Bitter Beans

BITTER BEANS

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TheCoffee Crisis

and its Impactin India

BitterBeansBitterBeans

An Analysis of the Coffee Crisis in India

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BITTER BEANSAn Analysis of the Coffee Crisis in India

Shatadru ChattopadhayayPramod Johnd Johnd Johnd Johnd John


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BITTER BEANSAn Analysis of the Coffee Crisis in India

Shatadru ChattopadhayaySenior Programme Manager, Partners in Change, New DelhiPramod JohnSenior Programme Manager -South, Partners in Change, Bangalore

Research CoordinatorSjoerd PanhuysenProject-Coordinator; Dutch Coffee Coalition, The Netherlands

© 2007, Partners in ChangeEdition: FirstISBN 81-903505-3-6

Published by

Partners in ChangeC-75, South Extension Part II,New Delhi 110 049Tel: +11-4164 2348-51www.picindia.org

With Support ofDutch Coffee Coalition, ZNF/Koffiecoalitie, The Netherlandswww.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 isprohibited.

Photographs: Pramod John

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

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Table of ContentsPreface 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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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 IndiaAccredited Under the National Programme for OrganicProduction (NPOP) 113

Annexure 2: Interview with Mr. Gautam Sircar,Vice President, Hindustan Lever Limited: 115

Acknowledgments 118

Frequently referred units

1 acre .4047 hectare

1 Lakh 100,000.00 100 Thousands

10 Lakhs 1,000,000.00 1 Million

1 Crore 10,000,000.00 10 Million

10 Crores 100,000,000.00 100 Million

100 Crores 1,000,000,000.00 1 Billion

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Preface

The effects of the fall of global coffee prices to a thirty-year low in2002, on key stakeholders, especially small-producers, in India hasnot received the attention it deserves and while there have been severalanalyses of the global coffee crisis in Latin America and Africa, this isone of the first efforts to understand the impact of the global coffeecrisis 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 moreimportant for the economies of the states in which it is grown. Coffeecontributes between 3 to 4 percent of the GDP of Karnataka, thelargest coffee-producing state of India. An estimated 5 million people,directly or indirectly, depend on coffee in the three southern states ofKarnataka, Kerala and Tamil Nadu for their livelihood. There are178,000 holdings in India, of which 98.4 percent are less than fivehectares in size and falls under the category of small holdings as perthe Government of India’s definition.

Indian coffee farmers, mostly poor smallholders, still sell their coffeebeans for much less than they cost to produce. Small-scale coffee farmersand farm workers are still vulnerable to the price swings in the coffeemarket 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 declinein the quality of coffee produced, which, in the long run, could affectall the actors in the value-chain. At the same time, the challenge is tomake the coffee market work for all, even if the global prices furtherimprove. Improved social, environmental and economic practices ofthe stakeholders across the supply chain can lead to remunerative prices


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for small coffee growers and fair wages to the workers, on the onehand, and better access to markets, reputational benefits, increasedworkers’ satisfaction and loyalty leading to increased productivity,increased savings through better environmental management andreduction 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 incollaboration with Koffie Coalitie, Netherlands is an in-depth analysisof the impact of the global coffee crisis on all the coffee industrystakeholders in India and associated social, economic andenvironmental issues and concerns in the coffee-producing states ofKarnataka, Kerala and Tamil Nadu. The study was made possiblethrough the active participation of different stakeholders includingthe small coffee-growers, curing establishments, exporters, trade unions,civil society organizations and government agencies.

I am confident that this study can contribute significant inputs tocoffee small holders, civil society organisations, policy-makers, businessleaders as well as academicians towards unleashing the immensepotential of the Indian coffee industry.

Viraf MehtaChief 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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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 BeuningenEconomic Advisor in Hivos (in the Hague NL and Bangalore)

Member of the Coffee Coalitionand the Coffee Support Network.

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IntroductionThe global coffee prices came down to a 30-year low in 2002. In recentmonths, however, the international coffee market has begun to recover,as reflected in higher international prices for coffee. But, the recoveryhas not led to an end of the coffee crisis. Indian coffee farmers, mostlypoor smallholders, still sell their coffee beans for much less than theycost to produce. Small-scale coffee farmers and farm workers are stillextremely vulnerable to the coffee market’s price swings and thedisproportionate market power of local buyers, international tradersand multinational coffee companies. Farmers sell at a heavy loss whilebranded coffee sells at a hefty profit.

With falling coffee prices, exports of Indian coffee went downsignificantly. In 2000, India exported 253,000 tonnes of coffee, whichfell 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 ofits foreign exchange earnings from coffee wiped out. The declinecontinued in the following two years. Coffee exports fell from 214,000tonnes in 2002 to just 186,000 tonnes in 2003, representing a fall of37 percent in a four-year period.. The fall was significant. While exportshave gone up in 2004-05, there is no surety that the problems facingthe coffee industry in India are over.

In the meantime, coffee production in India is rising. Taking 1997as the benchmark year, India registered a massive growth in productionfrom 2.64 million bags to 3.40 million bags in 2002. Yet, over thesame period export earnings “nosedived” 51 percent from close to Rs20 billion to Rs 9720 million.

The Indian coffee industry directly employs 535,000 people, of which50 percent of are women working in 178,308 coffee holdings. Theworst affected by this situation are the small holder-coffee growers andworkers in coffee plantations.


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In Kerala, several estates were reported to be closed or on the vergeof closure. Again, due to the crisis, many social benefits available toworkers were either pruned or withdrawn.

Many reports appeared in the media at this time of workers beinglaid off and plantations remaining unattended. Oxfam estimated thatbetween 2000 and 2002 there was a 20 percent fall in the number ofcoffee plantation workers in Karnataka. This meant the loss of atleast 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 tosell their lands, but land rates have fallen to Rs 115,000 per acre fromRs 450,000 before the crisis began. Often this is inadequate to pay offthe loans.

Suicide deaths have emerged as an annual trend in the rural scenein Karnataka. According to media reports, to date more than 200small coffee growers have killed themselves, unable to grapple withthe crisis. In Wayanad district of Kerala, 94 farmers, trapped in a viciouscycle of mounting loan liabilities, committed suicide between May2001 and June 2004. The suicides of coffee farmers in Kerala andKarnataka continue unabated. This fact brings to the fore the magnitudeof the economic collapse that prevails in the district.

Such kind of an alarming situation would lead to fall in the qualityof coffee produced and, in the long run, would affect all the actors inthe value chain – a fact agreed by the Indian coffee traders as well.However, coffee roasters have been unable or unwilling to takeresponsibility across the supply chain and, instead, put the responsibilityon the Government. The Coffee Board and the Government of Indiahave provided some relief to the farmers but, apparently, that benefitedonly a small number of growers. There are very few sustainabilityinitiatives like organic or fair trade schemes operational in the Indiancoffee industry. If at all in practice, they are restricted to big or mediumcoffee plantations.

While there have been some studies on the impact of low coffeeprices on small growers in Latin America and Africa, this is the firstattempt to systematically analyse the impact of low prices on smallcoffee growers in India, the roles of various actors in the coffee valuechain 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 specialreference to its impact at the social and economic levels forsmall-scale producers, cooperatives, plantations and workers.

Critically examine the legislative and policy framework (includingimplementation and execution of laws) in the coffee sector.

Undertake a mapping of the coffee industry value-chain toestablish key buyers, and identify key influence points for sociallyresponsible practices.

Evaluate the role of the key players and institutions involved inIndian coffee trade.

Identify the different quality systems active in the Indian coffeesector and its impact through the coffee chain in India.

Provide recommendations about various options to improve theworking and living conditions of the most marginalized in thecoffee value-chain.

The study has covered mainly the Indian states of Karnataka, Keralaand some parts of Tamil Nadu, as more than 90 percent of Indiancoffee is produced in these States, and crisis is manifested in its severeform in Karnataka and Kerala. The overall methodology was qualitativein nature and, to a substantial extent, participatory survey and casestudies. It included collection of secondary material and statistics, focusgroup discussions and surveys with coffee farmers and interviews inrelevant coffee regulatory agencies, institutions and industry actors.Some of the materials presented in this report have been retrievedfrom internet sources and coffee trade journals, while some others arebased on the findings of two workshops organized with small coffee-growers in Coorg, Karnataka. From the very beginning of the researchsmall coffee-growers and other grassroots-level NGOs working on coffeeissues were involved and contributed significantly to its findings.


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Blooming season – before the berries

Berries and leaves – a riot of green

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Background and Profile ofIndian Coffee Industry

Early History

No one knows how coffee came to India. Legend has it that, backin the 17th century, Baba Budan, a pilgrim travelling to the holy placesof Islam, brought back seven coffee seeds from Yemen. These seedswere planted in the hills of Chandragiri, situated in today’sChickmagalur district of Karnataka. For more than a century after itsintroduction, coffee was rated low in India, restricted in cultivationand consumption to the Malnad farmers who grew the crop forsubsistence and personal consumption. History credits the burst ofcoffee beyond the hills of Chandragiri to a European.1

Coffee was introduced in Kerala in 1826 and the first coffeeplantation in Tamil Nadu was set up in 1840.2 Most coffee planted inthe early years was Arabica, mainly the Old Chicks variety thatapparently inherited the bean qualities of the original Mokka introducedby the legendary pilgrim, Baba Budan.

Coffee was established as a commercially viable commodity by anenterprising manager by the name of J. H. Jolly of the famous tradingcompany, Parry and Company, Madras State. It was he who petitionedthe Mysore kingdom for a lease of 40 acres of agricultural land to cultivateand export the crop. The petitioner was duly obliged and it proved to bethe turning point for coffee in India. Early on, during his Indian sojourn,Jolly realised the commercial potential of coffee as the bean’s use spreadfrom Arabia to Asia Minor to Europe in the span of a few centuries.Despite the rabid opposition to coffee in some countries (it was termedas Satan’s drink in some places), it slowly gained popularity and came tobe consumed in increasing quantities across the world.


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The commercial exploitation of the drink made more and moreenterprising and pioneering planters to take to the cultivation of coffee.Over the years small holdings coalesced into larger ones that createdbigger coffee estates, almost all of them situated in Coorg district ofKarnataka.

Given that coffee was a variable berry crop by nature and that itsmarkets were volatile, only the courageous and resourceful survived toreap 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 straddledthe entire spectrum of activities in the industry.

These included coastal agents who arranged services leading up tothe shipment of coffee; managing agents who set up coffee-curing works;transport agents who ensured the transportation of the bean as a bulkcommodity and guaranteed its safety en route; and agents who organisedthe 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 thefirst time, an industry which had always forged ahead on its ownapproached the government for succour. This led to the setting up ofthe Coffee Cess Committee, which funded activities to promote coffeeconsumption in the country. The body, which later metamorphosedinto the Coffee Board of India, was set up in 1936 and was to alterIndia’s coffee landscape for many decades.

Since then, India has cultivated most of its coffee under a well-defined two-tier mixed shade canopy, comprising evergreen leguminoustrees. Nearly 50 different types of shade trees are found in coffeeplantations. Shade trees prevent soil erosion on a sloping terrain; theyenrich the soil by recycling nutrients from deeper layers, protect thecoffee plants from seasonal fluctuations in temperature and play hostto diverse flora and fauna.

Coffee plantations in India are, essentially, spice worlds too - awide 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 Indianplanters. The acreage under coffee plantation has grown from 92,000hectares during the 1950s to 354,840 hectares in 2004. Productionhas 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 during1950s to around 960 kg/ha by 2004 - which is one of the highestproductivity rates in the world. Direct labour employment in coffeeplantations was about 150,000 in the 1950s, which has gone up to535,000, 50 percent of them being women. The number of coffeeholdings has increased from 30,000 during the 1950s to over 178,308in 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

Table 1: Acreage under coffee-1950 to 2004

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 growingArabicas of mild quality while those with warm humid conditions arebest suited for Robustas. The major coffee producing regions in Indiaare Karnataka (210000 tons), Kerala (55700 tons) and Tamil Nadu(21100 tons) during the year 2004-05.


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Figure 1: Major coffee growing regions of India

The major coffee-growing districts in southern India areChickmaglur, Coorg and Hassan in Karnataka, Wayanad in Kerala,Pulneys and Nilgiris in Tamil Nadu. Karnataka accounts for 57.6 percentof the total coffee plantations in India; Kerala follows with 23.9 percentand Tamil Nadu with 8.6 percent.3 While Karnataka produces roughlyequal amount of Robusta and Arabica variety, Kerala and Tamil Naduproduces predominantly Robusta and Arabica respectively. Karnatakaproduces 71.0 percent of the total coffee produced in India, followedby 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 percentare less than five hectares in size and falls under the category of smallholdings as per the government’s definition. Of the total coffee holdings,77 percent are small holdings of less than two hectares and theseconstitute 33 percent of the total planted area of coffee in India. Thesegrowers could be, in the true sense of the term, considered as small andmarginal farmers.4 Kerala has the largest number of small and marginalcoffee growers numbering 63,122 (accounting for 83 percent of the totalsmall holdings), followed by Karnataka 32,305 (60 percent of the totalsmall holdings) and Tamil Nadu 11,488 (35 percent of the total smallholdings).

The classifications of small coffee growers by Coffee Board are basedon the parameters of tea industry. However, the major distinctionbetween small tea- and small coffee-growers is the economic status. A

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1 Data Base, Coffee Board of India, July 2005.

State/District

Arabica Robusta Total Arabica Robusta Total

Karnataka

Chickmagalur 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 8,600 29,600 18,700 6,450 25,150

Sub total 94,800 115,200 210,000 83,350 102,200 185,550

Kerala

Wayanad 100 47,700 47,800 75 54,575 54,650

Travancore 750 6,300 7,050 300 6,700 7,000

Nelliampathies 450 1,700 2,150 650 1,550 2,200

Sub total 1,300 55,700 57,000 1,025 62,825 63,850

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

Sub total 16,500 4,600 21,100 14,350 3,400 17,750

Non Traditional Areas

Andhra Pradesh& Orissa 4,000 0 4,000 3,000 0 3,000

North Eastern Region 200 100 300 175 125 300

Sub Total 4,200 100 4,300 3,175 125 3,300

Non ConventionalAreas - - - 50 0 50

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

2004/05 2003/04

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

coffee grower with three to five hectares of land would not be fittingthe category of marginalised growers and are relatively well-off.Therefore, the study considers less than two hectares as the criterionfor small coffee holdings.

Section 1(4) of the Plantation Labour Act (PLA) 19515 provides alegal 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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Table 3: Area and share of production of coffee underdifferent coffee holdings in India 2001-2002

No. of Holdings Area under coffee

No. Size of Holdings Number % to Total Area (Ha) % to TotalShare

I 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

Total 175475 98.4 247087 71.21 60%

II 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

Above 100 167 0.1 31571 9.10

Total 2833 1.6 99908 28.79 40%

III Total (India) 178308 100.00 346995 100.00 100%

Source: Coffee Board of India, July 2005.

fifteen or more persons are employed or were employed on any day of thepreceding twelve months.

Holdings between 10 hectares and 100 hectares may be generallyclassed as those belonging to semi-feudal landlords. They constitute1.6 percent of all holdings and carve up 23.5 percent of all land undercoffee. Holding size above 100 hectares is generally called as “companyestates” 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, representing71 percent of all coffee areas, which account for 60 percent of the totalcoffee produced in India.. However, the remaining 40 percent isproduced by 2,833 holdings that are above 10 hectares in size. Theyconstitute just 1.6 percent of the total holdings and yet control around30 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 muchmore 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 ofKarnataka, Kerala and Tamil Nadu for their livelihood. While coffeecontributed only around 1.5 percent of India’s total export earning, in2003-04, India’s share in global production was at 4.45 percent and itsshare 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 tonneswere exported. On an average, more than 80 percent of the coffeeproduced in India is exported. Of the total production, more than 70percent is exported to European countries with Italy, Russia andGermany being the largest importers of Indian coffee. The biggestexport destination of Indian coffee is Italy (23.5 percent in 2004-05 atthe 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, bythat comparison, imports only 3604 MT (1.70 percent in 2004-05 atthe rate of Rs. 72,760 per tonne).

Region-wise exports of Indian Coffee

The Different Stages of Coffee Production in India

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

Source: Coffee Board of India, 2005


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turning progressively from green to yellow to orange and finally brightred on ripening.8

These ripe berries are picked and sent for processing. The berriesare pulped to extract the coffee beans, which are then washed anddried naturally under the sun. Both Arabica and Robusta varieties areprocessed by the wet (washed) and dry (unwashed) methods and areaccordingly classified as Plantation (washed Arabica), Arabica cherry(unwashed Arabica), Robusta Parchment (washed Robusta) and

Ready for picking

Ripe berries

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Robusta Cherry (unwashed Robusta). After processing, the beans aretaken to curing works. The thin parchment skin on the coffee bean isstripped off, revealing the bean, commercially known as green coffee.The hulled coffee beans are graded and sorted and are screened forconformity with different quality standards. Sometimes, the hulling isdone at the farms, but, for small coffee-growers in India, there areseveral private small hulling units who do the work for them.

After this, the beans are graded. The primary grades are based on thesize of the bean, while the secondary grading is based on the density of thebean. The beans are sized by passing them through a sieve and, then, theyare separated by density. Then the beans are manually inspected to removebad beans the ones that have not completed the processing properly.

The operation of curing works includes warehousing, storing, pre-cleaning, 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 anEnglish planter of the same name during the 1920s.This variety remained popular with the plantingcommunity till the 1940s, because it was less susceptibleto rust. Today, it is grown in a few areas but it is stillknown for its exceptional cup quality.

S.795: This is by far the most popular Arabica selection releasedduring the 1940s with high yields, bold beans, superiorquality and relative tolerance to leaf rust. This selectionwas developed using ‘Kents’ Arabica, known for its highquality. Even today, the S.795 is a favourite with theplanters and is a widely cultivated Arabica variety.S.795 has a balanced cup with subtle flavour notes ofMocca.

Cauvery: Popularly known as Catimor, Cauvery is a descendantof a cross between ‘Caturra’ and ‘Hybrido-de-Timor’.Caturra is a natural mutant of the famous Bourbonvariety. Thus, Cauvery inherited the high yielding andsuperior quality attributes of Caturra and the resistanceof ‘Hybrido-de-Timor’.

