2005. 19 C.V. Joy, Small Coffee Growers of Waynad, Centre for Development Studies, Kerala, 2004. 20 C.V. Joy, 2004. 21 C.V. Joy, 2004 22 C.V. Joy, 2004 23 As reported by P. Sainath, “Crisis drives the bus to Kutta”, India Together, December 2004. 24 The Connoisseurs Book of Indian Coffee (2004), p. 60. 25 Interview of Mr. Sanath Kumar, Yes-Kay Coffee Curing Works private Limited, Wayanad, Kerala on 9th August and Mr. Narendra Kumar, Planter, Kodagu, Karnataka, 17th August 2005. 26 http://www.tata.com/0_media/features/interviews/20010506_ashraf(1).htm 27 Peoples’ March, December 2003. 28 Peoples’ March, December 2003. 29 Peoples March, December 2003. 30 www.hll.com, 10 September 2005 31 The Hindu, 8 November 2002 32 The Hindu, 8 November 2002 33 Interview conducted on 26 September 2005 at Bangalore, Karnataka. For the complete interview please see the Annexure. 34 Aparna Dutta, “Indian Coffee Direct”, Coffee File, August 2005 35 www.indiainfoline.com, 30 September 2005 36 Mr. Raghu, Interview to Frontline, 16-29 March, 2002. 37 Interview with Dr. Radhakrishna, Deputy Director of Coffee Board, Bangalore, August 19, 2005.

Increasing Numbers of Suicides by Small Coffee Farmers and Workers Frontline, July 2003. As told to the Joint team of Partners in Change and Dutch Coffee Coalition, April 2006. 3 www.indiatogether.org, September 2005. 1 2

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BITTER BEANS 4 Interview with Mr. Somasekhara Rao, Liaison Officer, Coffee Board of India, Waynad, Kerala, 8th August 2005. 5 Interview with Mr. A.C. Varkey, Chairman, Farmers Relief Forum, Mananthbadi, Kerala, 8th August 2005. 6 Interview with Mr. A.C. Varkey, 8th August 2005. 7 Figures as per Kerala State Mental Health Authority data, 2003. 8 The Hindu, 11 October 2006. 9 Interview with Mr. K.J. Devasiya, President, South Indian Coffee Grower’s Association, Wayanad, 9th August 2005. 10 Malayalam Manorama, March 1998. 11 Frontline, April-May, 2004. 12 New note to be inserted. 13 Interview of Mr. Jose Sabastian, Spice India Trust, Wayanad, Kerala, 9th August 2005. 14 Deccan Herald, 10 March 2005. 15 Election Manifesto of A.C. Varkey, Kerala Assembly Elections, April 2006. 16 Consultative meeting on Sustainable livelihood for the Marginal Coffee Growers, Organised by Partners in Change and Koffie Coalitie 17 Peoples March, December 2004. 18 Deccan Herald, 20 September 2003. 19 The Times of India, 31 December 2001. 20 People’s March, December 2004. 21 Interview with Mr. Bose Mandana, Vice Chairman of Coffee Board of India, Kodagu, Karnataka, 18 August 2005. 22 Interview with Mr. Roy David, Chairman, CORD, 17th August 2005. 23 The committee of five members consists of former chairman B L Shankar as Convener, Kerala MP M P Veerendra Kumar, former Rajya Sabha member Ramachandra Pillai, Kisan Sabha President of Wynad Mohammed, Small and Marginal Coffee Growers Association President P V Lokesh have been appointed. 24 Small Coffee Growers Workshop in Coorg, Karnataka organised by Partners in Change and Koffie Coalitie in April 2006.

Analysis of Various Factors Behind the Crisis 1 Taking inflation into account, the “real price” of coffee beans has fallen dramatically lower: it is now just 25% of its level in 1960. Gresser, Charis and Tickell, Sophia. “Mugged, poverty in your coffee cup”. 2002. Oxfam international: p.9 2 Landell Mills Consultants estimated that the coffee price at the end of 2001 did not cover the total costs of either Robusta or Arabica producers. Gresser and Tickell, 2002: p.9 3 In the early 1990s earnings by coffee producing countries were some US$10-12 billion and the value of retail sales of coffee, largely in industrialised countries, about US$30 billion. Now the value of retail sales exceeds US$70 billion but coffee producing countries only receive US$5.5 billion. Prices on world markets, which averaged around 120 US cents/lb in the 1980s, are now around 50 cents, the lowest in real terms for 100 years. Figures published on the International Coffee Organisation’s web site, section “coffee crisis”. Feb. 2005. www.ico.org 4 Gresser and Tickell, 2002: p.2 5 O.Nestor. “The Global coffee crisis: a threat to sustainable development”. 2002. paper submitted to the World Summit on Sustainable Development, Johannesburg. International Coffee Organisation’s web site. Feb. 2005. www.ico.org: p.1 6 Global Exchange, “Squeezing Coffee Farmers to the Last Drop,” October, 2001. http:/ /www.globalexchange.org/campaigns/fairtrade/coffee/news2001/gx100001.html (October 1, 2003).

