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EARLIER IT WAS cotton; now it is coffee. Reports of half a dozen small coffee growers committing suicide in the last couple of months brings home yet again the utter failure of institutions set up to protect the interests of producers and of policy-makers in taking timely action against the tyrannies of the marketplace. The crisis facing coffee producers — majority of them small growers — has been brewing for some time now. Expanding production, slowing export market growth, falling producer prices across the world, and failure to promote domestic consumption have together contributed to unremunerative prices. The continued decline in returns has driven many a small grower to despair and penury. Falling incomes have forced many to compromise on input application which invariably tells on the quality, again leading to lower prices. Meanwhile, pressures of rising input costs and burden of loan repayments continue unabated, forcing growers to the brink.

Without doubt, international coffee prices have turned against producers over the last 2-3 years. Seemingly on a free fall, prices that started dropping in 1998 are yet to stop falling. In the last five years, world coffee exports expanded 12 per cent, but export earnings for producers shrank a massive 58 per cent. Indeed, the very export orientation of the commodity that was sought to be projected as a great success story has become the bane of producers. This is primarily because no one thought it necessary to educate growers about the obvious risks of integrating with the global market. On its part, the industry did little to promote domestic consumption, busy as it was creating, albeit unwittingly, an over-dependence on the ephemeral export market on the back of tax and other concessions. It is unclear if the governments — both at the Centre and in Karnataka — have taken cognisance of the issues confronting the coffee sector, in general, and the growers, in particular. The authorities have started a fire-fighting operation. The relief package for growers in terms of rescheduling of bank loans, reduction in interest burden and similar reliefs may help mitigate the rigours of the ongoing crisis. But the initiative must be to find long-term solutions.

Basic issues of production and consumption need in-depth examination. With 100 crore potential consumers, there is no alternative to promoting domestic consumption. However, lack of promotional efforts and high consumer prices (having no rational relationship with producer prices) have slowed domestic demand growth. Small growers should be encouraged not only to combine and reap benefits of scale economies, but also to upgrade farms to produce better quality beans. Flow of relevant market information among growers must receive high priority so that informed decisions are made possible. A weak area for small growers is marketing. They play into the hands of wily, and often unscrupulous, traders. Longer the supply chain the lower is the price the producer gets. So, pooled marketing with proper documentation, and perhaps with government oversight for some time should be explored. The Coffee Board's role needs to be redefined, taking into account current realities.

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