Sln.9: Selection 9 is a derivative of a cross between anEthiopian Arabica collection, ‘Tafarikela’, and‘Hybrido-de-Timor’. Sln.9 has inherited all the superiorcup quality traits of Tafarikela.


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curing works served as pooling agents for the Coffee Board. Sincethen, growers directly interact with the curing works. As service units,they play a key role in managing the supply of green coffee accordingto the requirements of the domestic and international commoditymarkets that are governed, to a large extent, by daily and weekly auctionprices.

Harvested, processed, sorted and graded, the beans then get packedinto sacks and are taken to ports for loading into ships for export. Theport of Cochin in Kerala handles the maximum number of shipmentsof coffee from India. Mangalore, Tuticorin and Chennai are the otherexit points. Coffee is sold in the domestic market too.

The Coffee Board of India

The Coffee Board of India was constituted by Government of Indiathrough the Coffee Act of 1942. It is a statutory organization underthe Ministry of Commerce. The Coffee Board owes its origin to theCoffee Control Conference that was held in 1940 in India to discussthe serious economic problems faced by the coffee industry duringWorld War II. The Government then recommended that privatemarketing of coffee in India should be prohibited and that it should bedone by a marketing authority - the Coffee Board.9 Producers wereobliged to surrender their produce to the Board, which, in turn, soldthe coffee through domestic and export auctions. The growers receivedtheir remuneration based on average sales realization. The pricing systemensured that exports were competitive, while domestic consumersobtained coffee at controlled prices. In the process, it insulated growersfrom the volatility of coffee prices and led to a large scale expansion ofcoffee plantations based on steady return. This nationally regulatedcoffee marketing system was reinforced by international marketingregulations of the International Coffee Organisation (ICO) in 1960.

With the collapse of international quota system in 1989, the movefor deregulating of coffee marketing also caught up in India. In 1992-93, the Government initiated a process by which an Internal SalesQuota allowed growers to sell 30 percent of their output directly tothe domestic market. It was increased to 50 percent in 1993-94 and in1996 coffee marketing was fully liberalized in India. Hence, it meant amajor shift in the role of the Coffee Board. Now the activities of theCoffee Board are focused in the areas of research and development,quality control, market information and its dissemination, promotion,extension and free market development.

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The Board comprises 33 members representing all sectors of thecoffee industry. They are nominated by the central government andhold office for a period of three years. The Chairman of the Board isusually an Indian Administrative Services (IAS) officer from deputedfrom the Government of India.

The members comprise three members of parliament, four memberseach representing principal coffee-growing states and the interests oflabour, seven members representing small growers, three members eachrepresenting large growers and coffee trade, two members representingcuring houses, consumers, interests of non-traditional coffee growingstates, one member representing instant coffee manufacturers and oneeminent personality in marketing, management or promotion of coffee.

The Coffee Board functions through its six statutory committees,namely, Executive Committee, Marketing Committee, PropagandaCommittee, Research Committee, Development Committee and CoffeeQuality Committee. The headquarters of the Coffee Board is inBangalore but it has 69 extension offices spread throughout the coffeegrowing areas of India. The research department has six researchstations and labs and the promotion department administers threecoffee depots and the famous chain of 11 Coffee Houses all over India.

Table 4: The structure of Coffee Board of India

I. Members of Parliament

II. Representatives of Governments of principalcoffee- 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 thanprincipal coffee growing states

IX. Representatives of consumer’s interests

X. Representatives of Instant coffee manufacturers

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


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Coffee Trade

At present coffee from the growers is purchased at approximately40 local buying centres. Many major and small buyers are representedat each centre. Most small growers prefer to sell coffee in the form ofdry cherry and parchment. Large growers and estates sell coffee ingreen and graded form either directly to exporters or through privateauctions.

As mentioned above, Coffee Board was selling coffee by domesticand export auctions but a vacuum emerged after the dismantling ofthe marketing function of the Coffee Board. This was filled in by theprivate sector in the form of Indian Coffee Trade Association (ICTA),which begun conducting weekly auctions (Thursdays) at the CoffeeBoard premises in Bangalore, from 1993.

The sellers in the form of individual plantation companies and theestates offer different lots of green coffee at a certain floor price. Thebuyers in the form of coffee brokers, export agents and domestic roastersbid for the lots. Once the bid is sealed, the buyer and seller enter intonegotiations to lift the stocks, transport the beans to warehouses andthereafter either move the green coffee into the domestic market orship it to export markets. At present work is also going on tradingonline through a portal www.CommodityIndia.com

As of now, less than 10 percent of the total coffee is sold throughauctions, primarily because most small growers prefer to sell theirunprocessed crop directly to exporters or roasters. Tracing the reason forthis to tax laws, Mr. Arun Bidappa, Managing Director of Karnataka CoffeeBrokers, 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 incomefrom “self-cured” coffee has to be shown as income under the Income TaxAct,10 which is a federal legislation. Growers, who already pay agriculturalincome tax in the State, do not want the additional hassle of filing returnsunder the Central income tax Act too, according to Mr. Bidappa.

Farmers prefer not to cure the coffee, saving themselves the troubleof filing one more paper. In the process, curing works lose out. Theydo not get business directly from farmers and can cure coffee only ifthey buy it. However, this makes them “buyers” and are liable to paythe State sales tax.

What is happening is that instead of dealing with the organisedsector (the curing works), farmers now have to turn to agents, whomay or may not be reliable. The agents buy the green coffee fromfarmers and cure it for a processing fee at curing works and sell it. The

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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 largeexporters who have established channels overseas with long termassociations with importers and roasters.

Sell directly to the domestic roasters, soluble manufacturers orexporters.

Hold coffee under the growers own title at a curing works afterprocessing and then sell through channel of one’s choice.

Submit the coffee to the curing works and warehouses formarketing through auctions.

Tendering a lot of 600 kg of graded Plantation A or RobustaCherry AB into the domestic futures market.

The major coffee traders in India are Allanasons Limited, GeneralCommodities Limited, Hindustan Lever Limited, Amalgamated BeanCoffee Trading Company Limited and Tata Coffee Limited. Major buyersare Harrisfreeman, Coca Cola Far East Limited, MT Treieste UK.

Table 5: Major coffee exporters of India

Sl. Name of the Exporter Arabica Robusta TotalNo. (M.Ton) (M.Ton) (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

10 LMJ International Ltd 1309 2452 3762

Total 30722 64265 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 theproducers of tea, coffee, rubber, and spices. The membership of the


30

association comprises proprietors of small and large holdings as well asrepresentatives of corporate bodies. Three state planters’ associationsfrom Karnataka, Kerala and Tamil Nadu along with various districtassociations 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 importantplayer in the economy and several district planters’ associations wereformed in Wayanad, Coorg, North Mysore, Travancore, the ShevaroyHills and Kolagheny Hills of southern India. However, theseorganisations were working independently and had no centralorganisation. In1893 it was decided to form the United Planters’Association of Southern India (UPASI).

Membership was restricted to the District Planters’ Associations andthere was no provision for individual membership. However, membersfelt that various influential proprietors and firms from southern Indiashould also be incorporated in UPASI so that it could play a major rolewith regard to policy-making in the plantation sector. Eventually, in1936, 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. Duringthis time, many Indian planters joined the association.13 UPASI wentthrough another reorganisation in 1955. The member-associations fromMadras, Travancore-Cochin, Mysore and Coorg took over theresponsibility of dealing with labour-related issues along with other

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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 theaffairs of the association. This Committee accords representation toall crops, size-groups and states. There are nominated members as wellin the form of representatives from state planters’ associations, legaladvisers and co-opted members. The EC forms various independentcommittees to focus on one particular commodity. The presentcommittees 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 Presidentare the trustees. They oversee the working of the Secretariat, ResearchInstitute and advice the Executive Committee on various aspects ofthe 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 oncoffee gardens/plantations is estimated at 535,000. This estimate, madeby the Coffee Board, does not include the contribution of family labour,which is significant. However, institutions such as UPASI, estimatethe total labour force that toils to produce India’s coffee at one million.15


32

Most of these plantations are situated in remote and uninhabitedareas, where crops have not previously been grown. Hence, plantationworkers are mostly migrants. These labourers are often provided housingin the estates itself along with facilities for shops, services andcommunity activities such as recreation and cultural expressions.16

These big plantations focus solely on the production of coffee tobenefit from economies of scale. They are mainly situated in the Coorgregion of Karnataka. These big plantations are often part of a chain ofplantations owned by large corporations. These plantation structureshave often been termed as “enclaves”, alien and inward-looking andcut off from all links with the surrounding people and economy.17

Labour is hired from outside, given housing and incorporated into anew form of society, the pattern of which is dictated by the managementof the plantation and designed solely to suit the needs of theplantations. Some observers have noted that the owners of theplantations were also the rulers of their principalities.18

State/Dist 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04*

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 31393

2. Travancore 9060 9360 9930 10107 10484 9436 9506 9506

3. Nelliampathies 278 2780 2780 2780 2780 2502 2515 2515

Total 46310 46600 47230 47533 47985 43187 43415 43415

Tamil Nadu

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

Coimbatore(Anamalais) 2260 2260 2260 2260 2260 2034 2044 2049

Total 29670 29550 29660 29660 29660 26694 26830 26960

Non-TraditionalArea 9870 9870 10200 13802 14295 12866 33857 33605

Grand Total(India) 486730 491700 526470 535156 551777 496845 527540 527431

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

Table 7: Average employment of workers in the coffee plantations

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


34

Hulling in process

Heaped up beans ready for packing for export

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The Coffee Crisis andits Impact in India

Coffee industry in India has witnessed a major crisis caused by fallingcoffee prices. The average price of Arabica variety of coffee has comecrashing down from 130.18 US cents per pound in 1997 to 39.61 UScents in 2002, to recover marginally to 54.46 US cents in 2004.However, the dramatic fall in Robusta prices which is grown widely inIndia has created a major crisis. Robusta prices fell from 76.3 US centsper pound in 1997 to 22.08 US cents in 2002 to marginally recover to30.03 US cents in 2004.1

Source: www.indiaonestop.com, August 2005.

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


36

The fall in coffee prices means small and medium sized coffeeplantations having to close down production, one after another. Theplantations being enclave economies, thousands of coffee workers arelosing their jobs. Their wages are not paid and they do not have anyincome, otherwise, to purchase food and clothing. Their children stopgoing to school and begin to work along with them to augment familyincome. Workers are also denied medical care.

Marginal and small coffee-growers, owning less than two hectaresof land, are on the verge of a major crisis as well. These marginalcoffee-growers comprise 77.5 percent of the total coffee holdings whichis around 33 percent of the total land under coffee cultivation in India.Many small growers are debt-ridden due to falling prices and someseveral have committed suicides. It is in this context that the presentsection looks into the impact of the crisis in Kerala, Karnataka andparts of Tamil Nadu.

Coffee Workers

Former UPASI President, Mr. I.J.J. Rebello estimates that coffeeplantations 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 “precariousand, unless prices improve, the entire industry will close down.” “Someestates are unable to pay wages and provident fund dues or meetpayments due to their suppliers,”2he said, echoing his class interest.

Off to work in the inclement weather

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It appears most of the job losses are related to the casual or temporaryworkers. “The first to be hit in such a crisis is labour,” says N.K. Pradeep,General Secretary of the Karnataka Growers’ Federation. “But growersare deeply in debt and are unable to make repayments to financialinstitutions. Many planters have actually abandoned their estates.”3

Pradeep had a labour force of 50 to manage his estate but now it isreduced by 30 percent. Today, his losses are between Rs.10,000 andRs.15,000 per acre.4

This kind of a situation was visible to this researcher during visitsto Wayanad in Kerala. Mr. K.A. Asokan,5 the trade union leader fromBharatiya Mazdoor Sangh (BMS) and member of the Coffee Board inWayanad felt that with the fall in coffee prices many coffee plantationsin Wayanad have closed down. In places where coffee plantations arestill working, the employers have cut down the number of workers ina major way. According to him, before the crisis there were 55,000workers; it is now down to 40,000. Majority of the workers who areaffected are tribals - mainly from the Pania community, who primarilywork as plantation workers and don not own agricultural lands. Healso felt that children are working to augment family income. Whilediscussing about wages, he maintained that bonus has not been paidto workers in operational estates for the past couple of years and thatworkload has increased significantly. Mr. Asokan, along with othermajor trade union leaders like Mr. Kunji Kannan of Centre of IndianTrade Unions (CITU), Mr. B.K. Gopalan of Indian National TradeUnion 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 ActionCommittee” on the issue of job-loss of farm workers and for paymentof 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


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Elumbelary Estate (Coffee and Cardamom unit),Mepadi Panchayat 60

Baby Estate, Thariode Panchayat 60

Mr. P.T. John, a trade union leader, said that it was relatively easyfor planters to close down coffee garden compared to tea gardens. Teagardens usually have their factories located within the garden withvery 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 withoutincurring heavy losses.7

The workers of the closed-down plantations are desperately lookingfor jobs in other regions. This kind of a situation has led to a series ofstrikes and major movements led by coffee workers.

An estimated 360,000 workers of the rubber, tea, coffee andcardamom plantations in Kerala went on a strike demanding de-freezingof their dearness allowance (DA) and revision of wages, pending since2002.8 Later, the unit of All India Kisan Sabha (AIKS) in Wayanadalong with Agricultural Workers Union (KSKTU), Adivasi KshemaSamithi, CITU, and DYFI, had gone on a series of agitations. Themain 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 tosafeguard the price of agricultural produces in the domesticmarket.

Procure produces by declaring minimum support price (MSP).

Institute agro-industries in the government and co-operativesectors.

Provide free land to landless adivasis.9

One of the demands of the agitation was payment of compensationto the bereaved families of workers who committed suicide. Anindefinite hunger strike in front of the district administrative officesin Wayanad lasted 11 days in March-April 2004. In the background ofmounting suicides this agitation actually shook the entire state ofKerala.

The media also played a positive role and helped to create awarenessamong the public about the gravity of the agrarian crisis. The

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Government responded by negotiating with the agitators and to pay acompensation of Rs. 50,000 to the bereaved families. The governmentdeclared a one-year moratorium for all agriculture loans and waivedinterest for one year. It was also forced to provide free ration to alladivasi and poor families.10

AIKS decided to advance the agitation in order to force the centraland state governments to find a solution to the agrarian crisis.Conventions of farmers suffering from indebtedness were organised atdistrict and village levels in which thousands of farmers participated. Ajoint delegation visited the prime minister and agriculture minister atNew Delhi and submitted a memorandum in the first week of July.11

They have also conducted a march of 562 persons who travelled morethan 500 kilometres from Wayanad to Thiruvananthapuram, the Statecapital, and staged a public meeting in front of the legislature on 19 July2004.

In Karnataka, most of the organized coffee workers are located inCoorg in Kodagu District. The fall in coffee prices has led to lesser daysof employment for the workers, but there are no major reports of closuresof the estates. The trade union movement is weak in this region, andthe fact wages were fixed in 1999 under tripartite agreement involvingthe Government , the Karnataka Planters’ Association and the tradeunions is an evidence of this. The wages were then fixed at Rs 70.10 perday equated at 2491 points in the State Average Consumer Price Indexand the rate of variable dearness allowance (VDA) was fixed at 3.5 paiseper point over 2491 points. As per this agreement, the total wages atpresent would be Rs. 78.66 per day.12 However, in the agreement betweenKarnataka Planters’ Association and the trade unions on 20 April 2005,due to the crisis in the coffee sector, it was agreed to nominally increasethe wages to Rs. 71 per day equated to 2703 consumer price index pointsand VDA at the rate of 2.75 paise per point per day per worker over andabove 2703.13

However, the Karnataka Industrial and Plantation Labour Union(KIPLU) refused to sign this agreement. Mr. M.G. Aiyappa, the GeneralSecretary of the union has sent several notices to the KarnatakaPlanters’ Association and to the Labour Commissioners, mentioningthat the plantation workers are losing Rs. 1.83 per day from 1 April2004. As per his calculations the wages should be 72.83 per day and iswilling to challenge the present settlement in the court.14

The Communist Party-affiliated CITU organized a major conferencein Chickmagalur district of Karnataka in December 2002. The union


40

came up with the following demands:

1) Immediate opening of all closed gardens;

2) Proper implementation of the Plantation Labour Act andamendments to the Act in favour of the workers;

3) No wage cuts and freezing of dearness allowance (DA). Ensureimplementation of all existing benefits. Appropriate wages toensure 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 harassmentin all gardens as per the guidelines of the Supreme Court;

6) Immediate negotiations with all trade unions of plantationworkers on their long-standing demands and conditions in theindustry, and

7) Increase taxes to big plantations and provide relief to small andmedium growers.15

However, other trade unions were not part of these demands.

In Tamil Nadu, there are 320 estates which come under the estatesystem of coffee production. Out of that, 214 are between 10 and 20hectares.16 Tamil Nadu, being a predominantly tea producing state,coffee is grown alongside tea. Therefore, during the coffee crisis, theworkers were accommodated in the tea plantations. Some of theexclusive coffee estates have converted themselves into tea estates inthe Nilgiris like Glenburn Estate. Some of the estates have left onlyone division for coffee and concentrating on tea like Maruwalla estate,Kilkotagiri estate, Kuttada Estate, Houkal Estate, Singara Estate inKotagiri, Nilgiris.34 There are some exclusive coffee estates in Gudalurregion of Tamil Nadu like Sengel Estate which has 800 acres of coffeebut there is no union representation there. The trade union leaderspointed out that there are other estates in Tamil Nadu like Anipallam,Korangamudi and Mauar which are inaccessible as they are situated inremote areas and trade unions have limited access to these estates.17

In Gudalur, the trade union leaders felt that the workers have beenless affected because the tea agreement that is entered between trade unionsand employers also governs coffee workers.

However, according to trade union leaders, the majority of thecoffee grown in Tamil Nadu is by small holders and the wages areRs. 54 per day.18

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Small Coffee-Growers

The impact of the crisis on the small coffee-growers could be assessedas following:

First Category: Coffee farmers who had sufficient liquid fundscould face the crisis and continue to maintain the holdingswithout postponing the required agricultural practices to keepthe estate running. . These farmers certainly will benefit onceglobal prices increase. But their numbers are very small.