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An Analysis of the Coffee Crisis in India The Global Coffee Trade, https://gobi.stanford.edu/cases/Documents/IB53.pdf. Peoples March, December 2003 9 The most recent entered into force in 2002 10 Nowadays, the ICO makes a practical contribution to the world coffee economy by: 1) enabling government representatives to exchange views and coordinate coffee policies and priorities at regular high-level meetings. 2) Improving coffee quality through the coffee quality programme. 3) Increase world coffee consumption through innovative market development activities. 4) Initiating coffee development projects to improve quality and marketing. 5) Encouraging a sustainable economy and environmental standards. 6) Working closely with the private sector through a 16 strong private sector consultative board which tackles issues such as food safety. 7) Providing objective and comprehensive information on the world coffee market. 8) Ensuring transparency in the coffee market through statistics. The International Coffee Organisation’s web site, section “What we do?” Feb. 2005. www.ico.org. 11 The Nestle Coffee Report. March 2004. 12 Nestor. 2003. Commemoration of forty years of the International Coffee association statement by Doctor Nestor Osorio, London executive Director of the ICO. Cartagena, Colombia, 16 September 2003 13 Coffee retention, however, was not successful in improving coffee prices. The process of liberalisation of domestic coffee marketing in producing countries has made it more difficult for them to control stocks and the flow of exports. Also, the scheme was lacking proper monitoring and punitive clauses. 14 The plan targets the retention of 20 per cent of total world production as long as the 15-day moving average of the ICO composite price indicator stays below 95 cents per pound. Stefano Ponte, 2001: p.13 15 The ICA also stipulates that the ICO should promote training and information programmes designed to assist the transfer of technology relevant to member countries; also analyse and advertise the preparation of projects to the benefit of the world coffee economy. International Coffee Agreement 2001. The International Coffee Organisation’s web site. Feb. 2005. www.ico.org. 16 The committee formulated recommendations that were agreed by the ICO in February 2002 under Resolution 407. This resolution established the Coffee Quality- Improvement Program and spelled out the minimum standards for exportable coffee based on defect count and maximum moisture content. A higher defect count is allowed for Robusta than for Arabica. 17 The Resolution number 420 adopted in 2004 took a further steps to adjust this coffee quality programme by targeting quality standards for coffee. May 2004. International Coffee Council resolution. 18 Nestor. 2002: p.5 19 From the perspective of producer countries, the Agreement brought a golden era of good and stable prices (…) from 1975 to 1989, though prices fluctuated significantly, they remained relatively high and rarely fell bellow the ICA price floor of $ 1.20/1bag. Gresser and Tickell, 2002: p.17 20 Gresser and Tickell. 2002: p.18 21 Alain Stella. 1998. L’ABCdaire du café. Flammarion. Paris: p. 56 22 Trading takes place from 9:15 AM to 1: 32 PM (EST) M-F. 23 Delivery months are March, May, July, September, and July. This is why the nearest neighbouring delivery month is used to set the current cash price. 24 The World Coffee Market. www.cafedirect.co.uk 25 There are five classes of coffee: a) class one. Speciality Coffee – 0 to 5 defects; 2) Premium grade – 6 to 8 defects. 3) Exchange grade – 9 to 23 defects. This is the grade traded on the NYCE. Class 1 and 2 demand premiums to this price, whereas Class 4 and 7 8

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BITTER BEANS 5 coffees demand discounts. 4) Class 4, below standard grade -24 to 86 defects. 5) Class 5. Off grade- more than 86 defects. The coffee search web site, www.coffeesearch.org. Feb. 2005 26 Stuart Daw, 2005. Green Coffee Market News. February 18, 2005. www.heritagecoffee.com 27 Robbing Coffee’s Cradle, ActionAid-International, May 2001. 28 EFTA Fair Trade Year Book, 1997. 29 People’s Democracy, 20 June 2004. 30 Bose Mandana, Former Vice Chairman of Coffee Board and a seniormost coffee planter pointed out that the cheaper coffee from Vietnam and Indonesia are coming into India, and the smaller players in India would find it difficult to compete against them because of cheap labour available in those countries. 31 Lakshmi Venkatachalam, Chairperson of Coffee Board of India, The Hindu, 30 August 2002. 32 Interview with Bose Mandana, Kodagu, Karnataka, 18 August 2005 33 The Hindu, 31 August, 2004. Social and Environmental Standards in Indian Coffee Sector 1 T. Kleist (2004). ‘Seal of approval: A certification primer’, Roast Magazine Nov/Dec, 2004: 26-53. 2 Cora Dankers, Environmental and Social Standards, Certification and Labelling for Cash Crops, (FAO, Rome, 2003). 3 Every worker (including his family) is entitled to a housing accommodation after six months of continuous service whether staying inside or outside a plantation and who has expressed a desire in writing to live in the plantation. The requirement of continuous service of six months will not apply to a worker who is the member of the family of a diseased worker who was residing in the plantation. Under Section 16, the-State Government has been empowered to make rules relating to standards of housing and constitution of an advisory board with representatives of workers and employers. 4 Maximum hours of work are 9 hours a day and 54 hours a week; The worker is entitled to overtime wages at twice the rates of ordinary wages. He/she also has a right to One weekly holiday. Working on a holiday or the day of rest of the worker will entitle worker for double the wages as in overtime work. 5 This point was highlighted by trade union leaders Mr. Asokan and also by Mr. Aiyappa of KIPLU as by many other civil society actors. 6 Interview with Mr. M.G. Aiyappa, General Secretary, KIPLU, Kodagu District, Karnataka, 19 August 2005. 7 Interview with Mr. M.G. Aiyappa, General Secretary, KIPLU, Kodagu District, Karnataka, 19 August 2005. 8 Meeting of the Tripartite Industrial Committee on Plantation Industry, New Delhi, 26 August, 2005 9 Ministry of Commerce, Government of India, http://commerce.nic.in/annual200405/englishhtml/lesson-9.htm 10 Ministry of Commerce, Government of India, http://commerce.nic.in/annual200405/englishhtml/lesson-9.htm 11 William Lindsay Simpson, “An example of self-regulation within the global coffee market”, Unpublished dissertation, Universities of Fribourg, Geneva, May 2005. 12 Daniele Giovannucci and Freek Koekoek, January 2003, “State of Sustainable Coffee: A study of twelve major markets”, US Library of congress, p.15 13 Sjoerd Panhuysen, 2005, “Codes of conduct for the mainstream coffee sector, a challenge for local trade unions and NGOs” Dutch Coffee Coalition, p.4

