Coffee Plantations in Tamil Nadu, Karnataka, and Kerala were opened out from the 1820's onwards with the active support of the Government of India, for the production of coffee for shipment to the European Market. Pioneers of the coffee plantation Industry were assigned land by the government for a value and were encouraged to invest large sums of money to develop the coffee plantations. The Forest policy of 1894 consciously encouraged the expansion of the plantation industry. The coffee plantations existing today are the results of the conscious policy of the Government of India in the nineteenth century. However the coffee plantation industry is one of the most misunderstood, misrepresented and unfairly portrayed industries vis-a-vis the effects on the environment.

Shade Coffee

Unlike coffee produced in most parts of the world coffee plants in India requires shade tress for protection during 3-4 months of dry season Cloudless skies during the dry season and the scorching sun can severely damage the coffee plants without shade trees. Most other coffee producing countries have little or no shade trees at all. Coffee is grown in open conditions, since there is cloud coverage to protect the plants from the hot sun at least during part of the day.

Arabica Coffee in India is grown under two canopies of shade. The lower canopy consists predominantly of dadaps (Erythirinia Lithosperma). This is also referred to as temporary shade. Dadap trees are pruned once or twice a year to regulate the amount of sunshine and rainfall required for the coffee plants. There are approximately 200 dadap trees per acre in a coffee plantation. The leaves of the dadap trees are rich in nitrogen and are used to regenerate the nitrogen depletion in the soil. The flowers of dadap trees are an important source of food for the flying fox (fruit bat).

The upper canopy consists of permanent shade trees like Silver Oak (Grevillia Robusta), Jack fruit, Jumblum, Wildfig, Red cedar, Albezzia and a variety of other naturally occurring Jungle tree species and other exotic jungle trees. On an average there will be around 100 permanent shade trees per acre in a coffee estate. Beside providing shade to the coffee plants the leaves of the trees serve as an important source of mulch to improve the humus content of the soil. The trees also serve to protect the top soil from erosion during the monsoon. The tall trees often reach 100ft. above from the ground level and serve as an important source of food and provide nesting sites for various species of birds. The birds feed on the fruits of the trees, control the insect, rodent and snail population on the estate and their dropping enrich the soil. Several western countries with their growing "Green Consciousness" are encouraging production of ecologically, friendly "Shade Coffee". Growers of coffee situated in the western hemisphere are paid a high premium for their coffees, which are produced as "Shade Coffee". Several producing countries in the western hemisphere are now beginning to produce "Shade Coffee" to take advantage of the economic incentives offered to them.

Water Management

Most coffee estates also have manmade water storage tanks, dams, ponds and streams for use during the dry months. During the monsoon water storage helps prevent soil erosion. The water collected and stored is usually stocked with various species of fish, tortoises and fresh water prawns. Many species of birds and animals depend on the fish from these ponds for food.

Social Contribution

Coffee Plantations provide employment in rural and backward areas to semi skilled and unskilled labourers who would otherwise flock to the urban areas further straining the meager infrastructure of the metropolises. Labour welfare measures adopted in coffee plantations are the most comprehensive and progressive compared to any other industry in the country.

The industry is predominantly export-oriented and contributes more than Rs. 1,000 crores per year in foreign exchange earnings. There is a negotiable import component involved in the production of coffee.

Non Polluting Industry

The Production of coffee does not cause any air or noise pollution. Water used to pulp coffee contain only organic solids and are therefore fully biodegradable and can very easily be treated. There are no effluents with heavy metals or minerals to contaminate the ground water. On the other hand coffee estates with the dense population of shades trees, coffee and intercrops (shade trees 300 trees per acre, coffee 1000 trees per acre, inter crops 100 per acre. Total 1400 trees per acre) help to absorb and cleanse the carbon dioxide and carbon monoxide emitted by other industries.

Agricultural Income Tax

The rates of agricultural income tax in Tamil Nadu, Karnataka and Kerala were 50% and 65%, and 40% and 50% and 65% for individuals and companies respectively compared with central income tax rates of 30% and 35% for individuals and companies. Agricultural income tax besides being totally exorbitant were completely out of tune with the liberalisation and globalisation policies of the Government of India.

Agricultural income tax was levied on plantation crops only by the state Governments (coffee, tea, rubber and cardamom.) Inter crops were also assessed and income tax was levied on these intercrops along with the Income derived from coffee.

However, if inter-crops such as coconut, mango, pepper, cloves, nutmeg, peaches, plums and mandarin oranges etc. were grown separately then they would be exempt from the purview of the Agricultural Income Tax. Besides being a disincentive to produce intercrops on coffee plantations it was inherently discriminatory. The effective rates of Agricultural Income Tax were in reality higher due to the discretionary powers of the assessing officers to arbitrarily disallow expense and to arbitrarily add to declared income. Besides, increasing the effective rate of AIT, this led to harassment of the Assessees. The Agricultural Income Tax Act also does not recognise the coffee plants as productive asset which will over a period of time lose its ability to produce efficiently and will have to be replaced by new plants. The concept of depreciation of the coffee plants should also be taken into consideration like the productive Assets of other industries.

The planters were in deep trouble due to the low price of coffee and the increasing cost of production. The Planter's Associations made representations on many occasions for rationalisation of the Agricultural Income Tax particularly the rate structure and requested the Government to reduce the rates. Finally, the Government of Tami Nadu took the decision to abolish the Agricultural Income Tax w.e.f. 1-4-2002, which is considered a major breakthrough in the industry.

Sales / Purchase and Central Sales Tax

Sales Tax, Purchase-tax and central sale tax are also levied on coffee which adds to the burden of taxes suffered by the coffee producers.

Agricultural Cess (Duty of Customs)

Agricultural cess is collected at the port of shipment by the customs authority for coffee exported out of India which is yet another burden on the coffee plantations.

Local Bodies Taxes

Local bodies collect land revenue or land and house-tax on building it plantation areas, in spite of the fact that they do not offer any basic amenities such as drinking water, streetlights garbage disposal, sewage disposal and other basic amenities offered by local bodies in urban areas.

The following economic incentives for bio diversity on coffee plantations can be offered:

Sales / Purchase and Central sales taxes on coffee seeds before they are roasted and powdered should not be levied.

Agricultural Cess (Duty of customs; collected at the port of shipment should be waived for coffee seeds exports without being roasted or powered.

Taxes by local bodies on coffee plantations must also be waived, the Government of India may compensate the local bodies for the loss of revenue through various schemes already in existence for the development or rural backward areas populated predominantly by tribals.