Second Category: Farmers who did not have liquid reserve fundsand 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 underSection 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 tothe 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 workedby the individual workmen provided he or she has not actually workedfor less than 85% of the working days in a month. Fraction of a day willbe rounded to a day in favour of the workman. The attendance bonusshall not be taken into account for calculation of PF, Bonus, Gratuity orany other benefit/allowance.

3. Dearness Allowance: On and from the quarter beginning 1.1.2006, theworkmen will be paid a D.A. at the rate of 30 paise per day. Thereafter theD.A will be enhanced at the same rate every quarter until the quarterOctober/December 2007.

4. Plucking incentive: The plucking incentive structure will be modified asfollows from 1.1. 2005-09-15

Yield Class Base Kgs Incentive SlabsGL/YLD/Ha/Month 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: 90ps. Per kg


42

and survived for three to four years. But, gradually they are alsobeing drawn into the debt trap.

Third Category: These are coffee farmers who do not have liquidfunds, have borrowed heavily from banks and other sources andare deeply in debts. This category of coffee farmers wasadventurous in nature. In anticipation that the coffee boomperiod would continue for some more years, they startedexpanding their land-holding, invested a lot on purchasingmachineries, upgradation of infrastructure facilities, etc. Theyare now in deep trouble. Even if the coffee prices shoot up tothe level of boom period, their survival seems to be a big questionmark. The only hope and expectation is that the governmentwould take necessary bail-out steps and that the coffee boomperiod would last for a longer period of time. Even though theimpact is not uniform on all coffee farmers, 80 percent of themare drawn into debt trap, with 60 percent of them being severelyaffected. The majority of small and marginal farmers is in thiscategory.

As we have seen earlier, most of Indian coffee is produced by smallcoffee growers. The highest numbers of growers owning less than twohectares of land under coffee are in Kerala, numbering 63,122, followedby 32,035 in Karnataka who are severely affected by the fall in coffeeprices.

The majority of small coffee-growers in Kerala are situated inWayanad district in three Grama Panchayats - Nenmeni, SulthanBathery, and Noolpuzha. In these three panchayats, coffee is thepredominant commercial crop and the major source of livelihood forfarmers. Coffee is cultivated on 1500 hectares in Sultan Bathery, 2900hectares in Noolpuzha, and 1200 hectares in Nenmeni. The Wayanadcolonisation scheme was implemented mainly in these three panchayatsunder which two hectares of land were distributed to each settler-farmer and ex-serviceman. Around 49,000 hectares of land were thusdistributed during the early 1950s and all those plots were convertedinto coffee gardens. Through inheritance and sales, these lands haveundergone subdivision and fragmentation. Hence the area has thelargest concentration of marginal and small farmers.19

Coffee cultivation is the largest provider of employment to thepeople of Wayanad. The 114,000-strong tribal population of Wayanadparticularly depend on coffee cultivation for their livelihood, mainly

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Grama Panchayat Area

Meppadi 5562

Vythiry 1560

Pozhuthana 1290

Kottathara 1216

Thariode 920

Padinjrathara 1762

Vengappally 680

Kaniymabetta 800

Ambalavayal 2400

Noolpuzha 2900

Sulthan Bathery 1500

Menangadi 1316

Grama Panchayat Area

Poothady 2050

Pulpally 550

Nenmeni 1200

Mullenkolly 50

Panamaram 605

Vellamunda 1660

Edavaka 431

Mananthavady 1760

Thirnelly 1262

Tavinjal 200

Thondaranadu 440

Malpetta (Municipality)1638

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

because coffee provides employment in all seasons. Weed controlmeasures are taken during the rainy season. At the outset of the south-west monsoon, the soil is prepared by upturning. The first doses ofmanure and fertilisers are also applied during this time. The secondweeding is done during October and November. Post-monsoon fertilizerapplication is done during this period. Harvesting starts in the monthof December and comes to a close by the end of January. Pruning isdone in February and March. Control measures against pests, insects,and diseases are taken in the month of April. Pre-monsoon manuringis 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 coffeeplantation 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 cultivationis strong among marginal and small farmers. Members of the household,both men and women, perform a sizeable proportion of the agriculturalactivities in coffee cultivation. It is estimated that 16 percent of the

Source: Coffee Board of India


44

work in the holdings of marginal farmers and 10 percent of the workin the holdings of small farmers are carried out by household members.During harvesting season, even school-going children in the familyengage themselves in beans-plucking to earn some pocket money. Itwas stated that the involvement of domestic labour made it possiblefor marginal and small farmers to produce coffee at a low cost.

There is a strong presence of migrant workers as well, mostly fromthe neighbouring state of Karnataka. A majority of them are fromChamaraja Nagar, H.D. Kote areas of Karnataka. The main reason behindtheir moving to Wayanad was the attractive wage structure prevails inthe plantation economy of Wayanad. In 2000, the average wage oflabourers was Rs. 125 per day. It was reported that during thecorresponding period wage rates in Karnataka were only Rs. 35 per day.22

Ironically, with the onset of the crisis, thousands of people fromWayanad are crossing border into Karnataka and Tamil Nadu everyday 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 husbanddown with tuberculosis,” she explains. She has to finish cooking, cleaning,washing and get things ready for the children to go to school. “And I haveto leave by 7 a.m. to reach here (Kutta, Kodagu in Karnataka) in time forwork. Here, the sahucar’s vehicle will pick me and others up to take us tohis estate.” There, Bimala will earn Rs. 50 for her weeding work, whichkeeps her bending for eight hours in the sun. But she will lose Rs.15 eachday on bus tickets. She takes her food from home. “At the work place weget 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.3.50each way) to buy provisions. Since Bimala has very little cash in hand at anygiven moment, she cannot buy enough at one time and thus reduce thenumber of trips she makes. So, this often cuts further into the Rs.35 shescrapes out of her trips to Nathayal. On whatever is left she looks after twoyoung sons (in the 8th and 9th standard) and a sick husband who cannotwork. Bimala sleeps at ten p.m. or after, most nights. The family survivesand 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,” sheexplains. “Most come here like me, seeking work. I’ve done this for fouryears. The only thing is, I hardly ever see the children awake.” Wayanad’salready marginalised adivasis have been pushed deeper into debt and penuryby a crisis that has sharply reduced any employment they could get.

(The Hindu, 27 Dec 2004)

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who are adivasis go for work in Kodagu district at half the wage theyused to get in Wayanad. “When there was work in Wayanad,” saysMani, “I got a daily wage of up to Rs. 120. Now I work for Rs. 80 a dayin Kolikuppa. My bus fare to the place is Rs. 34 one way.” Mani triescoping by doing the journey only three times a week and staying overthe other days, leaving very little time to spend with his family.23

To sum up the impact of the crisis, coffee growers are trying outdesperate measures to hold on to their farms. The first impact isenvironmental, as the growers are selling off the shade trees in theirgardens to survive.

This coffee crisis has forced the farmers to postpone much-neededcultural operations. That has resulted in losing almost 10 percent oftheir Arabica farm due to severe Arabica coffee stem borers (pests anddiseases). In the absence of any remedial measures from the governmentto combat the crisis, small growers are trapped in the clutches of money-lenders with heavy interest-bearing loans. They are forced to borrowat unreasonable and unsustainable levels of interest, thus eroding theirvery base in a few months’ time. In this process some of them havelost 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 andchildren. This crisis is no exception. Here, children are being betrayedquality education for want of adequate resources.

The cordial relations between workers and various market playersdeveloped over the decades are gradually eroding. This has resulted ina 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 agentsfor the Indian Coffee Board but after the elimination of pooling in1992, there has been a proliferation of hulling and curing units. Thehulling units only procures the coffee and removes the husk from thebean and grades them, whereas the bigger curing houses also plays therole of warehousing, storing and advanced level of curing. The All IndiaCoffee Curers Association (AICCA) is the sole representative body ofthe coffee curers and is based in Karnataka. The Association has playeda vital role in rationalising the activities of the curing works in differentstates, including fixing indicative curing charges and other related costs.


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The Association also looks after the quality parameters of the coffee andinteracts with other associations and central and state governments onissues of interest to the curers.24

Since 1992, there was a great demand for hulling units as smallgrowers began selling their coffee directly to private agents. However,with the fall in prices, many of the hulling and curing units are alsogoing through a crisis.

There are similar stories everywhere in Karnataka. The hub of curingworks is Kushalnagar where, out of 38 curing works, only five arereportedly functioning at present. Some of the curers have reportedlybegun compromising on the quality of coffee to make up for the fall inprices by mixing sand.25 However, the majority of the curing work isdone by big players like ABCL and Tatas, who cure one-third of thetotal Indian coffee crop.

Roasters and Big Companies

While the coffee crisis has affected all the smaller players, the bigplayers have remained relatively unaffected during the peak crisis periodof 1998-2002.

Tata Coffee owes its origin to two companies — Coorg CoffeeCompany Limited, London and Pollibetta Coffee Estates CompanyLimited, London, both managed by Matheson & Co. They wereamalgamated to form the Consolidated Coffee Estates Limited,Edinburgh in 1892. In 1943, the Edinburgh enterprise formed an Indiancompany called Consolidated Coffee Estates Limited with its headoffice at Pollibetta, Karnataka.

In June 1967, the name of the company was changed toConsolidated Coffee Limited (CCL) and in 1990-91, Tata Tea acquireda controlling interest in CCL through an open offer to CCL’s residentshareholders. In September 1999, Asian Coffee Limited, Coffee LandsLimited, Veerarajendra Estates Limited and Charagni Limited weremerged with CCL, making it the largest integrated coffee company inAsia. In August 2000, its name was changed to Tata Coffee Limited.Today the company controls 25 estates in Coorg, Hassan andChikmagalur in Karnataka.26

At present the Tatas have a coffee-curing capacity of over 32,000tonnes per annum which cures one-eighth of all coffee produced inIndia. In addition to coffee it produces on its estates, it also roasts andgrinds coffee in three plants in different locations in South India.27

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In early 2005, Tata Coffee, along with Turner Morrison, purchasedequity worth Rs. 500 million in the Mauritius-based Barista CoffeeInternational. Barista Coffee International is, in fact, a subsidiary ofthe New Delhi-based Barista Coffee Company. With this, Tata Coffeeobtained a 34.3 percent stake in Barista. Barista sells coffee at kiosksto 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 totouch Rs 8000 million by then.28

Due to all these strategies, Tata Coffee maintained its profits evenduring the crisis period. In fact, most of Tata Coffee growth has takenplace during 1998-2002.

Similarly, around the same time some major companies like

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 Coffeeand Estate Produceand Gross Incomefrom Servicerendered, etc. 21,193.64 17,826.57 16,823.33 18,522.24 20,256.64

Profit before Tax 1,462.60 1,317.38 2,026.24 2,199.10 3,111.83

As percentage of sales 7 7 12 12 15

Profit after Tax 1,357.56 914.24 2,019.89 1,710.36 2,870.23

As percentage of Sales 6 5 12 9 14

As percentage of NetWorth (Shareholders’ Fund)10 7 14 1 16

Expenses as percentageof Income 93 93 88 88 89

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

Fixed Assets / NetWorth (as percentage) 81 80 69 62 54

Net Profit perEquity Share 10.89 7.33 16.20 13.72 23.02

Dividend Distributed 4.00 3.50 5.00 5.00 6.50

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


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Amalgamated Bean Coffee Trading Co. Ltd. (ABCL) went on an expansiondrive and have showed constant profits. According to reports in thepress this year, Naresh Malhotra, Director of ABC Trading Co., “plansto expand the land under coffee plantation were being pursued by thecompany.”29 ABCL has also expanded its curing business becomingone of the largest curers in India handling 75,000 tonnes in 2001. Ithas also expanded the retail sale of its coffee. Coffee Day Xpress filledthe slot between the traditional café and the vending machine, therebyproviding for fast, hygienic food and beverage at very convenientlocations. Coffee Day Xpress serves the coffee that ABCL grows on its5,000 acres of coffee estates.

Similarly, others such as Hindustan Lever Limited, a subsidiary ofUnilever, have recorded double-digit growth in coffee brands, Bru andGreen Label. According to Mr. Ms. S. Banga, Chairman of HLL, thefoods division of HLL has shown a gross margin of improvement ofabout 13 percent during 2001-04.30

HLL’s Green Label and Bru are leading players in the filter andinstant coffee segments of the domestic market. Latest industry figuressuggest that Green Label has a retail value in excess of Rs. 1000 millionand accounts for nearly 56 percent of the value-share in the filtercoffee segment. The instant variant, Bru, also has a sizeable presencein its category with a retail value estimated at around Rs. 1900 million.31

Meanwhile, HLL is likely to galvanise Bru to tap the increasinglyattractive out-of-home liquid coffee retailing segment. Currently, HLL,through Bru, operates about 10,000 vending machines in bothinstitutional and retail segments and expects this figure to double inthe next two to three years.32

According to Mr. Gautam Sircar, Vice President of HLL, the roastersand traders have remained, to a great extent, unaffected by the fall inprices which is a cyclic phenomenon. However, he acknowledges thatif prices remain low, the small coffee-growers would be forced tocompromise on quality, which will eventually affect all players in thesupply chain. HLL’s suggestions to deal with the present scenario are:

a. The small coffee-growers need to be organized and work forimproving quality. The rights of coffee workers need moreattention.

b. The Coffee Board should levy a cess on coffee exports to createa separate fund for coffee workers and small growers in crisis.

c. Small coffee-growers should go for inter-cropping to ensure that

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their livelihood is not affected if prices of one of the commoditiescrash.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 coffeefrom India accounts for 90 percent of ITG transactions. The annualturnover is in the range of 14,000 to 18,000 tonnes, making Coca-Cola Far East, the entity that effects the purchase, one of the topoverseas buyers of Indian coffee.

Ecom Coffee Group

Another recent entrant is the Ecom Coffee Group, part of ECOMAgroindustrial Corporation of Switzerland, a vertically integratedcommodity origination and processing firm. Ecom accounts for over 8percent of the global trade in coffee and ranks as the third largestplayer in the coffee sweepstakes worldwide. Ecom’s global business modelrelies on a decentralized, entrepreneurial mode of operation suited tothe specific business environment in each country. Its India operations,Ecom Gill Coffee Trading Pvt. Ltd., based in Bangalore, maintains adirect relationship with growers, offering high-end risk managementservices and has its own green coffee processing unit in Mysore district.The company serves its international roaster clients on a round-the-year basis through its unique vendor managed inventory system.

Olam International

Yet another global commodity major, Olam International,headquartered in Singapore, has significantly increased its purchasesfrom India in recent months and now ranks amongst the top ten foreignbuyers of Indian coffee. Olam International Limited (Olam or thecompany) supplies raw and processed agricultural commodities, grownmainly by community and SME producers in developing countries towell-established regional and international clients. It is a fully integratedcompany that engages in itself sourcing, primary processing, transport,warehousing and distribution of a broad range of commodities, includingcocoa, rice, timber, cashew, cotton, coffee, sugar, sesame, cashew nuts,and spices. It is the largest shipper of Robusta coffee in the world. InIndia, it operates through Olam Exports (India) Ltd., with its principaloffice located in Quilon, Kerala, and having branch offices in Bangalore,Delhi, Mumbai, Chennai and Ahmedabad.


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Nedcommodities India Pvt. Ltd.

The latest actor on the scene is Amtrada Holdings BV based inAmsterdam, The Netherlands, which has a 100 percent stake inNedcommodities India Pvt. Ltd. Having taken over the Kodagu CoffeeCuring Works in Kushalnagar, Coorg, the company is currently in theprocess of installing new equipment to enhance capacity and upgradethe 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 illycaffèS.p.A., the world’s leading roaster of Espresso coffee from Italy,synonymous with fine coffee. It awarded prizes to the winners of itsprestigious contest, the Third India Coffee Quality Prize for Espresso,at a function held in Bangalore. illycaffè is the single largest buyer ofArabica beans from India, having sourced over 40,000 bags of greencoffee beans from the country last year. As per Andrea Illy, head ofillycaffe, it is interested in developing the market for gourmet coffeein India. The University of Coffee, a centre of excellence establishedin Trieste, Italy, to spread Italian coffee culture internationally, plansto conduct a series of training courses in different cities in India, bothfor the trade and consumers. This would be in addition to the workbeing conducted by illycaffè technologists with the Indian coffee growers’community to improve methods of harvesting, curing, processing andpackaging.35

Comark

Comark – the Indian Coffee Marketing Cooperative Ltd, whichwas started in 2001 – offered a long-term solution to the crisis bysuggesting the development of the Indian domestic market for freshcoffee through a link-up between Comark and a cooperative marketinginstitution. “If coffee has to reach the Indian middle class, it has to bethrough a marketing cooperative with a good network. There is hugepotential here,” D.S. Raghu, Chairman of Comark, said.36 Comarkhas been talking to Amul as a possible marketing and retailingcooperative in this venture. The initiative would need an initialfinancial support of around Rs. 500 million. However, Dr.Radhakrishna, Deputy Director of the Coffee Board of India pointedout that Comark today is going through a major crisis and is makinghuge losses.37

There are some major players in India who accept the fact some

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


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The forlorn look of a small farmer – what about gen-next?

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

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Increasing Numbers ofSuicides by Small Coffee

Farmers and Workers

Situation in Kerala

Between May 2001 and June 2004, 120 farmers committed suicidein Wayanad, 24 of them in the last six months alone. Trapped in avicious cycle of mounting loan liabilities, they opted to resort to theultimate step. This fact brings to the fore the magnitude of the economiccollapse that prevails in the district.

For every acre of land in Mullankolly-Pulpally Panchayat of Wayanadthere is a debt of Rs. 200,000 to 300,000. The price crash has maderepayment of loans impossible. Growing debt has forced many to fell treeson their lands to sell the timber damaging the ecologically fragile zone.The crisis has affected the children as well. Many of the young childrenhave dropped out of schools and have begun working in the fields ofKodagu, Karnataka. Parents are not in a position to pay the tuition fee ofthe children.