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An Analysis of the Coffee Crisis in India Daniele Giovannucci and Freek Koekoek, p. 17. http://population.wri.org (Downloaded on 12 August 2006 ). 16 Interview with Tomy Mathew, Managing Director, Elements, April 2006, Kerala. Also visit (www.elementsindia.net) 17 Cora Dankers (2003), op. cit. 18 Frontline, Volume 21 - Issue 13, Jun. 19 - Jul. 02, 2004 19 In general, a grower or processor of organic coffee may be certified by a public or private certification company if, among others, the following standards and procedures are met: coffee is grown without the use of synthetic agro-chemicals for three years prior to certification; farmers and processors keep detailed records of methods and materials used in coffee production and management plans; and a third-party certifier annually inspects all methods and materials. 20 National Programme for Organic Production, www.apeda.com/organic/index.html, (24 December 2006). 21 Aparna Dutta, Coffee File, August 2005. 22 Aparna Dutta, “Organic South Asia”, Coffee File, August 2005 23 http://indiacoffee.org/coffeeregions/default.htm#organ, accessed on January 2006. 24 www.utzkapeh.org 25 EUREPGAP is an initiative of agricultural producers and their retailer customers belonging to the Euro-Retailer Produce Working Group (EUREP). The mission is to develop widely accepted standards and procedures for the global certification of Good Agricultural Practices (GAP). The work of the EUREPGAP Committees is supported by FoodPLUS, a not-for-profit limited company based in Cologne, Germany. www.eurep.org 26 http://www.tatatea.com/tata_coffee_info.htm, 15 September 2005 27 www.plantersnet.com/general/itccoffee1EN.asp#top, 28 August 2005. 28 Stefano Ponte, Standards and Sustainability in the Coffee Sector, IISD, Denmark, 2004. 29 Jeffrey Neilson and Bill Pritchard, (2006)”Green Coffee? Contestations over global sustainability initiatives in the Indian coffee industry”, Development Policy Review. 30 Based on interview conducted by the joint team of Partners in Change and Koffie Coalitie during April 2006 also see Neilson and Pritchard, Op.Cit. 31 Neilson and Pritchard, Op.Cit. 32 Venkatachalam, L. (2005). Perspectives on Sustainability and Globalization and the challenges for the coffee sector. Proceedings of the 2nd World Coffee Conference, 23-25 September, Salvador, Brazil (available at http://www.ico.org/event_pdfs/wcc2/presentations/ venkatachalam.pdf). 33 Interview with Mr. Sanath Kumar, Chairman, Yeskey Coffee Curing Works Pvt Ltd., August 2005 34 Interview with Ms. Aparna Dutta, Editor, Coffee File, Bangalore, August 15, 2005 14 15

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Bibliography Ahold (2005). ‘Utz Kapeh responsible certified coffee: Establishing an independent and credible system for assurance of baseline good practices in the production of coffee.’ (available at: www.ahold.com). Alain Stella. 1998. L’ABCdaire du café. Flammarion. Paris: p. 56 Aparna Dutta, “Indian Coffee Direct”, Coffee File, August 2005 Aparna Dutta, “Organic South Asia”, Coffee File, August 2005 Aparna Dutta, Coffee File, August 2005. Bhagwat, S.A.; Kushalappa, C.G.; Williams, P.H. and Brown, N.D. (2005). ‘A Biodiversity Concerns: The Case of Coffee-Farming Units in India’, World Business Line, 26 July 2002. C.V. Joy, Small Coffee Growers of Waynad, Centre for Development Studies, Kerala, 2004. Chandrakanth, M.G.; Bhat, M.G. and Accavva, M.S. (2004). ‘Socio-economic changes and sacred groves in South India: Protecting a community-based resource management institution’, Natural Resources Forum 28 (2): 102-111. Codagu Planter’s Association, Quarterly News Letter, Madikeri, (Vol. XXI, Issue 2), 2005. Coffee Board of India, “Coffee Profile of India”, 2005. Coffee Profile of India, Coffee Board of India, 2005. Common Fund for Commodities, “Partner in Sustainable Development: Basic Cora Dankers, Environmental and Social Standards, Certification and Labelling for Cash Crops, (FAO, Rome, 2003). CTD: Declining Commodity Prices in The Spotlight. “Bridges”. Vol 8, Damodaran, A. (2002). ‘Conflict of Trade-Facilitating Environmental Regulations with Daniele Giovannucci and Freek Koekoek, January 2003, “State of Sustainable Coffee: A study of twelve major markets”, US Library of congress, p.15 Data Base, Coffee Board of India, July 2005. Database, Coffee Board of India, 2005. Deccan Herald, 10 March 2005. Deccan Herald, 20 September 2003. Development 30 (7): 1123–1135. Edgar Graham & Ingrid Floreing, The Modern Plantations in the Third World (London, Croom Helm, 1984), p.25. EFTA Fair Trade Year Book, 1997. Election Manifesto of A.C. Varkey, Kerala Assembly Elections, April 2006. Facts” May 2004. www.common-fund.org