However, it has to be noted that the government does not admitmore than 50 distress suicides during this period.3 The officials of theCoffee 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 centsin Edavaka and of Mohammed Ali with 58 cents of coffee land in Porunnannur ofKerala is no different. These were just three of the many farmers sunk by theprice of coffee and pepper. Their debts rose as farm-gate prices fell. They, andsome 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


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that there are such large numbers of distress suicides.4 However, A.C.Varkey, Chairman of Farmers’ Relief Forum (FRF), one of the largestfarmers’ organizations in Kerala with a membership of around 150,000families mentioned that the banks provided huge loans on liberal termswhen the coffee prices were good, but as the prices fell, the banksbegan to mortgage the lands of small farmers leaving them with noalternative but to commit suicide.5 According to Varkey, more than600 distress suicides have taken place in Wayanad between 2000 and2005. “Everyday I am taking dead bodies from the small growers’ familiesto the cemetery or to the crematorium.”6 FRF has launched somemilitant 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

“The coffee we are producing gets sold for no price, but we have to buy even ourcoffee from the market at a huge price. Where does the profit go?”

Without knowing the complexities of the global coffee value chain, Clara, thewife of Johny T.T., a small coffee-grower who had committed suicide was able toraise a very pertinent issue. The Johny family had been growing coffee in theirone-acre plot for some time. They had borrowed Rs. 25,000 from the bank in late1990s when the coffee prices were very high. However, with rapid fall in prices anddraught 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 childrenand also repay the loan. However, she wonder with the Rs. 70 per day she getswhen 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 65such cases taken place in last two years.2

Ms. Clara Johny of Merakkadabu village, Pulpally, Wayanad district, Kerala

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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 thatrates of suicides have gone up tremendously during the 1995-2002period. As per the statistics of 2002, Kerala has the highest suiciderate (30.8 per 100,000 population) among all states in India. Thenational rate is only 11.2 per 100,000, while Global rate is 14.5 per100,000. The total number of suicides reported in Kerala during 2002is 9810, that is, 27 each day of the year or one per hour. The majorityof the people who committed suicide were farmers and the most-affectedareas 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 Wayanaddistricts show the highest numbers of suicides. Idukki district is apredominantly tea-producing area and most of the tea plantations haveclosed down. Wayanad, on the other hand, is predominantly a coffee-producing area. It is also interesting to observe that the rate of suicidesincreased by almost 20 percent in Wayanad during 2003, the year afterthe worst crisis in the coffee sector. Although there has been somedecline in the number of suicides in Idukki and Wayanad, (in Wayanadit went down to 38.02 per 100,000 population in 2005),8 it is still wayahead of the national average of 11.2 per 100,000.

Initiatives to address the situation

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


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collectorate of Wayanad in March 1999 and several picketing of CoffeeBoard offices.10

The Indian Farmers’ Movement (INFAM) has also been active intaking up the issue of indebtedness of coffee-growers. On 13 April 2004,over a thousand farmers under the banner of INFAM organised a siegeof the lead bank at Kalpetta and declared that the farmers of Wayanadwere “on their own writing off their bank loans.” INFAM has claimedthat, with over 650 units and nearly 11,000 active members in thedistricts, it would spread the message that the farmers of Wayanad neednot bother about their debt burden any more. They declared that,beginning April 13, they would consider all loans as closed and wouldfight any kind of recovery measures collectively. This is the only way,INFAM believes, they can save the small growers from committingsuicide.11

The coffee growers in Wayanad lost nearly Rs 1.2 billion due to thefall in coffee prices, during 1995-2000. The effect of such loss of incomeis visible in the economy of the entire district.

Initiatives by the Government

The Government of India approved a 169,786.9-million rupeerehabilitation package for farmers in the predominantly suicide-pronedistricts of Andhra Pradesh, Karnataka, Kerala and Maharashtra inSeptember 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, andspecific schemes for watershed development, seed replacement,horticulture and extension services, and for subsidiary income throughlivestock, dairying and fisheries.

It also includes an ex gratia of Rs.15.5 crore from the PrimeMinister’s National Relief Fund to the families of farmers whocommitted suicide in these States.

The package would be implemented over three years in 31 suicide-prone districts – six each in Vidharbha and Karnataka, 16 in AndhraPradesh and three in Kerala.

For Karnataka, the package is Rs. 2,689.64 crore, including aninterest waiver of Rs. 209.81 crore. The Kerala package of Rs.765.24crore encompasses an interest waiver of Rs. 360 crore.12

Price Volatility

The Convener of the Small and Marginal Farmers’ Association

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(SMFA), Mr. P.T. John, informed that SMFA, the Spice Trust of India,FEMARK and Wayanad-based NGOs such as Solidarity, have cometogether to intervene in various ways. The interventions they haveplanned 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 ResearchInstitute (CFTRI), which has developed the technology to make coffeedecoction concentrates with a shelf life of six months. Initialexperiments done by SMFA show that one unit can produce 70 litresof coffee decoction in a day using 200 kg. of coffee beans. SMFA hascontacted the industrial department and tribal welfare department ofthe Kerala government for support and has secured 50 percent subsidyfor tribal units. SMFA is planning to raise the balance amount frombanks. It plans to procure the coffee beans from the tribal small coffee-growers from different villages and roast it centrally. SMFA is alsoplanning to approach the Kerala Infrastructure Development Agency(Kinfra) for providing land at a subsidised price. It also aims to tie upwith the Milk Marketing Cooperative of Kerala which has got 7720outlets all over the state to market the coffee decoction. Thisgovernment cooperative is already selling tea and coffee at their outletsand SMFA seeks to urge the cooperative to buy coffee from them on apreferential manner which will be sold at a lesser price than establishedbrands like Nestle or Bru or Tata Coffee, all owned by multi-nationalcorporations.

SMFA has organised several meetings and consultations to unitethe small coffee-growers of Karnataka, Tamil Nadu and Kerala. In March2005, it organized a three-day conference of small coffee-growers in

Source, C.V. Joy, 2004.

Year Production Price Difference Loss(1000 tonnes) (Rs. per Kg) (In Pirce) (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


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Kushalnagar of Kodagu district in Karnataka and adopted a resolutiondemanding a debate on their problems in the parliament andimplementation of planter- and grower-friendly policies. The resolutionsadopted at the conference include growing high-quality coffee to counterthe challenges posed by MNCs, creating awareness among people onprofit-making initiatives and persuading the government to treat theproblems of the planters and the workers without discrimination.13

The resolutions also took note of the need to create a market for theproduce through co-operative associations. Apart from this, coffeeshould be sold under different brands in the local market throughthese co-operatives, it was decided. The conference also decided tointroduce locally grown coffee using organic methods.14

A.C. Varkey of Farmers’ Relief Forum has taken the other route ofcontesting to the state legislative assembly. The major demands of theForum are:

Improve medical facilities for workers in the plantations.

Support production of value-added coffee by small growers byway of putting up a processing unit which would be run bygrowers’ cooperatives.

Write-off loans to small and marginal farmers.15

In a consultative workshop held in Wayanad, Kerala16 with thecoffee 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 regulatingthe market.

No proper information on coffee cultivation in the departmentof agriculture.

Less internal consumption of coffee.

Old and obsolete technology.

Some of the major suggestions mentioned to come out the problemsinclude:

Farmers need to consider cheaper ways of value addition.

There should be national and international networking betweensmall coffee-growers to learn from each others’ experiences.

Coffee Board should explore ways and means to increase

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domestic coffee consumption.

New web-enabled information centres/kiosks related to coffeecultivation and trade must be set up.

More awareness on coffee must be created through the self-helpgroups.

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 differentfrom their counterparts in Kerala. Most of the small coffee-growers areindebted and have even begun working in larger plantations as casuallabourers on lesser wages.

In the Malnad region, the coffee growing peasantry is seriouslyindebted. Most peasants are not able to repay debts and have tried tosell their lands. But land rates have fallen to Rs 115,000 per acre fromRs 450,000. Often, this is inadequate to pay off the loans.

Suicide deaths have become a regular feature in rural Karnataka. Todate more than 200 peasants have reportedly committed suicide, unableto grapple with the crisis.17 The situation reached such an alarmingproportion that the Government through the Zilla Panchayats andofficials from different departments have initiated meetings with thesmall coffee-growers to discuss different ways prevent the growers fromtaking the extreme step.18

Thammaiah of Sakleshpura taluk in Hassan district ofKarnataka

Thammaiah had built a concrete-roofed house when the going was good. Heowns one acre of coffee. Now with prices hitting rock bottom, he finds himselfworking as a casual labourer at wages that are 35% less than normal. His declassprofession has kept him going. But it has been of no help in clearing the debtshe has accumulated. (Peoples March, December 2003)

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


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Reasons for suicides

Karnataka Government set up the Veeresh Committee in 2000 toinvestigate the high numbers of suicides. The Committee’s findings notedthat that most of the 147 people who committed suicide in Karnataka,although eligible for government compen-sation, have not done sobecause of agricultural losses, but due to personal reasons or lack ofmoney to repay private loans. The committee was set up after ChiefMinister of Karnataka, Mr. S. M. Krishna, told the assembly thatgovernment compensation had become an “incentive” for farmers tocommit suicide. The compensation given to the family of a farmer whohas 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 Coorgdistricts that the Karnataka Growers’ Association represents decidedto take to the streets and sat on a dharna (picketing) in front of thehead office of Coffee Board in March 2002. They had put up severalbail-out demands before the Government of India which included apetition to defer the repayment of loans taken by small growers foreight to 10 years and to waive interest repayments and sought freshloans. The proposal has been accepted by the Government.

However, investigations doneby leftist groups in Chickmagalurdistrict of Karnataka in 2001showed a huge impact on the smallgrowers due to the fall in coffeeprices. Rural indebtedness stoodat an average of Rs 14,687 for eachpeasant household. Only 30percent of these were frominstitutional sources.20 The restwere from landlords. Hence,government measures to coffeeproducers such as debtrescheduling and temporarydownscaling of interest rates arenot helpful to the small andmarginal farmers as they are to themedium and big coffee planterswho draw all their loans from banks.

Major Trade Unions in CoffeeSector of Karnataka

1. Thota Karmikara Sangha(INTUC)

2. Karnataka Estate Labour Union(INTUC)

3. Karnataka Planters Trade UnionCongress (INTUC)

4. United Plantation WorkersUnion (AITUC)

5. Karnataka Industrial andPlantation Labour Union

6. Sahyadri Plantation andGeneral Workers’ Union

7. Karnataka Estate Coffee Curingand Hotel Workers Union

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Currently, against the input cost of Rs. 63 a kg for Arabica, thesmall coffee-growers are getting only around Rs. 40. For Robusta, theyare getting Rs. 22 against an input cost of Rs. 30. Moreover, smallgrowers pay interest rates ranging between 14 and 15 per cent for theloan they avail of.21

NGO such as Coorg Organisation for Rural Development (CORD)based in Kushalnagar, Kodagu district of Karnataka, in association withKerala-based agencies has taken up several activities in the region aswell. Their main is to prepare coffee decoction after procuring coffeefrom the tribal coffee-growers who are in distress and then market itlocally.22

A preparatory meeting was held in Bangalore recently to bring allcoffee growers of the country on one common platform. The smallcoffee growers’ associations of Karnataka, Kerala and Tamil Nadu metBangalore in August 2004 under the banner of South India CoffeeGrowers’ Associations’ Co-ordination Committee. They have decidedto form a Coffee Growers’ Associations’ Federation, a national-levelorganisation involving coffee growers’ association representatives fromall over the country.. The objective of the Federation is to fight locallyas well nationally on issues related to small coffee-growers.

An action committee was also formed to formulate rules andregulations, to give a final framework for the Federation and to theproposed national convention in consultation with various coffeegrowers’ associations.23 However, the Federation is dominated by left-wing groups and does not have the cooperation and participation ofall key players.

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

C.T. Medhappa of Major’s Coffee Curing Work,Kushalnagar, Karnataka


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

No cure – closed works

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Analysis of VariousFactors Behind the Crisis

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

International Factors

According to the Oxfam report “Mugged - Poverty in Your CoffeeCup” published in 2002, there are 25 million coffee producers worldwide.It is estimated that around 70 percent of the world’s coffee is grown onfarms of less than ten hectares. In many countries prices do not evencover the costs of production by small coffee-growers. Yet, coffee priceshave fallen by almost 50 percent in the past three years.1 Consequently,the producers are selling at a heavy loss while branded coffees are soldwith significant margins.2 A point to be noted is that ten years back,the producer-country retained one-third of the value of the coffeemarket,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 prosperousand uncontroversial. But, although coffee business is booming in consumingdeveloped countries, current rock-bottom prices are causing immense hardshipto countries where coffee is a key economic activity, as well as to the farmerswho produce it.” The crisis led “to low price levels in recent years and a highdegree of price volatility (…) (this is an obvious) problem, particularly to themillions of small holders who depend on coffee for their livelihood.5

The global coffee trade is controlled by a handful of big coffeeroasters, 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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coffee beans annually. In today’s market, there exists a clear divisionbetween a booming coffee business led by the roasters and a decliningcoffee sector paid for by some of the poorest people in the world.According to some sources in the Global Exchange, the coffee crisiswas “a bonanza for multinational companies.”6 Mr. Brett Inder,spokesman for People for Fair Trade, said, “all the power lies with themultinationals that actually control the industry.” The main cause ofthe price decline, he said, was not the glut of coffee beans, but theprocessors’ use of market power.

Kraft’s flagship brand is Maxwell House. Other Kraft brands includeYuban and General Foods’ International Coffees. Sara Lee’s brandsinclude Douwe Egberts, Hills Brothers, Chock Full o’ Nuts, and MJB.Procter & Gamble’s brands are Folgers and Millstone. Tchibo is soldmainly in Germany. While its competitors concentrated on groundcoffee, Nestle focused on powdered, soluble coffee, sold under the brandname of Nescafe.7

The End of International Coffee Regulations and theCollapse 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 coffee-exporting countries. This could have affected the stability in manythe developing countries which primarily depended on coffee exports.During this period the US government took initiative in forging anInternational Coffee Agreement (ICA). Third World countries favoured

Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jan97 97 98 98 99 99 00 00 01 01 02 02

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

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

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it since it provided price stability and appeared as the only insuranceagainst price collapse.8 The first International Coffee Agreement (ICA)was signed in 1962 and included most producing and consumingcountries.

The International Coffee Organization (ICO) was created in orderto implement the ICA. It is an inter-governmental organizationestablished by the United Nations in 1962, and set up in London in1963. The ICO has administered six Coffee Agreements since theinception of ICO.9 Its members include coffee-exporting and -importing countries and it functions through the International CoffeeCouncil, 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 targetprice for coffee was set and export quotas were allocated to eachproducing country. When the indicator price rose over the set price,quotas were relaxed. When it fell below the set price, quotas weretightened. If a significant increase in coffee prices occurred, quotaswere abandoned until prices dropped to the set price. Although therewere problems with this system, most analysts agreed that it wassuccessful 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 thequota system. Secondly, the existence of producing countries as ‘market units’where governments were in control of decisions concerning exports helped instabilizing the regime. Also, because of Brazil’s acceptance of a shrinking marketshare that resulted from successive ICAs. And, at last, to a common strategy ofimport substitution in producing countries, which required maximummobilization 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 increasingheterogeneity of development models (as Brazil and Indonesia moved towardsa more export oriented industrial strategy). 3. And the rigidity on the supplyside worried roasters, who feared that competitors could get access to cheapercoffee (from non-member countries). This undermined their cooperationwithin the ICA system.

(Stephano Ponte, 2004. Standards and Sustainability in the Coffee Sector. A Global ValueChain Approach. Danish Institute for International Studies. May 2004)


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systemic shortcomings, largely as a result of the withdrawal of USsupport.11 The combined result of these changes led to the failure torenew the ICA in 1989.

The change in regime did not occur overnight. It is important toemphasize that in 1985 only 15 producing countries out of 51 hadtheir domestic coffee markets run by the private sector. All otherproducing countries had different systems of regulation, which weredivided into variable schemes based on a system controlled by thestate (from marketing boards to stabilisation funds or quasi-governmental coffee producer associations and coffee institutes). It istherefore evident that the end of the ICA regime has severely affectedthe balance of power in the coffee chain. From a balanced context,market relations shifted to a dominance of consuming-country-basedoperators over farmers, local traders and producing-countrygovernments. As the head of the ICO, Nestor Osorio, highlights, “inthe last decade consensus was replaced by the new doctrines ofliberalization. This proved to be a serious blow to producers of coffeeand other tropical products and their vulnerability was clearlyexposed.”12

The first post-ICA attempt to organize the coffee market was in1993 with the establishment of the Association of Coffee ProducerCountries (ACPC). It was an attempt initiated by the producingcountries who wanted to reimpose some control over supply flowsthrough an export retention arrangement. Some of the major producersdid not join in, and other member countries withdrew in 1998-99.Finally, during the same season, Brazil exceeded its quota by six millionbags, and the whole arrangement collapsed.13 In May 2000, ACPCundertook a new retention plan that came into operation on October1, 2000. However, just like the first attempt, it also was not successful.14

The ICO has also taken a few initiatives to resolve the “coffeecrisis” although it lacks adequate regulatory power to do so. First, theICO drew up a new ICA in September 2000, which was adopted bythe Council in by a resolution (number 393). This six-year Agreementwas designed to strengthen international cooperation among producingand consuming countries. It includes a number of new objectives whichare to encourage members to develop a sustainable economy bypromoting coffee consumption, a better quality of coffee, and providea forum for the private sector.15 But the most high-profile initiative inthis sector started in September 2001, when the ICO established aQuality 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 anumber of ways in both the supply and demand side by which thecoffee crisis can be addressed through international cooperation.17 TheICO also launched coffee promotion activities in new markets andnegotiated the elimination of tariffs and other barriers to all forms ofcoffee within the framework of the WTO negotiations.18 It is importantto stress that the US were reincorporated into the ICO. The “Returnof the US” will probably give more legitimacy to the ICO.

There were also some attempts at forming regional producergroupings. In January 2002, the Asian coffee-growing countries -Vietnam, Indonesia and India - met in Hanoi to form a body of thethree leading Robusta coffee-producing countries of the world in orderto regulate Robusta sales so that global prices could be manipulated totheir 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 topof that, world stocks amount to some 40 million bags. Coffee productionhas been rising at an average annual rate of 3.6 percent, but demandhas been increasing by only 1.5 percent. At the origin of this coffeeglut lies the rapid expansion of production in Vietnam and newplantations in Brazil, which are harvesting bumper crops in the currentseason.

Three reasons explain why supply and demand have got far out ofline. First, it is the collapse of a managed market governed by theICA.19 Second is the penetration of two coffee giants, Brazil andVietnam, into the global coffee market, Vietnam produced around 1.5million bags in the early 1990s. By 2000, it had become the secondlargest producer in the world with 15 million bags, produced mainlyon small farm-holdings. Brazil, on the other hand, is not a newcomer;it has long been the world’s largest producer, but production has recentlybeen 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 growthalthough newer markets, such as Eastern Europe, show greater promise.The big coffee companies spend millions of dollars on advertising eachyear, but they have failed to stop rich consumers turning to alternative


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drinks.20 All these create a structural imbalance between supply anddemand for coffee. To these one may add other factors such as pricevolatility, which is basically due to climate variability but worsened byreduced cooperation at the international level, increased speculativeactivity by large fund houses in the commodity market, and deregulationof national markets.

Fluctuating International Prices

London and New York are the two main markets where coffee isquoted. These two centres exert a strong influence on world coffeeprices.21 London is dedicated to Robusta and New York to Arabica.There are two markets for coffee - the cash market and the futuresmarkets. The cash market is the market for immediate delivery. It isthe price one would pay for coffee that would be instantly delivered.The futures market is used to help determine the price for futuredeliveries. It is used to purchase a contract for guaranteed futuredelivery. However, it is used to help protect against major fluctuationsthat occur due to market variations. The price is determined byarbitratists meeting on the floor of the New York and London coffeeexchanges, where an open bid occurs. Arbitratists place bids to buy oroffers to sell coffee until the buyer and the seller agree on a price. Thisis how price is fixed and explains the fluctuations. Trading takes placeat certain hours22 and deliveries occur only a few months a year.23 Theprices are extremely volatile. They fluctuate ever day depending onfactors such as the size of coffee stocks worldwide, the weather, politicalconditions and so on.. Over 90 percent of the world coffee traded isgreen (which means unroasted) coffee beans.24

A basic price is defined. Called “the basis,” it represents thedifference between today’s price and the futures price for the nearestdelivery month. The quality of coffee also affects the price. Premiumsor discounts are paid according to what category or what classes thecoffee sold can be ranked (coffee quality can be classified according toa scale of five different ranks).25

Because of its market share, an old saying goes, regarding coffeeprices, “Brazil rules”. It means the moment of truth may come withthe advent of the Brazilian harvest beginning in May. Prices, whilenow relatively high when compared to the past few years, are still wellbelow historic peaks.26

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Non-Tariff Barriers

The rules of international trade ensure that farmers and countriesgrowing coffee for export can never make the most of their crop.Developed countries use escalating tariff structures, that is, systemswhereby import duties increase as a product is refined or manufactured.These prevent coffee exporting countries from developing their coffeeindustries to the full. The same applies to other important crops. Forexample, import tariffs on raw cocoa are set at one level by importingcountries, but import tariffs on processed cocoa powder are set higher,and chocolate higher still. In effect, it becomes not worthwhile forcocoa-producing countries to add value to their crop by turning it intochocolate, even though they can sell chocolate at a higher price thanraw cocoa. The tariffs cancel out any financial gain. In some developedcountries these tariffs reach a peak of 350 per cent or more.

The same dilemma applies to coffee-producing countries. It is noaccident that while import duties on unprocessed coffee are low andthose on processed coffee are considerably higher, the largest and mostprofitable coffee roasting and processing industries are in the developedworld. This system helps prevent developing countries from buildingup value-added industries and thereby increasing their export earnings.27

Similarly, the existence of import duties offers the possibility ofgranting tariff advantages to particular coffee-exporting countries. Thisis a popular instrument in the EU. For example, within the frameworkof the Lom Convention (an agreement between the EU and formercolonies in Africa, the Caribbean and the Pacific), coffee from theseACP countries has free access to the EU market. Also the LeastDeveloped Countries (LDCs, which, to some extent, overlap with theACP countries) are exempt from import duties on processed andunprocessed coffee. The same goes for four South American countries(Bolivia, Colombia, Ecuador and Peru) and a number of CentralAmerican countries (Panama, Costa Rica, Honduras, Nicaragua, ElSalvador and Guatemala). These are temporarily exempt from importduties to prevent coffee producers from succumbing to the temptationto switch to production of cocaine.28 Effectively, this puts countrieslike India, Vietnam and Indonesia in a disadvantageous situation.

Domestic Factors

Increased Production

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


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also the time when prices were falling but the fall in prices did notlead to a fall in production. The supply of green beans was actuallyincreasing.

Increased Imports

Most of the planters and small growers complain that import ofcoffee from countries such as Vietnam and Indonesia at a cheaper ratehas led to excess availability in India. While only small amount of thecoffee imported are coffee essence and other extracts, the bulk of it isin the form of unroasted green coffee. Some major trade unions likethe All India Agricultural Workers’ Union and the All India KisanSabha have sent appeals to the Finance Minister and CommerceMinister of India to restrict import of coffee into India.29 Similarapprehensions were shown by senior coffee planters as well.30

Low Domestic Consumption

Coffee consumption in India is mainly concentrated in southernIndia at about 42,000 tons. The highest coffee-consuming state is TamilNadu, followed by Karnataka, Andhra Pradesh and Kerala. There isvery little coffee consumption in the rest of India. However, coffeeconsumption has shown an increase - from 50,000 tons in 1997-98 to68,000 tons in 2002-03 in absolute terms. But, in terms of percentage

Table 2: Total Coffee Availability and Coffee demandin 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 availability230597.5 267880.4 294352.1 305412.7 303368.6 280888.5

Exports 179059 211623 244941 246908 213586 207333

Domestic consumption50000 50000 55000 60000 64000 68000

Total Demand 229059 261623 299941 306908 277586 275333

Total Accumulated Coffee Stock1538.45 7795.82 2206.95 711.68 26494.24 32049.72

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, coffeeconsumption has remained in the range of 19 to 20 percent in theperiod between 1997 and 2003. The Coffee Board does not see theexpansion of the domestic market as a safeguard against fall in prices.However, the Coffee Board is going ahead with a major consumersurvey 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 beforedomestic consumption increases. Even Brazil, the largest consumeramong producing countries, took ten years to double its consumptionlevel and, significantly, this was entirely by initiatives from theindustry.31

Excess Coffee Stocks in India

Following the symptoms of global coffee industry, there is morecoffee available in the country than it could export or consume (seeTable 2). The excess coffee stock available in the Indian market wentup 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 by2002-03) brought down the price further.

Withdrawal of Coffee Board of India from Marketing Coffee

Small and big coffee growers had, for long, protested the removalof coffee-pooling by the Coffee Board. They complained that the CoffeeBoard was not providing them the true global prices in spite of makinghuge profits. Coffee is now procured (since 1992) by private agentsand the small coffee growers feel that these traders are not givingthem fair prices. Although traders are in a position to offer a higherprice to growers, many take advantage of the small growers’ lack ofknowledge of the global factors. While the traders claim that worldprices regularly published in newspapers, the farmers are aware aboutthe relationship between world price and the price they expect toreceive. Although, some of the small farmers were aware of the globalprice movement, the marginal tribal farmers holding less than oneacre of land had very little knowledge of the prices and rely on hearsayand on the trader who fetches the coffee from the farm gate. Even ifsmall growers are aware of the prices only the better-off growers canafford to store their cherries for several months and choose when tosell. The majority of marginal coffee-growers, desperate for cash, oftenhave to sell as soon as the cherries are harvested. In a weak bargainingposition, they often receive much less than other growers. The privatetrader system has also led to long dealer chains. Coffee is traded up aline of dealers before it is exported.


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Inability of Indian Small and Medium CoffeeGrowers to bypass the MNCs

While more than 80 percent of Indian coffee is exported, it isvirtually impossible for the small and medium producers to reach theWestern consumers directly. This is because green unprocessed coffeecan be stored while processed coffee has a relatively short shelf-life. Itis therefore preferable to locate the processing units as close to theconsumers as possible, both in terms of time and distance. Secondly,blending requires a thorough knowledge of (varying) consumerpreferences. Thirdly, trading and processing are strongly dominated bya small number of transnational companies (TNCs), making it almostimpossible for newcomers to enter not only the global market but alsothe Indian market. Mr. Bose Mandana, a leading coffee-grower fromKarnataka, mentions his company developed a new brand, ‘PlantersGold’ and tried to sell at a competitive price in Andhra Pradesh andTamil Nadu. But, the big players forced the retailers not to stock andsell 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, aretrying to survive by plucking green beans and selling them to localtraders at whatever price available. This kind of situation is leading toa gradual fall in the quality of coffee. Although there are several schemesoffered by the Coffee Board for improving coffee agricultural practices,not many marginal farmers seem to have benefited from these. Thesmall growers have no inkling of what the consumer market requiresand are completely dependent on the information provided by thetraders.

Limited Capacity of the Small Coffee Growers’ Associations

Although there are several small growers’ organizations in all thecoffee-producing states, also represented in the Coffee Board, theirimpact has been limited. Many of the marginal coffee-growers owningone or two acres of land are not members of these associations or theydo not have a voice. Moreover, the activities of the associations havebeen focusing on seeking debt relief from the government and there ishardly any instance of direct marketing attempted. The small growers’associations have also remained fragmented unsuccessful in unitinggrowers from the major coffee producing states. The efforts by theAIKS - the left-leaning farmers’ association - to form an All-IndiaCoffee Industry Action Committee have been questioned by groups

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

Office of the Kodagu Planters’ Association, Coorg


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Scenic Coorg, where most of the coffeeproduced in Karnataka is grown

Mixed crops – Coffee amongshade-giving trees

One of the estates of TataCoffee in Karnataka

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Social and EnvironmentalStandards in Indian

Coffee Sector

The social and environmental standards in the food sector haveperhaps attracted the biggest attention of different groups - fromconsumers to campaigning NGOs. By some accounts, the first instanceof certified coffee being offered to consumers was the certified organiccoffee in 1982, followed by the launching of ‘Fair Trade’ coffee in 1988by the Max Havelaar Foundation of the Netherlands.1 This wasfollowed by labels such as ‘bird-friendly’, and ‘shadegrown’. Ecologically-sound coffees were developed in a complementary fashion to thosebased around Fair Trade and organic themes.

However, as the quality consciousness of consumers (in developedcountries) started increasing since more and more information aboutfood and related matters became available, there was a heightenedapprehension. Whereas, previously, consumers’ concerns were limitedonly 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, environmentalcontaminants and food additives, as well as a broader interest into theway products were grown and processed. In response to these fears andinterests, food packaging materials displayed more and moreinformation.2

The history of labour standards goes back to the creation of theInternational Labour Organization (ILO). The ILO is a tripartiteorganization that brings together representatives of governments,employers and workers in its executive bodies. The first annualInternational Labour Conference, in October 1919, adopted the first


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six International Labour Conventions, which dealt with hours of workin industry, unemployment, maternity protection, night work normsfor women, minimum age and night work of young persons in industry.A few years later, the International Court of Justice declared that theILO’s domain extended also to international regulation of conditionsof work in the agricultural sector. In 1948, the International LabourConference adopted Convention No. 87, on freedom of associationand the right to organize.

However, almost all the standards first talk about observing thenational law and then look into what more is needed. Hence, thechapter begins with an analysis of the major act in the plantationsector (which includes coffee sub-sector) of India.

The Plantation Labour Act of 1951

A number of laws, both Central and State, govern various aspectsof coffee and tea production in India. The most significant legislationgoverning labour standards and working conditions in plantations isthe Plantation Labour Act of 1951. The other relevant legislationsare the Factories Act of 1948, Workmen’s Compensation Act, IndustrialDisputes Act, 1947, Minimum Wages Act of 1948, Employers’ Providentfund Act, Industrial Employment Act, Payment of Bonus Act,Maternity Benefits Act of 1961, and the Employers’ Social InsuranceAct. Among these, the Plantation Labour Act regulates employment,working conditions and working hours, and forms the principal basisof legal entitlement of the workers.

The Plantations Labour Act, 1951 (PLA) applies to any land usedor intended to be used for growing tea, coffee, rubber, cinchona orcardamom or any other plant which measures 5 hectares or more andin which 15 or more workers are employed on any day of the preceding12 months.

Although most of the provisions related to workers’ welfare arealready present in the PLA, 1951, it remains silent on two key aspects- environmental issues and occupational heath and safety norms. Italso legalizes working of adolescents (between the ages of 14 and 18years) at a cheaper rate than adult workers. Yet, the PLA has been abig achievement of the trade unions immediately after India’sindependence with the help of a supportive socialist government. But,the fact remains that many of the provisions of PLA have never beenimplemented or only partially implemented in the big company-ownedplantations.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 stategovernment) have to be maintained and made available by the Employer(Section 10).

Welfare

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

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

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

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

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

provide the workers and umbrellas, blankets, rain coats or other like amenitiesfor 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 weekfor adolescent or child workers (Section 19).4

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

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

No Night for women and children (Section 25)

No child or adolescent will be allowed to work in the plantation unless theemployer 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 dayswork (Section 30 & 31)

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

The Employers are under obligation to maintain a register of accidents andnotify the authorities of any accident where a plantation Worker suffersdeath or body injury and he is unable to report for work for forty eight hoursor more (Section 32).

Source: Tea Act of India, 1951, Government of India


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violations have become quite regular. According to Mr. Aiyappa, leaderof the KIPLU, organising workers in coffee plantations of Karnataka isquite difficult as there are more workers available to do casual workcalled “chengoly”. If the unions try to organise them, the employerspromptly terminate them from service. Moreover, very often, theworkers do not get wage slips which are mandatory under the Paymentof Wages Act. It is considered a legal document and serves as necessaryevidence for workers to avail their Provident Fund.6 He further pointsout that while there are 202,941 coffee-workers in Coorg district aloneas per the figure given by the Coffee Board, not even 60,000 workershave provident fund accounts. He points out that the medical facilitiesare lowest in the medium estates (non-company estates) and, wherethey exist, they are often mere dispensaries manned by unqualified orsemi-qualified doctors. As a result, workers’ with serious illnesses haveto get themselves treated in private referral hospitals like Indo-American Hospital in Ammathi and they have to bear the majorportion of the medical bills.7

One of the primary reasons of inefficacy in implementing the PLAis the penalty imposed for violation of the provisions, which is a fineof Rs. 500 and/or three months’ imprisonment. For subsequent orcontinued violations the fine is Rs. 1000 and/or imprisonment of sixmonths. Under these circumstances, employers find it convenient topay the fine. During the crisis in the coffee sector, which coincidedwith the crisis in the Indian tea sector, the planters made variousrepresentations to the Government to dilute the statutoryresponsibilities under PLA. Their major demand was that thegovernment 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 coffeeplantations and coffee-curing works spread over the entire coffee-growing areas/states including North-Eastern region every year. In 2003-04, the Board reportedly implemented a scheme granting educationalstipends, meritorious awards and financial assistance, besides givingsome 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. Manyplanters are also not aware of the labour welfare measures of the Board.

Under labour welfare measures for 2004-05, provision has beenmade to help girl children of the laborers working in coffee estates/coffee works, who dropped out from class 7 or above to continue theirstudies.

In order to empower women, educationally and financially, theCoffee Board is providing vocational training for women plantationworkers under the Human Resources Development scheme to honetheir skills to generate additional income and for improving theiroverall socio-economic status. In 2004-05, the Board has chalked outa plan to provide vocational training for 500 women plantation workersthrough 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 groupsare different from other self-help groups.

The concept was largely based on the linking up like-minded smallcoffee-growers in potential areas, registering them under the KarnatakaSocieties Act or the Act governing cooperative societies. The groupsenrol a maximum of 50 small growers belonging to a contiguous area.They adopt the requisite bye-laws, constitute administrativecommittees, elected from among members, and follow all normsstipulated by the relevant Act under which they are registered. Thegeneral bodies of these SHGs are empowered to take policy decisionsand vested with overall administrative powers. Some of the activitiesenvisaged by SHGs in facing the challenges confronting the coffeeindustry 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 totackle multifarious problems connected with agriculture, irrespectiveof whether it is agricultural or commercial crop. Group approachor collective action is essential for adoption of post-harvesttechnology, promotion of infrastructural development and multi-institutional approaches/linkages and coordination with government/private agencies (NGOs), pest and diseases control, promotion ofvalue-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 inagriculture, relating to agricultural as well as commercial crops.

4. To promote and extend the scope for gender participation (i.e.women’s empowerment) in decision-making on vital issuesconnected to self-sustainability/-reliance.

5. To promote common action programmes interacting with othergroups, government and private institutions/agencies for technicalexpertise/support as well as financial requirements.

6. To promote viable investment packages for optimum returns perunit area.

7. To promote a cost-effective delivery system.

8. To promote cost-effective technology for viable cultivation of cropsas 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 inChickmagalur, nine in Hassan and 13 in Kodagu), only 32 have availedof the one time grant of Rs. 200,000 offered by the Board. As forutilization of this grant, only 15 Groups have utilized it fully, while 17have utilized it only partially, to carry out activities as approved by theBoard. The Board plans to increase the number of SHGs to 250.10

There are, however, effective civil society organisations working atthe grassroots level with coffee farmers like the Coorg Organisationfor Rural Development (CORD) in Karnataka and the HighlandDevelopment Agency (HiLDA) in Kerala. The Coffee Board schemesexperimented through SHGs had only a limited impact and benefitedonly a few. A majority of the distressed farmers have been left out ofthis support scheme. The Board should work together with civil societyactors to reach out to the most vulnerable and marginalised coffeegrowers.