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An Analysis of the Coffee Crisis in India Frontline, April-May, 2004. Frontline, July 2003. Frontline, March 2002 Frontline, Volume 21 - Issue 13, Jun. 19 - Jul. 02, 2004 G. E. Beckford, Persistent Poverty: Under-development in Plantation Economies of the Third World. (London: Oxford University Press, 1972), p. 75. Girippa S. Plantation Economy in India, New Delhi: M.D. Publications. 1995. Global Exchange, “Squeezing Coffee Farmers to the Last Drop,” October, 2001, http:/ /www.globalexchange.org/campaigns/fairtrade/coffee/news2001/gx100001.html (October 1, 2003). Green, Duncan. “Tropical Commodities and the WTO.” Bridges. Year 8, No 10. Harris, Brian. “Coffee market perking up, but growers still smarting and cautious”. http://indiacoffee.org/coffeeregions/default.htm#organ, accessed on January 2006. http://population.wri.org (Downloaded on 12 August 2006 ). http://www.tatatea.com/tata_coffee_info.htm, 15 September 2005 ICO (2006). Trade Statistics. London: International Coffee Organization. (available at http://www.ico.org/trade_statistics.asp). Jeffrey Neilson and Bill Pritchard, (2006)”Green Coffee? Contestations over global sustainability initiatives in the Indian coffee industry”, Development Policy Review. Kleist, T. (2004). ‘Seal of approval: A certification primer’, Roast Magazine Nov/Dec, 2004: 26-53. Kodagu Coffee Growers Co-operative Society. 29th Annual Report, Madikkeri 1990’91. Kunhaman P. “Understanding Tribal Life Kerala Dossier”, State and Society, Second Quarter, 1983. Kunhaman. P. Bonded Labour in Kerala State and Society. Second Quarter. 1983. Landscape Approach to Biodiversity Conservation of Sacred Groves in the Western Ghats of India’, Conservation Biology 19 (6): 1853-1862. Malayalam Manorama, March 1998. Menon, U. (2005). ‘Foresee 4c Foxy’ (editorial), Planters Chronicle 101 (10) in Journal Ministry of Commerce, Government of India, http://commerce.nic.in/annual2004-05/ englishhtml/lesson-9.htm Ministry of Commerce, Government of India, http://commerce.nic.in/annual2004-05/ englishhtml/lesson-9.htm Mugged: Poverty in Your Coffee Cup, (Oxfam, 2002). National Programme for Organic Production, www.apeda.com/organic/index.html, (24 December 2006). Nestor. 2003. Commemoration of forty years of the International Coffee association statement by Doctor Nestor Osorio, London executive Director of the ICO. Cartagena, Colombia, 16 September 2003 Ninan, K.N. and Sathyapalan, J. (2005). ‘The economics of biodiversity conservation: a study of a coffee growing region in the Western Ghats of India’, Ecological Economics 55 (1): 61-72. No 7. Feb 26, 2004. www.ictsd.org/weekly/04-02-26/story2.htm November 2004:3-5. www.ictsd.org/monthly/bridges/BRIDGES8-10.pdf O.Nestor. “The Global coffee crisis: a threat to sustainable development”. 2002. paper submitted to the World Summit on Sustainable Development, Johannesburg. International Coffee Organisation’s web site. Feb. 2005. www.ico.org: p.1 of the United Planters’ Association of Southern India (UPASI): 1. P. Sainath, “Commerce and Crisis hit Students, India Together, January 2005.

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BITTER BEANS P. Sainath, “Crisis drives the bus to Kutta”, India Together, December 2004. P. Sainath, “So near to god, so far from heaven”, India Together, December 2004. Parcival Griffiths, The History of the Indian tea Industry, London, Weidenfeld and Nicolson, 1967, p544-55. Peoples March, December 2003 Peoples March, December 2004. Peoples’ Democracy, 18 July 2004. Peoples’ Democracy, 5 September 2005. Prakash, B.A. “A Case Study of South Wayanad Tribals,” Yojana, 1 April 1980. Robbing Coffee’s Cradle, ActionAid-International, May 2001. S. Muthiah, A Planting Century: The First Hundred Years of The United Planters’ Association of Southern India (Coonoor, 1994), pp. 265-68. Sjoerd Panhuysen, 2005, “Codes of conduct for the mainstream coffee sector, a challenge for local trade unions and NGOs” Dutch Coffee Coalition, p.4 Stefano Ponte, Standards and Sustainability in the Coffee Sector, IISD, Denmark, 2004. Stuart Daw, 2005. Green Coffee Market News. February 18, 2005. www.heritagecoffee.com T. Kleist (2004). ‘Seal of approval: A certification primer’, Roast Magazine Nov/Dec, 2004: 26-53. The Business Line, 14 January 2003. The Business Line, 16 June 2002. The Connoisseurs Book of Indian Coffee (2004), Macmillan, India The Connoisseurs Book of Indian Coffee (2004), Macmillan, India. The Global Coffee Trade, https://gobi.stanford.edu/cases/Documents/IB53.pdf. The Hindu, 11 October 2006. The Hindu, 30 August 2002. The Hindu, 31 August, 2004. The Miami Herald. Nov. 22, 2004. The Nestle Coffee Report. March 2004. The Times of India, 31 December 2001. United Planters of Southern India (2005). Year Book and Annual Report 2004-05. Coonoor (India): UPASI. Utz Kapeh (2005). ‘Certified Producers’. (available at www.utzkapeh.com). Venkatachalam, L. (2005). Perspectives on Sustainability and Globalization and the challenges for the coffee sector. Proceedings of the 2nd World Coffee Conference, 23-25 September, Salvador, Brazil (available at http://www.ico.org/event_pdfs/wcc2/ presentations/venkatachalam.pdf). William Lindsay Simpson, “An example of self-regulation within the global coffee market”, Unpublished dissertation, Universities of Fribourg, Geneva, May 2005. Working Class, (February 2003). www.eurep.org www.indiainfoline.com, 30 September 2005 www.plantersnet.com/general/itccoffee1EN.asp#top, 28 August 2005. www.utzkapeh.org