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 dynamiccontinuum and can best be perceived as an ongoing process ratherthan a static achievement. Sustainability has been defined in severalways but the term generally accepted by the international developmentcommunity, states that

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

Another useful definition states that “a sustainable producer shallmeet long-term environmental and social goals while being able tocompete effectively with other market participants and achieve pricesthat cover his production costs and allow him to earn an acceptablebusiness margin.”12

Fair Trade

Fair Trade’s origins can be traced to the 1940s when churches inNorth America and Europe provided relief to refugees and poverty-stricken communities by selling their handicrafts to northern markets.

In 1988, the Max Havelaar convention in Holland establishedinternational standards as to what constitutes a liveable wage, andwhat constitutes safe and healthy working conditions. This createdthe Fair Trade Labelling Corporation, an international non-profitorganization that certifies farms and growers as “Fair Trade.”

Fair-Trade workers receive no less than a fixed liveable wage andwork in a regulated healthy environment. Consequently, almost allFair Trade certified farms are organic and sustainable.

Although the FairTrade movement and the promotion of fairlytraded goods such as coffee have grown steadily in Europe and theUnited States, the overall market share of products that have beenproduced as FairTrade in a responsible manner is generally only 1 to 4percent; sometimes, it is less and, very occasionally, it is more. Around95 percent of the coffee trade is traditional commerce.13

Total global sales for 2002 were in excess of 1.1 million bags ofcoffee. With average sales growth many times greater than conventionalcoffees, these are among the fastest-growing market segments becausethey appear to be attuned to the emerging consumer demands,increasing corporate responsibility, and heightened risk managementalong agricultural supply chains.14

On the other hand, Fair Trade trade in coffee is administered throughlabels such as Max Havelaar, Fair Trade Labelling Organization (FLO),Café Direct and Transfair International, owned and managed by non-profits in Europe and North America. It is designed for small growersand cooperatives, assisting them in gaining access to markets and buyerswilling to pay a fair price, thus ensuring that benefits flow back togrowers.


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Insights from Tea Industry: The Samyukta VikasCooperative- A Fair-Trade Success Story

Residents of three remote hill villages located on a former tea plantationare 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 hasallowed residents to construct a community drinking water supply, andthe villagers are developing plans to add ginger, cardamom, and orangesto their organic exports.

Life for the villages’ 483 families, all of Nepali descent, has improvedsignificantly in just eight short years. Since the tea estate they inhabitwas abandoned in 1952, the isolated communities had survived onsubsistence farming. Their soil’s high acidity, the result of intensive teacultivation, led to very low productivity. Local deforestation had alsocontributed to soil erosion, landslides, and the loss of forest products.

Most families lived a precarious existence, surviving on less than 12,000rupees 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 formthe Samyukta Vikas Cooperative and use their own resources to improvetheir livelihoods. Three community members were chosen as “animators”and trained by RCDC in participatory decision-making and co-opmanagement.

Once the cooperative was functioning, RCDC linked the villagers withTea Promoters of India (TPI), a Calcutta-based, family-owned companythat manages four organic tea gardens, all run according to Fair Tradestandards.

Tea-leaf production from the villages has grown steadily since the firstcollection for TPI in May 1998. Tea collectors are selected from thecommunity by each hamlet committee, and paid a wage by TPI. Otherco-op members transport the leaves to TPI’s nearest tea garden, wherethey are processed and blended for export.

Samyukta Vikas Cooperative is the first non-plantation, cooperativetea supplier established in Darjeeling. Since 1999, organic EnglishBreakfast, Earl Grey, and green tea sourced from its family-owned plotshas been exported by Tea Promoters of India to the Fair Trade companyEqual Exchange, based in Massachusetts.

While it remains a small-scale enterprise, the successful collaborationbetween community-owned farms in Darjeeling, local Fair Tradeexporters, and overseas Fair Trade importers demonstrates one route bywhich global markets, when combined with fair prices and localgovernance over use of natural resources, can benefit poor producers indeveloping nations. 15

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

Organic coffee

The development of organic agriculture was mainly influenced byRachel Carson’s book, Silent Spring, which, in 1962, exposed the hazardsof the pesticide, DDT. It had a great impact on the wider public’sawareness of the negative aspects of intensive agriculture methods ingeneral and the dangers of uncontrolled pesticide use, in particular.As the organic sector developed, organic farmers’ associations wrotetheir own standards, more to communicate what they had learnedrather than to codify what constitutes “organic farming.”. The need tocodify the parameters of organic farming only became necessary whenconsumer demand for organically-grown products increased. Organicproducts became available in conventional food outlets and pricepremiums provided incentive for fraud. Other, more recent,environmental labels on food include the Rainforest Alliance Certifiedlabel (formerly ECO-OK), the Smithsonian Institute’s Birdfriendlycoffee label, and various declarations of the use of “integrated productionmethods” and integrated pest management. Also, the InternationalOrganization for Standardization (ISO) has developed anenvironmental management systems standard, ISO 14001.17

There are some natural advantages of organic coffee production inIndia. They are:

Coffee is mainly grown in deep fertile jungle soil under well-defined mixed shade consisting leguminous and non-leguminoustrees.

Majority of the coffee holdings are dominated by small and tribalgrowers with low or zero inputs or synthetic inputs with


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sustainable yields, which are ideally suited for conversion toorganic farming without any serious setbacks in yields.

Majority of small and tribal holdings are following traditionalfarming practices such as cattle manure, composting, manualweeding, recycling of organic wastes, which are prerequisites fororganic coffee production.

Coffee, in principle, is mainly grown under high degree of mixedcropping under shade with sustainable income.

Although, India’s share in the $150-million global organic coffeemarket is hardly one percent,18 the coffee-growers are approaching thequestion of sustainability from an environmental perspective at presentby focusing on organic coffee. In short, organic coffee is coffee thathas been produced without the use of pesticides and herbicides.19 Theidea underlying this concept is an approach that views the farm as anecosystem. These organic standards are devised by governmentauthorities, international organizations (FAO/WHO, CodexAlimentarius) and the International Federation of Organic AgricultureMovements (IFOAM). In India, the National Programme for OrganicProduction (NPOP) defines organic agriculture as “a system of farmdesign and management to create an eco-system, which can achievesustainable productivity without the use of artificial external inputssuch as chemical fertilizers and pesticides.”20

In south India, the United Nilgiris Tea Estates Co. and the BombayBurmah Trading Corporation (BBTC) were among the first companiesto convert some of their tea and coffee estates to the organic method ofcultivation. More recently, some areas under Tata Coffee and the IBCGroup estates have been converted. The Poabs Organic Estate in Kerala,growing coffee and tea, is certified organic since 2002; it is now identifiedas the single largest multi-crop organic plantation in the world.21

Interestingly, some of these estates brought in internationallyrenowned organic and bio-dynamic consultants to advise them. WhileTadeu Caldas of Ecotropic (www.ecotropic.com) assisted Ambootia andBBTC, Peter Proctor of Biodynamic Outreach, New Zealand, was aninspiration at the training programmes of the Bio-Dynamic Associationof 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 agriculturalprocesses.22

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Government support for organic production

The Coffee Board has also initiated several steps to promote organiccoffee production in the country through its “Promotion of OrganicCoffee Production in India,” taken up as a project in the Ninth Planperiod (1997-2002). It main objectives are standardizing a package ofpractices for production of organic coffee, creating awareness amonggrowers by organizing training/workshops/seminars/educationcampaigns, identifying potential zones for production of organic coffeein the coffee-growing regions of India. Based on the outcome of thesurveys and case studies, it was felt necessary to extend certainincentives, besides technical support, in order to promote organic coffeeproduction. The project has been extended into Tenth Plan period(2002-07). Initially, the Board decided to extend developmentalassistance by providing financial assistance towards cost of inspectionand certification of organic coffee estates. As a result, various modalitiesand norms were drawn up.

National Programme for Organic Production has identified theCoffee Board of India is an Accreditation Agency (AA) for thedevelopment and promotion of organic coffee in the country. In thiscapacity, the Board accredited three inspection and certificationagencies 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) toorganic coffee-growers to defray the cost of inspection and certificationof organic coffee. The eligibility norms for providing financial assistanceare:

The grower/growers’ association/SHGs having to produce organiccoffee as per the National Standards of Organic Production(NSOP).

The Coffee should have been certified by an accreditedinspection and certification agency recognized under NationalProgramme for Organic Production.

In case they are self-help groups, growers’ associations/cooperatives or NGOs, they should have been registered underthe Cooperative Societies Act or the Societies Registration Actof their respective state.23


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Some Examples of Sustainable Coffee Initiatives in India

Utz Kapeh Certified Coffee

Amalgamated Bean Coffee Limited (ABC Ltd) has got its 19 coffeeestates certified by Utz Kapeh. Utz Kapeh (good coffee in a Mayanlanguage) is an independent foundation established as a partnershipbetween coffee producers, roasters and non-government organizations.24

Originally set up with the support of the Dutch company Ahold, oneof the world’s largest retail chains, it is now an independent initiative.It has developed a code of conduct for growing sustainable coffee onthe basis of the “good agricultural practices” of the European RetailerGroup (EUREP-GAP).25 Utz Kapeh Code of Conduct sets criteria forsocially and environmentally appropriate coffee-growing practices andefficient farm management. Combined with a traceability system andchain of custody, Utz Kapeh provides assurance for responsible coffeesourcing. Utz Kapeh’s goals are to guarantee access to basic socialservices, guide producers to match standards for growing sustainablecoffee, and provide assistance in implementing these standards. Thefoundation registers interested producers and provides the code ofconduct. It establishes contact with an independent certification agency,which performs inspections and grants the certificate if standards aremet. 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 andgroups of cooperatives in sixteen countries. Most of the demand forUtz Kapeh coffee, until very recently, came from Ahold Coffee Company,a roaster controlling about 12 percent of the Dutch market and sourcingall its homebrand coffee as Utz Kapeh certified. As mentioned above,in March 2004, Sara Lee announced that it will be buying 7500 tonsof Utz Kapeh coffee in 2005 with a promise of increasing it steadily.Another 40 roasters are buying Utz Kapeh coffee, but in smallerquantities. It is clear that this certification scheme is growing fast andhas reached a substantial size. The Utz Kapeh certified coffee estatesin India are ABC Group, Tata Coffee Limited, Ottumani Estate, BCKPlantations, B. Shettigeri, S. Kodagu, Bombay Burmah TradingCorporation Limited and Manamboli-Savamalai Estate. The Utz Kapehcertification is given by the Indian subsidiary of the Netherlands-basedSKAL International. Apart from Utz Kapeh, SKAL provides manyother certifications for the farmers. Some of the key coffee plantationscertified by SKAL are.

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1. Amalgamated Bean Coffee Trading Company Ltd. CoffeeMr. Rajeev Gupta# 321 , Raheja Chambers, 3rd Floor,12 Museum RoadBangalore – 560001 UTZ KAPEHTel : 080 – 5589581/ 0881/5594648 / 4649Fax: 080 - 5580535Email: [email protected]

2. Chinnappa K.M Coffee, Pepper,T.Shettigeri village & post, ginger, paddySouth Kodagu, Cinnamom, Clove,Karnataka, India Nutmeg,CardamomTel No: 08274246264 NSOP, EU & NOP

3 Chitrabail Estate – II Coffee, pepperMr. N.A Madappa Yadoor Village , Ammathi Vantiangadi PostP.B. 127 South Coorg – 571211Tel: 08274- 452176 NSOP & EU

4 Hanchikad EstateMr. Sibi Pual Coffee, pepper,P.B. No. 71, Pollibetta Post orangesSouth Coorg – 571215Tel: 08274 - 451467Mobile: 9448217391Email: [email protected] NSOP & EU

5 Korana Estate CoffeeMr. Leelakanth K. PPost Box No: 58, Suntikoppa, North Kodagu - 571237Tel: 08276 – 262425 , 9845192102Email: [email protected] NSOP & EU

6 Lakshmiswara Estate Cardamom,Pepper,Mr. P.R. Gandhi Rao Coffee, Orange,Arvathoklu Village & Post ArecanutGonicoppa – 571213South CoorgTel: 08274 – 447347 NSOP & EU

7 POABS Groups Tea, Pepper, Coffee,Mr. Thomas Jacob orange, Cardamom,Seethargundu P.O, Nelliyampathy Ginger, turmeric,Palakkad District 678 511 marigold, Basil,Kerala, India. ArecanutTel: 04923-246333, 246555,246223,246554 (samraj) NSOP, EU, NOP,Fax: 04923-246555 DEMETER, BioEmail: [email protected] , [email protected] & Naturland

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


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Tata Coffee

One of the biggest coffee producers in India, Tata Coffee has alsosuccessfully implemented the Social Accountability System (SA8000:2001) in their plantation division, the curing division and roastingand the grounding unit at Kushalnagar and received a certificate issuedby the Det Norske Veritas.26 Apart from this, Tata Coffee is involvedin activities through the Coorg Foundation, a charitable trustestablished by the company. It has been in operation for the past onedecade and promotes welfare activates. During the year, the Foundationmade contributions towards treatment of individuals afflicted withserious illnesses and made donations to medical institutions forconducting free medical camps. The Foundation also conducted adomestic nurse training programme for the unemployed rural womenin association with the Rural India Health Project Hospital , Ammathi.

The Conscofe General Public Charitable Trust under the auspicesof CCL (now Tata Coffee Ltd.), registered in 1986, has the declaredobjective of “adopting Pollibetta or any of the surrounding villages orany other village in Kodagu district or anywhere in Karnataka Statefor the purpose of development and the provision of public utilitiesand amenities.”

Tata Coffee has also been engaged with the small coffee-growersthrough its Small Growers’ Development Scheme, started in 1985. Itproved to be a big boon for 140 small coffee growers who have beenthe beneficiaries of this scheme. Under the scheme, the small growersare helped to maximise their returns from their land with timely advicealong 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 fullyplanted with coffee and subsidiary crops/timber such as pepper andsilver oak. The yield of coffee and pepper has improved through thisintervention.

To strengthen the bond further with its employees, ConsolidatedCoffee (Tata Coffee Ltd) has launched Conscofe Employees’ WelfareTrust to take care of the housing, education/scholarships, pensionbenefits, etc. of its employees. This has benefited a large section of theemployees of Tata Coffee.

Market Data

Some companies have initiated innovative ideas of building thecapacity 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 centresat Coorg and Chickmagalur, the heart of the Indian coffee growingland. ITC today annually exports around 8000 tons of the entire rangeof washed and unwashed Arabicas and Robustas from India. ITC e-choupal model provides agri-business with an e-solution. It facilitatessmall growers to use the internet to leverage transmission capabilitiesand access market data. They have a dedicated websitewww.plantersnet.com which provides information on coffee price andother technical information related to coffee. The information couldbe 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 thepremiums offered by each of the initiatives.

At current market prices, the highest premium is offered in FairTrade certification. The Fair Trade premium for mild Arabica coffee isalmost four times of what can be obtained for organic coffee and ninetimes larger than what would have been paid by Utz Kapeh had theyapplied their 2003 premium system. In the case of Robusta, the gap iseven higher - the premium is seven times of what is offered for organic.28

While observation of such standards in the forms of codes of conducthas gained some acceptance in India, very few agencies currently operatein the ecology/environment/social standards space for the small coffeegrowers. This is mainly because, in the period from 1942 to 1996, itwas mandatory for coffee to be pooled with the Coffee Board, whichmarketed these them through auctions. As a result, estate names losttheir significance. Moreover, there was a fixed market for the producersin the form of the Coffee Board; so many growers did not bother tolook into the aspects of social and environmental concerns.

Most of the small coffee-growers interviewed for the purpose of thisstudy mentioned that there is a need to assess the costs to be borne byfarmers (in terms of cost of certification to changes in farming practices)to meet these standards in comparison to the extra income earned frompremium. Also, the yields come down in a major way in the initialperiod if a non-organic coffee garden is converted into organic garden.

Government bodies such as the Coffee Board of India have notbeen favorably disposed towards various codes of conduct which existin 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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approach and that they are not based on grassroots realities. The codesare not adapted in a participatory process to understand the uniquelocal situations. “A ‘common denominator’ homogenizing tendency isin-built into its ‘checklist’ compliance methodology, which ill-fits theholistic approaches generally adopted in the Indian coffee industry.This philosophical objection rejects outright the assumption that foreignstandards, and an audit approach, are somehow superior to endogenousknowledge systems and participatory involvement of stakeholders.”31

Second, it is also felt that the cost of compliance for small producersis still very prohibitive. Lakshmi Venkatachalam, former Chairpersonof the Coffee Board of India puts it down like this:

If such standards are confined to the domain of niche markets, there is perhapsless cause for concern. A real danger however rises when such standards moveout of niche market to the mainstream market. In the absence of effectiveregulation mechanisms, inevitably all compliance costs and risks are pushed tothe producers.32

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

Source: Neilson and Pritchard (2005)29

Adoption of ‘alternativecoffee’ lines by thecoffee majors

Firm-specific supplier standards Collective privatestandardsSpecific

procurementpolicies

General Codes ofConduct

StarbucksintroducesPreferred SupplierScheme

Sara Lee ‘SupplierSelectionGuidelines’

2003

Nestle ‘CorporateBusinessPrinciples’

2005

2001

2004

P&G begins purchasingfair trade coffee andintroduces RA - certifiedline;

Kraft introduces RA -certified lines;

Starbucks beginsselling fair trade coffee

Kraft Code ofConduct;

P&G ‘Our ValuesOur Policies’

Sara Lee Beginspurchase of UtzKapeh-certified beans

Starbucks introducesCoffee and FarmerEquity (C.A.F.E.)Practices Scheme

Establishment ofEUREP-GAPprotocol for greecoffee based onUtz Kapehprotocol.

Nestle begins purchaseof fair trade coffee

Field-testing of theCommon Code forthe CoffeeCommunity (4C)

2002

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The cost of getting the holdings of small growers certified is indeeda prohibitive factor, particularly at a time when the prices are low. Thecertification from SKAL international requires around 50 to 60,000rupees and INDOCERT, the other organic certifying agencies isreportedly charging more than 100,000 rupees. These charges do notinclude the cost of improvement, which has to borne by the smallgrowers. The small growers reported to this study team that, in spiteof going organic, there is no adequate return for it. There is hardly anyorganic market in the country and most of the demand for organiccoffee is from the Western countries.33

However, some small growers’ groups like the Small and MarginalCoffee Farmers’ Association of Kerala demonstrated a keen interest ingoing for organic and Fair Trade certification. They are also aware thatthe conversion increases cost of production and that local traders willnot pay any higher price. Therefore, they suggest, at the first level,contact with importers is necessary and, on the second level, therehas to be an assurance by the importers that they ill not import cheapercoffee after the small growers have opted for the improvementprogramme.34 The curing works reported that big companies like Nestleor HLL do not go for high-priced high-quality coffee but go for cheapervarieties because high-quality coffee is not required for instant coffee.

The overall income impact of sustainability standards on producersdepends on the balance between the extra costs of matching thesestandards (including labour costs and the cost of certification) comparedto the extra income earned from the premium plus or minus the impactof changing farming practices on yields and quality. No estimates areavailable for Utz Kapeh certification yet. In the case of organic gardens,yields and quality tend to increase in areas where agro-chemicals werenot used prior to conversion. In other cases, quality is still likely toimprove, but yields may suffer in the short term. However, the factremains that the costly upfront input investments of intensive,chemically-supported cultivation are often not available to farmersand when calculated with the costs of borrowing for these inputs can,in some cases, make such intensive production methods lesscompetitive. Application and contamination risks should also beconsidered especially when inexperienced family labour is used.Sustainable production methods eliminate the risks inherent in notonly the upfront investment but can also reduce the dangerousdependence on a single crop.


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The balance sheet for Fair Trade is invariably positive, since farmersdo not pay for certification, the premium is very high and the necessarychanges in farming systems fairly limited. However, these impacts maybe hard to maintain in the future in the Fair Trade system - as oversupplycontinues and pressure for prices to descend increases. As for shade-grown certification, on the one hand, the impact on yields in theshort term is negative and labour inputs increase; on the other hand,coffee quality often improves, weeding becomes cheaper, soil fertilityimproves, 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 contributeto the social and economic development of their members and theircommunities and are democratically controlled by their members.However, most of the marginal small farmers have less than one acreor two acres of land and the movements to form farmers’ cooperativeshave not been much of a success.

Small coffee-growers also have very limited understanding of thecodes of conduct and environmental and social standards. The study

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did not come across any NGO providing training programme onenvironmental and social standards. Most of the codes of conductand standards are developed in global North to suit the requirementof their consumers. However, increasingly, it was felt that thetraditional top-down CSR strategies are not achieving improved CSRimplementation and not sustainable in the long run. There is a needto adopt different codes available through a process of genuine multi-stakeholder dialogues in India taking into account the unique socio-political and economic environment of India.


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Small farmers chalking out a plan of action

Linking farmers – PIC and Coffee Coalition understanding the crisis

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Concluding Observations

1. Although there are some unique examples of responsible businesspractices as far as the roasters are concerned, there are not manyexamples of traders taking responsibility across the value-chain. Thereare exporters who are willing to engage with small coffee growers butdue to inefficient or non-existing small holders’ associations, they areunable to do so. The small coffee growers, in order to survive, areplucking green beans and are also avoiding all sorts of necessaryagricultural practices required to keep coffee plantations productive.This will lead to fall in coffee quality leading to lesser profits in thelong run and there is a business case for the roasters and exporters toengage with the small growers.

2. The coffee crisis in India has severely affected the lives andlivelihood of the workers and small coffee-growers. Hundreds ofthousands of small coffee growers are debt-ridden. This kind ofsituation has led hundreds of workers and small growers to commitsuicide. On the recommendation of the Coffee Board and the Ministryof Commerce, the Reserve Bank of India had agreed, in May 2001,to re-phase all loan accounts in coffee that are likely to fall undersub-standard categories, and to extend fresh crop loans. Accordingto the Coffee Board, the number of rescheduled loans was around14,500, accounting for approximately Rs. 4 billion by September2001. However, most of the farmers’ associations has demanded thatinterest on loans taken by small and marginal growers from banksand cooperatives should be waived and repayment of the principal ininstalments spread over a long period facilitated. The governmentalso needs to take immediate steps to check the exploitation of smallgrowers by private money lenders who are charging them abnormalinterest 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 otherstates. Many children have dropped out of schools as their parentscould not afford the school fees and have begun doing odd jobs toaugment the family income. The government and other CSOs shouldensure that children are not taken out of schools. In the closed estateswomen workers are also suffering due to closure of primary healthcentres, particularly during pregnancy. The medical facilities need tobe restored or augmented in the gardens.

4. The coffee industry of India directly employs around 550,000workers. Many of these workers (some report suggest 20 percent,meaning around 110,000) have become jobless. Many of the provisionsof the Plantation Labour Act are not adhered to in the estates withsome noted exceptions. Most of the workers who lost their jobs arecasual workers without any rights. As per trade union leaders, workersare thrown out if they try to join a union. As a result, only minimumunionization has taken place in the coffee sector. The plantation ownersare duty bound to provide basic facilities to workers as per the PLA. Incase of failure on the part of the employers, the Central and StateGovernments should initiate a process of penalising the defaultingemployers. Also the capacity of the coffee trade unions vis-à-vis differentlaws and codes of conduct needs to be built up.

5. At the moment, local stakeholders, like small growers, tradeunions and non-governmental organisations, see codes of conductcovering labour issues, while they have not been consulted during thedevelopment stage of the labour-related standards. The knowledge ofthese organisations and familiarity with the local context, as well asan understanding of the technical, social, cultural, political andeconomical characteristics of the area is important to bring aboutpositive social change. Multi-stakeholder involvement is essential tocreate a sense of ownership and ensure the credibility and effectivenessof any code of conduct. Local stakeholders should be engaged moredirectly in developing, implementing and monitoring of codecompliance.

6. There is also a need to develop the capacities of small coffeegrowers’ associations and grassroots-level NGOs to enhance theirunderstanding of the codes of conduct and other critical issues. Thecodes of conduct are new tools available for the marginalized segmentsin the value-chain to protect their interests.

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7. In the marketing of coffee, the withdrawal of the Coffee Boardled to the emergence of intermediaries in the trade. Middlemen sellthe coffee they collect directly from farmers to wholesalers who inturn export it. At present, no agency exists to co-ordinate or givedirections to coffee marketing. The influence of the Coffee Board hasweakened considerably after the pooling system was abolished. Distresssale of the produce by small and marginal growers is reported to bewidely rampant. The growers are even selling the output well in advanceof the harvesting season at prices much lower than those prevailing inthe market in order to tide over their financial difficulties. This ismainly because of the lack of capacity of small growers’ associations tomarket the coffee they produce. One of the principal challenges ofsmall-scale farmer organizations is competition with exporters whohave the finance, the infrastructure, risk management tools, extensivemarket knowledge, and existing contracts. This combination of capital,infrastructure and experience allows exporters to reduce their cost ofgoods and achieve economies of scale. Hence, there is an urgent needfor building the capacities of small and marginal coffee growers. Thisshould be done in association with other stakeholders like the tradersand the roasters.

8. There are new attempts by small growers’ cooperatives to bypassthe middlemen and directly reach out to the consumers such as byusing new technologies to produce coffee decoctions with long-shelflife as a means of controlling the product which the small growersproduce. Such initiatives should be supported by the government andinternational donor agencies.


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Recommendations

Indian Government

1. Provide immediate relief to the small coffee growers’ families wheresuicides have taken place since 90 percent of the suicides havebeen committed by male members leaving the dependent femalemembers and children helpless.

2. Reschedule the loans on softer terms for the marginalized smallgrowers and desist the banks from taking over the coffee holdings.

3. Provide technical and marketing assistance to small andmarginalized farmers.

4. Provide credit schemes and debt management services.

5. Ensure that in the large plantations the labour laws are not violatedand the standards laid down by the ILO on decent work aremaintained.

6. Strengthen the social security mechanism of coffee estate workers.For this, special agencies, an implementation mechanism and afund must be created. The trade unions should be involved in theimplementation and monitoring stages,.

7. Provide incentives and encouragement for small growers to go foralternative market intervention practices.

8. Make preferential procurement of coffee for different governmentdepartments, which adheres to acceptable codes of conduct andprovide incentives for such companies that adheres to such codes.

9. Create a separate department within the Coffee Board dedicated tosmall and marginalized coffee farmers.

10.Support the ICO’s Coffee Quality-improvement Programme andother quality projects as a means of improving consumer appreciationand consumption of coffee in India.

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Non-Governmental Organisations

1. Technical assistance and other commercial-oriented supportincluding quality improvement training, sales, and marketing skillbuilding, support of participation in trade shows could be providedby the NGOs.

2. Training for coffee small growers on social, economic andenvironmental aspects to improve their understanding of the coffeevalue-chain.

3. Adapt codes of conducts to the local realities of India through aparticipatory process.

4. The small and marginal farmers owning between one and five acresof land often goes either unrepresented or do not have any voice inthe powerful small growers’ associations. These marginal farmersneed to be organised where they don’t have organisations andstrengthen the existing ones so that their ability to compete in themarket place improves.

5. Support broad-based rural development including the developmentof local processing capacity and producer-associations, and measuresto improve credit and risk management facilities.

6. Help the small and marginal farmers enter into regional andinternational alliances.

7. Encourage coffee roasters and traders to implement an effectivecode 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 andmarketing assistance.

4. Engage in comprehensive dialogue with representatives of marginalcoffee growers’ forms and CSOs working with them.

5. Initiate a disintermediation process by purchasing as much as possibledirectly from the small coffee growers and provide additional pricefor the coffee produced in a sustainable process.


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6. Do not lobby to dilute the social protections available to coffeeestate workers.

7. Conduct multi-stakeholder monitoring and verification of socialand environmental standards in coffee estates from where coffee isprocured.

International Coffee Organisation

1. The ICO should work with member-governments, private sectorand civil society groups to stimulate access to credit for smallproducer-organisations and establish risk-management facilities andtools suitable for use by under-resourced small farmers.

2. Expand coffee consumptions in non-traditional markets andmaintain consumption levels in traditional markets through qualitymaintenance, developing niche markets and disseminating positiveand objective information.

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Notes

Background and Profile of Indian Coffee Industry1 Tea and Coffee Asia, February-March 2004.2 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 andregulate 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 andNicolson, 1967, p544-55.13 Like ITA in the Northern tea plantations, UPASI remained mainly a Europeanassociation until India’s independence.14 S. Muthiah, A Planting Century: The First Hundred Years of The United Planters’ Associationof 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 theThird World. (London: Oxford University Press, 1972), p. 75.

The Coffee Crisis and its Impact in India1 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 20024 Frontline, March 20025 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 unionleader from Waynad, Kerala7 Interview with P.T. John, independent trade union leader from Waynad, Kerala, 8th


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August, 20058 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 200518 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, 200422 C.V. Joy, 200423 As reported by P. Sainath, “Crisis drives the bus to Kutta”, India Together, December2004.24 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).htm27 Peoples’ March, December 2003.28 Peoples’ March, December 2003.29 Peoples March, December 2003.30 www.hll.com, 10 September 200531 The Hindu, 8 November 200232 The Hindu, 8 November 200233 Interview conducted on 26 September 2005 at Bangalore, Karnataka. For the completeinterview please see the Annexure.34 Aparna Dutta, “Indian Coffee Direct”, Coffee File, August 200535 www.indiainfoline.com, 30 September 200536 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 andWorkers1 Frontline, July 2003.2 As told to the Joint team of Partners in Change and Dutch Coffee Coalition, April2006.3 www.indiatogether.org, September 2005.

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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 Coalitie17 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 GrowersAssociation President P V Lokesh have been appointed.24 Small Coffee Growers Workshop in Coorg, Karnataka organised by Partners in Changeand Koffie Coalitie in April 2006.

Analysis of Various Factors Behind the Crisis1 Taking inflation into account, the “real price” of coffee beans has fallen dramaticallylower: 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.92 Landell Mills Consultants estimated that the coffee price at the end of 2001 did not coverthe total costs of either Robusta or Arabica producers. Gresser and Tickell, 2002: p.93 In the early 1990s earnings by coffee producing countries were some US$10-12 billionand the value of retail sales of coffee, largely in industrialised countries, about US$30billion. Now the value of retail sales exceeds US$70 billion but coffee producing countriesonly receive US$5.5 billion. Prices on world markets, which averaged around 120 UScents/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 “coffeecrisis”. Feb. 2005. www.ico.org4Gresser and Tickell, 2002: p.25 O.Nestor. “The Global coffee crisis: a threat to sustainable development”. 2002. papersubmitted to the World Summit on Sustainable Development, Johannesburg.International Coffee Organisation’s web site. Feb. 2005. www.ico.org: p.16 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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7 The Global Coffee Trade, https://gobi.stanford.edu/cases/Documents/IB53.pdf.8 Peoples March, December 20039 The most recent entered into force in 200210 Nowadays, the ICO makes a practical contribution to the world coffee economy by:1) enabling government representatives to exchange views and coordinate coffee policiesand priorities at regular high-level meetings. 2) Improving coffee quality through thecoffee quality programme. 3) Increase world coffee consumption through innovativemarket development activities. 4) Initiating coffee development projects to improvequality and marketing. 5) Encouraging a sustainable economy and environmentalstandards. 6) Working closely with the private sector through a 16 strong private sectorconsultative board which tackles issues such as food safety. 7) Providing objective andcomprehensive information on the world coffee market. 8) Ensuring transparency in thecoffee 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 associationstatement by Doctor Nestor Osorio, London executive Director of the ICO. Cartagena,Colombia, 16 September 200313 Coffee retention, however, was not successful in improving coffee prices. The processof liberalisation of domestic coffee marketing in producing countries has made it moredifficult for them to control stocks and the flow of exports. Also, the scheme waslacking proper monitoring and punitive clauses.14 The plan targets the retention of 20 per cent of total world production as long as the15-day moving average of the ICO composite price indicator stays below 95 cents perpound. Stefano Ponte, 2001: p.1315 The ICA also stipulates that the ICO should promote training and informationprogrammes 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 coffeeeconomy. International Coffee Agreement 2001. The International Coffee Organisation’sweb site. Feb. 2005. www.ico.org.16 The committee formulated recommendations that were agreed by the ICO in February2002 under Resolution 407. This resolution established the Coffee Quality- ImprovementProgram and spelled out the minimum standards for exportable coffee based on defectcount and maximum moisture content. A higher defect count is allowed for Robustathan for Arabica.17 The Resolution number 420 adopted in 2004 took a further steps to adjust this coffeequality programme by targeting quality standards for coffee. May 2004. InternationalCoffee Council resolution.18 Nestor. 2002: p.519 From the perspective of producer countries, the Agreement brought a golden era ofgood 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.1720 Gresser and Tickell. 2002: p.1821 Alain Stella. 1998. L’ABCdaire du café. Flammarion. Paris: p. 5622 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 nearestneighbouring delivery month is used to set the current cash price.24 The World Coffee Market. www.cafedirect.co.uk25 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 gradetraded on the NYCE. Class 1 and 2 demand premiums to this price, whereas Class 4 and

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5 coffees demand discounts. 4) Class 4, below standard grade -24 to 86 defects. 5) Class5. Off grade- more than 86 defects. The coffee search web site, www.coffeesearch.org.Feb. 200526 Stuart Daw, 2005. Green Coffee Market News. February 18, 2005. www.heritage-coffee.com27 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 coffeeplanter pointed out that the cheaper coffee from Vietnam and Indonesia are cominginto India, and the smaller players in India would find it difficult to compete againstthem because of cheap labour available in those countries.31 Lakshmi Venkatachalam, Chairperson of Coffee Board of India, The Hindu, 30August 2002.32 Interview with Bose Mandana, Kodagu, Karnataka, 18 August 200533 The Hindu, 31 August, 2004.

Social and Environmental Standards in Indian Coffee Sector1 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 forCash Crops, (FAO, Rome, 2003).3 Every worker (including his family) is entitled to a housing accommodation after sixmonths of continuous service whether staying inside or outside a plantation and whohas expressed a desire in writing to live in the plantation. The requirement of continuousservice of six months will not apply to a worker who is the member of the family of adiseased worker who was residing in the plantation. Under Section 16, the-StateGovernment has been empowered to make rules relating to standards of housing andconstitution 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 entitledto overtime wages at twice the rates of ordinary wages. He/she also has a right to Oneweekly holiday. Working on a holiday or the day of rest of the worker will entitleworker 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, 20059 Ministry of Commerce, Government of India, http://commerce.nic.in/annual2004-05/englishhtml/lesson-9.htm10 Ministry of Commerce, Government of India, http://commerce.nic.in/annual2004-05/englishhtml/lesson-9.htm11 William Lindsay Simpson, “An example of self-regulation within the global coffeemarket”, 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.1513 Sjoerd Panhuysen, 2005, “Codes of conduct for the mainstream coffee sector, achallenge for local trade unions and NGOs” Dutch Coffee Coalition, p.4


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14 Daniele Giovannucci and Freek Koekoek, p. 17.15 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, 200419 In general, a grower or processor of organic coffee may be certified by a public orprivate certification company if, among others, the following standards and proceduresare met: coffee is grown without the use of synthetic agro-chemicals for three yearsprior to certification; farmers and processors keep detailed records of methods andmaterials used in coffee production and management plans; and a third-party certifierannually 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 200523 http://indiacoffee.org/coffeeregions/default.htm#organ, accessed on January 2006.24 www.utzkapeh.org25 EUREPGAP is an initiative of agricultural producers and their retailer customersbelonging to the Euro-Retailer Produce Working Group (EUREP). The mission is todevelop widely accepted standards and procedures for the global certification of GoodAgricultural Practices (GAP). The work of the EUREPGAP Committees is supportedby FoodPLUS, a not-for-profit limited company based in Cologne, Germany.www.eurep.org26 http://www.tatatea.com/tata_coffee_info.htm, 15 September 200527 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 globalsustainability initiatives in the Indian coffee industry”, Development Policy Review.30 Based on interview conducted by the joint team of Partners in Change and KoffieCoalitie 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 challengesfor 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 200534 Interview with Ms. Aparna Dutta, Editor, Coffee File, Bangalore, August 15, 2005

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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. 56Aparna Dutta, “Indian Coffee Direct”, Coffee File, August 2005Aparna Dutta, “Organic South Asia”, Coffee File, August 2005Aparna Dutta, Coffee File, August 2005.Bhagwat, S.A.; Kushalappa, C.G.; Williams, P.H. and Brown, N.D. (2005). ‘ABiodiversity Concerns: The Case of Coffee-Farming Units in India’, WorldBusiness 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 managementinstitution’, 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: BasicCora 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 withDaniele Giovannucci and Freek Koekoek, January 2003, “State of Sustainable Coffee: A

study of twelve major markets”, US Library of congress, p.15Data 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,

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Frontline, April-May, 2004.Frontline, July 2003.Frontline, March 2002Frontline, Volume 21 - Issue 13, Jun. 19 - Jul. 02, 2004G. 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 2005ICO (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 JournalMinistry of Commerce, Government of India, http://commerce.nic.in/annual2004-05/

englishhtml/lesson-9.htmMinistry of Commerce, Government of India, http://commerce.nic.in/annual2004-05/

englishhtml/lesson-9.htmMugged: Poverty in Your Coffee Cup, (Oxfam, 2002).National Programme for Organic Production, www.apeda.com/organic/index.html,

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Ninan, K.N. and Sathyapalan, J. (2005). ‘The economics of biodiversity conservation: astudy of a coffee growing region in the Western Ghats of India’, Ecological Economics55 (1): 61-72.