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Useful Web links Associations and Organizations International Coffee Organization (ICO) (www.ico.org) National Coffee Association (www.ncausa.org) Green Coffee Association (GCA) (www.green-coffee-assoc.org) Specialty Coffee Association of American (www.scaa.org) European Coffee Federation (ECF) (www.ecf-coffee.org) Specialty Coffee Association of Europe (SCAE) (www.scae.com) Interafrican Coffee Organisation (IACO) (www.oiac.iaco.org) Food And Agriculture Organisation of the United Nations (www.fao.org) Common Fund of Commodities (www.common-fund.org) World Bank (WB) (www.worldbank.org) World Trade Organisation (WTO) (www.wto.org) Trading and Pricing New York Board Of Trade (NYBD) (www.nybot.org) London International Financial Futures and Options Exchange (LIFFE) (www.life.com) Bolsa de Mercadorias & Futuros, Brazilian Mercantile & Futures Exchange (BM&F) (www.bmf.com.br) Coffee Futures Exchange India (COFEI) (www.cofei.com) Commodity Futures Tradiung Commission (CFTC) (www.cftc.gov) Identrus (e-commerce certification) (www.identrus.com) Coffee Trading & Information Services (www.coffee-exchange.com) Coffee Network (www.coffeenetwork.com) Tata Coffee www.tatatea.com/tata_coffee.htm Nestle-India (www.nestle.com/Header/Country_Access/Asia/India/India.htm) ABC-India (www.abcindia.com) Sustainability and Environment International Federation of Organic Agriculture Movements (IFOAM) (www.ifoam.org) Fairtrade Labelling Organizations International (FLO) (www.fairtrade.net) Max Havelaar foundation (fair trade) (www.maxhavelaar.org) TransFair USA (fair trade) (www.transfairusa.org) The Rainforest Alliance (www.rainforest-alliance.org) Independent Organic Inspectors Association (IOIA) (www.ioia.net) Smithsonian Migratory Bird Center (http://www.nationalzoo.si.edu) Technoserve (www.technoserve.org) Coffee Kids (www.coffeekids.org)

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BITTER BEANS Utz kapeh Foundation (www.utzkapeh.org) Common Codes for the Coffee Community (www.sustainable-coffee.net) Cup of Excellence® (www.cupofexcellence.org) Deutsche Gesellshaft fur Technische Zusammenarbeit (GTZ) GmbH (www.gtz.de) Other useful Sites www.p-maps.org www.iso.org www.supremo.be www.siemex.biz/coffee www.plantersnet.com www.kar.nic.in/exportcoffee www.coffeereview.com www.coffeeuniverse.com www.penscape.net www.masterroaster.com www.ravensbrew.com www.eldis.org Ministry of Commerce Websites www.ecgindia.com ww.indiacoffee.org tea.nic.in www.mpeda.com www.apeda.com www.indianspices.com

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Acronymns and Abbreviations ACB ACG ACP ADIPCO AEAAZ ANACAFE APEMB [Brazil] APPTA ASEAN ATO CAN CIF CIMS COLEACP Coocafé O CSA CSR CTE DCC DED EPOPA ETI EUREP EurepGap FAO FECAFEB FEDECOOP FFTU

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Accredited Certification Body Guanacaste Conservation Area [Costa Rica] Country in Africa, the Caribbean or the Pacific that has signed the Cotonou agreement with the European Union Cocolá Development Association [Guatemala] Agricultural Ethics Assurance Association of Zimbabwe National Coffee Association [Guatemala] Association of Ecological Growers of the Baturité Mountains Talamanca Small Farmers’ Association [Costa Rica] Association of Southeast-Asian Nations Alternative Trade Organization Conservation Agriculture Network [now SAN] cost-insurance-freight [standard contract terms] Centro de Intelligenca sobre Mercados Sostenibles/Sustainable Markets Intelligence Centre Comité de liaison Europe-Afrique-Caraïbes-Pacifique [Association of stakeholders in EU-ACP horticultural trade] Consorcio de Cooperativas de Caficultores de Guanacaste y Montes de r o RL [Costa Rica] Community-Supported Agriculture Corporate Social Responsibility Committee on Trade and Environment [of the WTO] Day Chocolate Company Deutscher Entwicklungsdienst Export Promotion of Organic Products from Africa Ethical Trading Initiative Euro-Retailer Produce Association EUREP Good Agriculture Practice Food and Agriculture Organization of the United Nations Federación de Cafetaleros Exportadores de Bolivia Federación de Cooperativas de Caficultores RL Farmers Fair Trade Uganda