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submitted to the World Summit on Sustainable Development, Johannesburg.International Coffee Organisation’s web site. Feb. 2005. www.ico.org: p.1

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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 2003Peoples 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.4Stefano Ponte, Standards and Sustainability in the Coffee Sector, IISD, Denmark, 2004.Stuart Daw, 2005. Green Coffee Market News. February 18, 2005. www.heritage-

coffee.comT. 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, IndiaThe 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).

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Useful Web links

Associations and OrganizationsInternational 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 PricingNew 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.htmNestle-India (www.nestle.com/Header/Country_Access/Asia/India/India.htm)ABC-India (www.abcindia.com)

Sustainability and EnvironmentInternational 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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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 Siteswww.p-maps.org www.iso.orgwww.supremo.bewww.siemex.biz/coffeewww.plantersnet.comwww.kar.nic.in/exportcoffeewww.coffeereview.comwww.coffeeuniverse.comwww.penscape.netwww.masterroaster.com www.ravensbrew.comwww.eldis.org

Ministry of Commerce Websiteswww.ecgindia.comww.indiacoffee.orgtea.nic.inwww.mpeda.comwww.apeda.comwww.indianspices.com


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Acronymns and Abbreviations

ACB Accredited Certification BodyACG Guanacaste Conservation Area [Costa Rica]ACP Country in Africa, the Caribbean or the Pacific that has signed the

Cotonou agreement with the European UnionADIPCO Cocolá Development Association [Guatemala]AEAAZ Agricultural Ethics Assurance Association of ZimbabweANACAFE National Coffee Association [Guatemala]APEMB Association of Ecological Growers of the Baturité Mountains[Brazil]APPTA Talamanca Small Farmers’ Association [Costa Rica]ASEAN Association of Southeast-Asian NationsATO Alternative Trade OrganizationCAN Conservation Agriculture Network [now SAN]CIF cost-insurance-freight [standard contract terms]CIMS Centro de Intelligenca sobre Mercados Sostenibles/Sustainable Markets

Intelligence CentreCOLEACP Comité de liaison Europe-Afrique-Caraïbes-Pacifique [Association of

stakeholders in EU-ACP horticultural trade]Coocafé Consorcio de Cooperativas de Caficultores de Guanacaste y Montes deO r o

RL [Costa Rica]CSA Community-Supported AgricultureCSR Corporate Social ResponsibilityCTE Committee on Trade and Environment [of the WTO]DCC Day Chocolate CompanyDED Deutscher Entwicklungsdienst

EPOPA Export Promotion of Organic Products from AfricaETI Ethical Trading InitiativeEUREP Euro-Retailer Produce AssociationEurepGap EUREP Good Agriculture PracticeFAO Food and Agriculture Organization of the United NationsFECAFEB Federación de Cafetaleros Exportadores de Bolivia

FEDECOOP Federación de Cooperativas de Caficultores RL

FFTU Farmers Fair Trade Uganda

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FLO Fairtrade Labelling Organizations InternationalFOB free-on-board [standard contract terms]FONAES National Fund for Support of Solidarity Enterprises [Mexico]GAP Good Agricultural PracticeGATT General Agreement on Tariffs and TradeGMO genetically-modified organismIBS IFOAM Basic StandardsICFTU/ITS International Confederation of Free Trade Unions/International

Trade SecretariatIEC International Electrotechnical CommissionIFAD International Fund for Agricultural DevelopmentIFOAM International Federation of Organic Agriculture MovementsIIED International Institute of Environment and DevelopmentILO International Labour OrganizationIMO Institut für Markökologie [organic certification body, Switzerland]IOAS International Organic Accreditation ServiceIPM Integrated pest managementIPPC International Plant Protection ConventionISEAL International Social and Environmental Accreditation and Labelling

AllianceISMAM Indígenas de la Sierra Madre de Motozintla San Isidro Labrador [Mexico]ISO International Organization for StandardizationITC International Trade CentreIUF International Union of Food, Agricultural, Hotel, Restaurant,

Catering, Tobacco and Allied Workers’ AssociationsJAS Japanese Agriculture StandardKKL Kuapa Kokoo Limited [Ghana]KNCU Kilimanjaro Native Cooperative Union [Tanzania]LBC Licensed Buyer Organization [in Ghana cocoa industry]LCU Lango Cooperative Union [Uganda]MAFF Ministry of Agriculture, Forestry and Fisheries [Japan]MAPO Movimiento Argentino de Producción Orgánica

MFN Most Favoured Nation [GATT/WTO context]NGO non-governmental organizationNOP National Organic Program [United States of America]NT National Treatment [GATT/WTO context]PIC Prior Informed ConsentPMO Produce Marketing OrganizationPPM Production and Processing MethodSA8000 Social Accountability 8000SAI Social Accountability InternationalSAI-Platform Sustainable Agriculture Initiative PlatformSAN Sustainable Agriculture Network [formerly CAN]SASA Social Accountability in Sustainable Agriculture projectSERRV Sales Exchange for Refugee Rehabilitation Vocation


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SNV Netherlands Development OrganizationSPS Agreement Agreement on the Application of Sanitary and Phytosanitary

MeasuresSSE Single Strain Juice EquivalentTBT Technical Barriers to TradeUCIRI Union of Indian Communities in the Isthmus Region [Mexico]UNCED United Nations Conference on Environment and DevelopmentUNCTAD United Nations Conference on Trade and DevelopmentUNEP United Nations Environment ProgrammeUSDA United States Department of AgricultureVREL Volta River Estates Limited [Ghana]WHO World Health OrganizationWTO World Trade Organization

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Inspection and Certification Agencies of IndiaAccredited Under the National Programme for

Organic Production (NPOP)

1. BVQI (India) Pvt. Ltd.Marwah Centre, 6th FloorOpp. Ansa Industrial EstateKrishanlal Marwah Marg, Off Saki-Vihar RoadAndheri (East), Mumbai-400 072 (Maharashtra)Contact Person: Mr. R. K. SharmaPhone No.: 022-56956300, 56956311 Fax No. 022-56956302 / 10Email: [email protected]

2. Ecocert SA (India Branch Office)Sector-3, S-6/3 & 4, Gut No. 102Hindustan Awas Ltd.Walmi-Waluj Road, Nakshatrawadi, Aurangabad – 431 002(Maharashtra)Contact Person: Dr. Alexander DanielPhone No.: 0240-2377120, 2376949Fax No.: 0240-2376866Email: [email protected]

3. IMO Control Private LimitedNo. 1314, Double RoadIndiranagar 2nd Stage, Bangalore-560 038 (Karnataka)Contact Person: Mr. Umesh ChandrasekharPhone No.: 080-25285883, 2520 1546Fax: 080-25272185Email: [email protected]

4. Indian Organic Certification Agency (INDOCERT)Thottumugham P.O., Aluva - 683 105, Cochin (Kerala)Contact Person: Mr. Mathew SebastianTelefax:0484-2630908-09/2620943Email: [email protected]

5. International Resources for Fairer TradeSonaUdyog (Industrial Estate)Unit No. 7,Parsi Pandhayat Road, Andheri (E), Mumbai – 400 072 (Maharashtra)Contact Person: Mr. Arun RastePhone No.: Tel: 022-28352811, 28235246 ext. 22Fax – 022-823-5245Email: [email protected]

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6. Lacon Quality Certification Pvt. LtdChenathra, Theepany, Thiruvalla - 689 101(Kerala)Contact Person: Mr. Bobby IssacTelefax: 0469 2606447Email: [email protected]

7. Natural Organic Certification AssociationChhatrapati House, Ground FloorNear P. N. Gadgil ShowroomPune-411 038 (Maharashtra)Contact Person: Mr. Sanjay DeshmukhPhone No.: 020-25457869, 56218063Fax: 020-2539-0096Email: [email protected]

8. OneCert Asia Agri Certification Private LimitedAgrasen Farm, Vatika Road, Off Tonk,Jaipur-303 905(Rajasthan)Contact Person: Mr. Sandeep BhargavaPhone No. : - 0141-2720202 to 0141-2770342Telefax No: - 0141-2720202Email: [email protected]

9. SGS India Pvt. Ltd.250 Udyog ViharPhase – IVGurgaon – 122 015(Haryana)Contact Person: Mr. Sudarshan SharmaPhone No.: 95124-2399990 to 98Fax No.: 95124-2399764Email: [email protected]

10. Skal International (India)A Division of CU Inspections India Pvt. Ltd.No. 191, 1st Main Road, Mahalaxmi Layout, Bangalore – 560 086Contact Person: Mr. Narayana UpadhyayaPhone No.: 080-23491928, 56966507Fax no.: 080-23491935Email: [email protected]

11. Uttaranchal State Organic Certification Agency (USOCA)12/II Vasant Vihar, Dehradun 248 006(Uttaranchal)Contact Person: Dr. S. K. MalikPhone No.: 0135-2760861Fax: 0135-2760734Email: [email protected]

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

1. What is your view about the coffee crisis? How HLL sources the coffeebeans for its brands Bru and Green label?

GS: The fall in tea and coffee prices should not be looked as a crisis as thefall in prices was only there for a few years which are a cyclic phenomenonand have happened in previous times as well. For example tea prices fellfrom the year 2000 to 2003 and coffee prices fell from 1997 to 2002.Now the prices are competitive. Hindustan lever buys the green beansmainly from the coffee curing units both for export purposes and for itsown brands in India. HLL does not buy directly from the coffee growers,as they are fragmented and also because they cant assure of quality andvolume. 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 andtherefore there has been no impact on HLL due to the fall in coffeeprices. However, its not just HLL but other strong coffee brands havealso grown during this period.

3. The present coffee crisis has affected the livelihoods of the small coffeegrowers. The small coffee growers in order to survive are trying tocompensate lowers prices through volumes ignoring the quality of thebeans. Do you think this process is growing to affect the coffee traderslike 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 ladless than 10.1 hectares, in coffee such a farmer would be very well offand would hardly fit into the description of small grower. Majority ofthe small coffee growers own less than 1 hectares of land. HLL agrees thatfall in returns for the small coffee growers will have an impact on thequality and as a result impact the profitability of the coffee traders likeHLL and others in the long run. Therefore every attention has to begiven 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 workingwith their first tier of suppliers on human rights, labour standards, workingconditions and care for environment-with the aim of complete adherenceby 2005-How is it being implemented in the coffee supply chain.

GS: HLL does not have the wherewithal to source their coffee from smallcoffee growers. They are not organized and there are no major contactpoints to engage with them. There is a need for organizing the small teaand coffee growers. HLL on its part is keen to engage with small coffeeand tea growers and want them to improve the standards. HLL is willingto preferentially buy the tea and coffee from them if they meet HLLquality standards and if it is commercially viable. HLL is also willing topay a competitive price if the small growers get their coffee and teacertified under any of the recognized social and environmentalcertification system. HLL is willing to explore the possibility ofpreferential buying at competitive rates and improvement programmesin association with NGO’s active in the tea and coffee sectors.

5. What role HLL is playing in the Coffee Board along with other playerslike Tata Coffee to reduce the adverse impact of the crisis and improvethe condition of the growers?

GS: HLL is represented in the marketing committee of the Coffee Board andtrying to do its best to disseminate good farm practices and researchfindings to the small coffee growers. Coffee Board needs to create a fundfor the welfare of the small coffee growers through putting a cess on thecoffee exports.

6. HLL has initiated some unique projects in its other areas of operationlike Swastha Chetna, Greening barrens, Happy Homes etc-Are theresuch initiatives in the coffee sector as well?

GS: These projects are primarily in the tea sector where HLL is involved inthe production process; However, HLL is not involved in coffeeproduction in India. Hence, there have been no such programmes beingconceived in the coffee sector.

7. Has HLL adopted any coffee sector specific codes like Utz Kaffee, RainForest Alliance, 4Cs etc?

GS: Most of these codes deal essentially with the coffee producers. There areno specific codes available for the traders. Therefore, HLL which is notinto coffee production has not adopted any codes mentioned above.

8. What are HLL’s suggestion with regard to improving the condition of thecoffee workers and coffee small growers?

GS: a. The coffee small growers needs to be organized and should work forimproving 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 separatefund for the coffee workers and small growers in crisis.

c. The coffee small growers should go for inter-cropping to ensure thattheir livelihood is not affected if one of the commodity prices crash.


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AcknowledgmentsWe sincerely thank all the people who have given their valuable

time and shared their experiences and insights with us, which madethis study possible.

As there are too many people involved in various stages of theproject, we don’t want to take the long route of listing all the namesand say thank you to every one. But, we gratefully remember all thepeople involved in one way or other. We will remember them alwaysand it is a fact that many of them have become our good friends in thecourse of the study and follow up actions for improvement of the supplychain.

We specially acknowledge the deep interest shown in the projectby Viraf Mehta, Chief Executive, Partners in Change and Coen vanBeuningen Economic Advisor in Hivos. We also thank them for writingthe Preface and Foreword respectively. We are thankful to Dr. BärbelWeiligmann of Dutch Coffee Coalition for painstakingly going throughthe 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, corporateexecutives and all others who allowed us to enter their life and learnfrom their experiences.

We thank Koshy Mathew, Word Makers, Bangalore for editorialand design support and Rajeev Govind for cover design and illustrations.

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Researchers and Authors

Dr. Shatadru ChattopadhayaySenior Program Manager, Partners in Change, New [email protected]

Shatadru holds a Ph.D. from Jawaharlal Nehru University (JNU), NewDelhi in South Asian Political Economy and has been working on Tradeand Livelihood-related issues in the Tea, Coffee and Garment industries.He specializes in Corporate Social Responsibility, particularly itsimplementation across the value-chain . He is an adviser to several Indianand International NGOs and Universities on sector-specific CSR issuesand is Secretary of the Indian NGO Forum for Responsible Business.

Pramod JohnSenior Programme Manager (South), Partners in [email protected]

Pramod joined Partners in Change in February 2004 and is located inBangalore. He holds a Master’s degree in English Literature from theMahatma Gandhi University, Kerala. He has worked both in the corporateand voluntary sectors and is a proponent of bridging the digital divide. In1991, he founded Prakruthi – a voluntary and charitable trust engaged incomputer literacy and livelihood skills enhancement for theunderprivileged children.

Research Coordinator

Sjoerd PanhuysenProject-Coordinator, Dutch Coffee Coalition, The [email protected]

Sjoerd Panhuysen is an international development specialist who receivedhis education at the University of Nijmegen and Center for InternationalDevelopment Studies. Sjoerd has been working in the Dutch CoffeeCoalition as a campaign coordinator and has initiated multi-stakeholdertraining programmes for local NGOs and labour unions in the coffee sectorin Brazil, Kenya and Guatemala. Currently he is working on the expansionof the training programme in India.


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BITTER BEANSTh e C o f f e e Cr i s i s a n d i t s I m p a c t i n I n d i a

Partners in Change is a not-for-profit organisation, established by ActionAid International-India in 1995 toproactively engage with businesses and to maximise their impact on the lives of the most vulnerable andmarginalised stakeholders, in a positive manner.

Partners in Change recognises that there are various stages of evolution towards the integration of CorporateSocial Responsibility (CSR) as an essential business process and helps businesses at all stages –identifying stakeholders, their relevant issues and managing these relationships, developing CSR policyand guidelines, training/sensitising company staff, benchmarking a company’s social responsibilityprogramme, establishing CSR management systems, social audit, keeping the company abreast of latestissues 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 oftrade and improve their livelihood. Towards this, Partners in Change is working to strengthen small coffeegrowers’ organisations and build their capacity on social and environmental standards and engaging withbig 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 conditionsat the beginning of the coffee chain. The Dutch Coffee Coalition is raising public awareness regarding thelack of labour rights on coffee plantations. The coalition is calling on coffee roasters and supermarketchains in the west to take responsibility for the violation of rights that occurs at the beginning of the coffeechain. In the coffee-producing countries themselves, the Dutch Coffee Coalition works (cooperates) withtrade 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.

This is a study undertaken in the coffee-growing regions of India in the light of the alarming increase innumber of farmers’ suicides following a crisis in the coffee sector. The study was done as a collaborativeeffort 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 socialand economic levels for small-scale producers, cooperatives, plantations and workers.

Critically examine the legislative and policy framework (including implementation and executionof laws) in the coffee sector.

Undertake a mapping of the coffee industry value-chain to establish key buyers, and identifykey 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 thecoffee chain in India.

Provide recommendations about various options to improve the working and living conditionsof the most marginalized in the coffee value-chain.

PPPPPARARARARARTNERSTNERSTNERSTNERSTNERS INININININ C C C C CHANGEHANGEHANGEHANGEHANGEwww.picindia.org

ZNF/K ZNF/K ZNF/K ZNF/K ZNF/KOFFIECOOFFIECOOFFIECOOFFIECOOFFIECOALITIEALITIEALITIEALITIEALITIE

www.koffiecoalitie.nl

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