BITTER BEANS FLO FOB FONAES GAP GATT GMO IBS ICFTU/ITS IEC IFAD IFOAM IIED ILO IMO IOAS IPM IPPC ISEAL ISMAM ISO ITC IUF JAS KKL KNCU LBC LCU MAFF MAPO MFN NGO NOP NT PIC PMO PPM SA8000 SAI SAI-Platform SAN SASA SERRV

Fairtrade Labelling Organizations International free-on-board [standard contract terms] National Fund for Support of Solidarity Enterprises [Mexico] Good Agricultural Practice General Agreement on Tariffs and Trade genetically-modified organism IFOAM Basic Standards International Confederation of Free Trade Unions/International Trade Secretariat International Electrotechnical Commission International Fund for Agricultural Development International Federation of Organic Agriculture Movements International Institute of Environment and Development International Labour Organization Institut für Markökologie [organic certification body, Switzerland] International Organic Accreditation Service Integrated pest management International Plant Protection Convention International Social and Environmental Accreditation and Labelling Alliance Indígenas de la Sierra Madre de Motozintla San Isidro Labrador [Mexico] International Organization for Standardization International Trade Centre International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations Japanese Agriculture Standard Kuapa Kokoo Limited [Ghana] Kilimanjaro Native Cooperative Union [Tanzania] Licensed Buyer Organization [in Ghana cocoa industry] Lango Cooperative Union [Uganda] Ministry of Agriculture, Forestry and Fisheries [Japan] Movimiento Argentino de Producción Orgánica Most Favoured Nation [GATT/WTO context] non-governmental organization National Organic Program [United States of America] National Treatment [GATT/WTO context] Prior Informed Consent Produce Marketing Organization Production and Processing Method Social Accountability 8000 Social Accountability International Sustainable Agriculture Initiative Platform Sustainable Agriculture Network [formerly CAN] Social Accountability in Sustainable Agriculture project Sales Exchange for Refugee Rehabilitation Vocation

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An Analysis of the Coffee Crisis in India SNV SPS Agreement SSE TBT UCIRI UNCED UNCTAD UNEP USDA VREL WHO WTO

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Netherlands Development Organization Agreement on the Application of Sanitary and Phytosanitary Measures Single Strain Juice Equivalent Technical Barriers to Trade Union of Indian Communities in the Isthmus Region [Mexico] United Nations Conference on Environment and Development United Nations Conference on Trade and Development United Nations Environment Programme United States Department of Agriculture Volta River Estates Limited [Ghana] World Health Organization World Trade Organization


BITTER BEANS

Appendix-1

Inspection and Certification Agencies of India Accredited Under the National Programme for Organic Production (NPOP) 1. BVQI (India) Pvt. Ltd. Marwah Centre, 6th Floor Opp. Ansa Industrial Estate Krishanlal Marwah Marg, Off Saki-Vihar Road Andheri (East), Mumbai-400 072 (Maharashtra) Contact Person: Mr. R. K. Sharma Phone No.: 022-56956300, 56956311 Fax No. 022-56956302 / 10 Email: scsinfo@in.bureauveritas.com 2. Ecocert SA (India Branch Office) Sector-3, S-6/3 & 4, Gut No. 102 Hindustan Awas Ltd. Walmi-Waluj Road, Nakshatrawadi, Aurangabad – 431 002(Maharashtra) Contact Person: Dr. Alexander Daniel Phone No.: 0240-2377120, 2376949 Fax No.: 0240-2376866 Email: ecocert@sancharnet.in 3. IMO Control Private Limited No. 1314, Double Road Indiranagar 2nd Stage, Bangalore-560 038 (Karnataka) Contact Person: Mr. Umesh Chandrasekhar Phone No.: 080-25285883, 2520 1546 Fax: 080-25272185 Email: imoind@vsnl.com 4. Indian Organic Certification Agency (INDOCERT) Thottumugham P.O., Aluva - 683 105, Cochin (Kerala) Contact Person: Mr. Mathew Sebastian Telefax:0484-2630908-09/2620943 Email: Mathew.Sebastian@indocert.org 5. International Resources for Fairer TradeSona Udyog (Industrial Estate)Unit No. 7, Parsi Pandhayat Road, Andheri (E), Mumbai – 400 072 (Maharashtra) Contact Person: Mr. Arun Raste Phone No.: Tel: 022-28352811, 28235246 ext. 22 Fax – 022-823-5245 Email: irft@vsnl.com

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An Analysis of the Coffee Crisis in India 6. Lacon Quality Certification Pvt. Ltd Chenathra, Theepany, Thiruvalla - 689 101(Kerala) Contact Person: Mr. Bobby Issac Telefax: 0469 2606447 Email: laconindia@sancharnet.in 7. Natural Organic Certification Association Chhatrapati House, Ground Floor Near P. N. Gadgil Showroom Pune-411 038 (Maharashtra) Contact Person: Mr. Sanjay Deshmukh Phone No.: 020-25457869, 56218063 Fax: 020-2539-0096 Email: contact@nocaindia.com 8. OneCert Asia Agri Certification Private Limited Agrasen Farm, Vatika Road, Off Tonk,Jaipur-303 905(Rajasthan) Contact Person: Mr. Sandeep Bhargava Phone No. : - 0141-2720202 to 0141-2770342 Telefax No: - 0141-2720202 Email: info@onecertasia.in 9. SGS India Pvt. Ltd. 250 Udyog ViharPhase – IV Gurgaon – 122 015(Haryana) Contact Person: Mr. Sudarshan Sharma Phone No.: 95124-2399990 to 98 Fax No.: 95124-2399764 Email: sudarshan_sharma@sgs.com 10. Skal International (India) A Division of CU Inspections India Pvt. Ltd. No. 191, 1st Main Road, Mahalaxmi Layout, Bangalore – 560 086 Contact Person: Mr. Narayana Upadhyaya Phone No.: 080-23491928, 56966507 Fax no.: 080-23491935 Email: skalindia@eth.net 11. Uttaranchal State Organic Certification Agency (USOCA) 12/II Vasant Vihar, Dehradun 248 006(Uttaranchal) Contact Person: Dr. S. K. Malik Phone No.: 0135-2760861 Fax: 0135-2760734 Email: uss_opca@rediffmail.com

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Appendix-2

Interview with Mr. Gautam Sircar, Vice President, Hindustan Lever Limited 1. What is your view about the coffee crisis? How HLL sources the coffee beans for its brands Bru and Green label? GS: The fall in tea and coffee prices should not be looked as a crisis as the fall in prices was only there for a few years which are a cyclic phenomenon and have happened in previous times as well. For example tea prices fell from the year 2000 to 2003 and coffee prices fell from 1997 to 2002. Now the prices are competitive. Hindustan lever buys the green beans mainly from the coffee curing units both for export purposes and for its own brands in India. HLL does not buy directly from the coffee growers, as they are fragmented and also because they cant assure of quality and volume. HLL is exporting green coffee beans to Kraft. 2. Has the fall in coffee prices impacted HLL? GS: The HLL brands have remained strong due to its focus on quality and therefore there has been no impact on HLL due to the fall in coffee prices. However, its not just HLL but other strong coffee brands have also grown during this period. 3. The present coffee crisis has affected the livelihoods of the small coffee growers. The small coffee growers in order to survive are trying to compensate lowers prices through volumes ignoring the quality of the beans. Do you think this process is growing to affect the coffee traders like HLL and others? GS: There is a distinction between small tea growers and small coffee growers. Where as the small tea growers is described as those growing tea on lad less than 10.1 hectares, in coffee such a farmer would be very well off and would hardly fit into the description of small grower. Majority of the small coffee growers own less than 1 hectares of land. HLL agrees that fall in returns for the small coffee growers will have an impact on the quality and as a result impact the profitability of the coffee traders like HLL and others in the long run. Therefore every attention has to be given for improving the quality of the coffee beans.

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4. The Unilever’s new business partner code says that the company is working with their first tier of suppliers on human rights, labour standards, working conditions and care for environment-with the aim of complete adherence by 2005-How is it being implemented in the coffee supply chain. GS: HLL does not have the wherewithal to source their coffee from small coffee growers. They are not organized and there are no major contact points to engage with them. There is a need for organizing the small tea and coffee growers. HLL on its part is keen to engage with small coffee and tea growers and want them to improve the standards. HLL is willing to preferentially buy the tea and coffee from them if they meet HLL quality standards and if it is commercially viable. HLL is also willing to pay a competitive price if the small growers get their coffee and tea certified under any of the recognized social and environmental certification system. HLL is willing to explore the possibility of preferential buying at competitive rates and improvement programmes in association with NGO’s active in the tea and coffee sectors. 5. What role HLL is playing in the Coffee Board along with other players like Tata Coffee to reduce the adverse impact of the crisis and improve the condition of the growers? GS: HLL is represented in the marketing committee of the Coffee Board and trying to do its best to disseminate good farm practices and research findings to the small coffee growers. Coffee Board needs to create a fund for the welfare of the small coffee growers through putting a cess on the coffee exports. 6. HLL has initiated some unique projects in its other areas of operation like Swastha Chetna, Greening barrens, Happy Homes etc-Are there such initiatives in the coffee sector as well? GS: These projects are primarily in the tea sector where HLL is involved in the production process; However, HLL is not involved in coffee production in India. Hence, there have been no such programmes being conceived in the coffee sector. 7. Has HLL adopted any coffee sector specific codes like Utz Kaffee, Rain Forest Alliance, 4Cs etc? GS: Most of these codes deal essentially with the coffee producers. There are no specific codes available for the traders. Therefore, HLL which is not into coffee production has not adopted any codes mentioned above. 8. What are HLL’s suggestion with regard to improving the condition of the coffee workers and coffee small growers? GS: a. The coffee small growers needs to be organized and should work for improving the quality. Rights of the coffee workers need more attention.

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b. Coffee Board should put a cess of coffee exports to create a separate fund for the coffee workers and small growers in crisis. c. The coffee small growers should go for inter-cropping to ensure that their livelihood is not affected if one of the commodity prices crash.

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Acknowledgments We sincerely thank all the people who have given their valuable time and shared their experiences and insights with us, which made this study possible. As there are too many people involved in various stages of the project, we don’t want to take the long route of listing all the names and say thank you to every one. But, we gratefully remember all the people involved in one way or other. We will remember them always and it is a fact that many of them have become our good friends in the course of the study and follow up actions for improvement of the supply chain. We specially acknowledge the deep interest shown in the project by Viraf Mehta, Chief Executive, Partners in Change and Coen van Beuningen Economic Advisor in Hivos. We also thank them for writing the Preface and Foreword respectively. We are thankful to Dr. Bärbel Weiligmann of Dutch Coffee Coalition for painstakingly going through the draft report and offering her valuable comments and suggestions. We sincerely thank the trade union leaders, farmers and growers, exporters, NGO leaders, consultants, government officers, corporate executives and all others who allowed us to enter their life and learn from their experiences. We thank Koshy Mathew, Word Makers, Bangalore for editorial and design support and Rajeev Govind for cover design and illustrations.

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Researchers and Authors Dr. Shatadru Chattopadhayay Senior Program Manager, Partners in Change, New Delhi shatadruc@picindia.org Shatadru holds a Ph.D. from Jawaharlal Nehru University (JNU), New Delhi in South Asian Political Economy and has been working on Trade and Livelihood-related issues in the Tea, Coffee and Garment industries. He specializes in Corporate Social Responsibility, particularly its implementation across the value-chain . He is an adviser to several Indian and International NGOs and Universities on sector-specific CSR issues and is Secretary of the Indian NGO Forum for Responsible Business. Pramod John Senior Programme Manager (South), Partners in Change pramodj@picindia.org Pramod joined Partners in Change in February 2004 and is located in Bangalore. He holds a Master’s degree in English Literature from the Mahatma Gandhi University, Kerala. He has worked both in the corporate and voluntary sectors and is a proponent of bridging the digital divide. In 1991, he founded Prakruthi – a voluntary and charitable trust engaged in computer literacy and livelihood skills enhancement for the underprivileged children.

Research Coordinator Sjoerd Panhuysen Project-Coordinator, Dutch Coffee Coalition, The Netherlands s.panhuysen@koffiecoalitie.nl Sjoerd Panhuysen is an international development specialist who received his education at the University of Nijmegen and Center for International Development Studies. Sjoerd has been working in the Dutch Coffee Coalition as a campaign coordinator and has initiated multi-stakeholder training programmes for local NGOs and labour unions in the coffee sector in Brazil, Kenya and Guatemala. Currently he is working on the expansion of the training programme in India.

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An Analysis of the Coffee Crisis in India

T h e C o f f e e C risis a n d i ts I m p a c t i n I n d i a This is a study undertaken in the coffee-growing regions of India in the light of the alarming increase in number of farmers’ suicides following a crisis in the coffee sector. The study was done as a collaborative effort between Partners in Change, India and Dutch Koffie Coalitie, Netherlands, with a view to:  Provide an account of the coffee crisis in India with special reference to its impact at the social

and economic levels for small-scale producers, cooperatives, plantations and workers.  Critically examine the legislative and policy framework (including implementation and execution

of laws) in the coffee sector.  Undertake a mapping of the coffee industry value-chain to establish key buyers, and identify

key influence points for socially responsible practices.  Evaluate the role of the key players and institutions involved in Indian coffee trade.  Identify the different quality systems active in the Indian coffee sector and its impact through the

coffee chain in India.  Provide recommendations about various options to improve the working and living conditions

of the most marginalized in the coffee value-chain.

Partners in Change is a not-for-profit organisation, established by ActionAid International-India in 1995 to proactively engage with businesses and to maximise their impact on the lives of the most vulnerable and marginalised stakeholders, in a positive manner. Partners in Change recognises that there are various stages of evolution towards the integration of Corporate Social Responsibility (CSR) as an essential business process and helps businesses at all stages – identifying stakeholders, their relevant issues and managing these relationships, developing CSR policy and guidelines, training/sensitising company staff, benchmarking a company’s social responsibility programme, establishing CSR management systems, social audit, keeping the company abreast of latest issues in development and social responsibility through publications, seminars, workshops and the website. In the coffee sector, Partners in Change seeks to empower small coffee growers of India for fair terms of trade and improve their livelihood. Towards this, Partners in Change is working to strengthen small coffee growers’ organisations and build their capacity on social and environmental standards and engaging with big coffee-roasting companies to take responsibility across the coffee supply chain. The Dutch Coffee Coalition was formed in 2002 with the aim of improving the working and living conditions at the beginning of the coffee chain. The Dutch Coffee Coalition is raising public awareness regarding the lack of labour rights on coffee plantations. The coalition is calling on coffee roasters and supermarket chains in the west to take responsibility for the violation of rights that occurs at the beginning of the coffee chain. In the coffee-producing countries themselves, the Dutch Coffee Coalition works (cooperates) with trade unions and other non-governmental organisations (NGOs) to improve the situation for coffee pickers. The Dutch Coffee Coalition comprises of Hivos, Novib, Oikos, Pax Christi, Solidaridad, FNV Bondgenoten, CNV Bedrijvenbond, Landelijke Vereniging van Wereldwinkels, Zuid-Noord Federatie.

P AR TNERS ARTNERS

IN C HANGE www.picindia.org

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ZNF/K OFFIECO ALITIE OFFIECOALITIE www.koffiecoalitie.nl

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