Crop	Chikmagalur				Coorg				Tamilnadu
-	Gross Income	Cost of Cultivation	Net returns	% to total Income	Gross Income	Cost of Cultivation	Net returns	% to total Income	Gross Income	Cost of Cultivation	Net returns	% to total Income
Arabica	62,400	46,380	16,020	88	75,000	46,425	28,575	89	46,200	30,125	16,075	63
Black	-	-	-	-	-	-	-	-	-	-	-	-
Pepper	4,000	700	3,300	6	8,700	1,700	10	6,000	1,200	4,800	8	-
Orange	0	0	0	0	Negligible	Negligible	Negligible	0	14,075	3,000	11,075	19
Arecanut	3,500	1,000	2,500	5	0	0	0	0	0	0	0	0
Cardamom	400	100	300	0.5	Negligible	Negligible	Negligible	0	1,983	400	1,583	3
Lemon	0	0	0	0	0	0	0	0	1,700	350	1,350	2
Banana	0	0	0	0	0	0	0	0	2,500	750	1,750	3
Avocado	0	0	0	0	0	0	0	0	600	150	450	1
Other Crops	450	100	350	0.5	700	150	550	1	Negligible	Negligible	Negligible	0
Total	70,750	48,280	22,470	100	84,645	48,350	36,295	100	73,088	35,985	37,103	100

Av.sixze of farm (ha)	20.34	15.93	7.52
B:C ration of arabica monocrop	1.35	1.62	1.53
B:C ration of arabica intercrop	1.47	1.75	2.03

2.1.4 Impact of diversification in

Indian coffee plantations:

The first major study on impact of diversification in coffee plantations was carried out covering all major coffee growing regions of India recently (Reddy et al 2004). Under this study, a field survey was carried out covering 132 arabica and 88 robusta holdings spread across major coffee growing regions of Chikmagalur and Coorg regions in Karnataka, Wynaad region of Kerala and Pulneys region of Tamil Nadu states.

Impact of diversification III arabica holdings

The results from arabica coffee holdings indicated that the cost of cultivation of coffee was 96% ofthe total cost for lha area in Chikmagalur and Coorg regions of Karnataka while it was 84% in Pulneys region of Tamil Nadu. While in case of mixed crops the cost incurred towards their cultivation was about 4% of the total costs in Karnataka and 16% in Tamil Nadu. On the otherhand, the contribution of intercrops to the gross income ranged from 12% in Karnataka to 37% in Tamil Nadu. In Chikmagalur region of Karnataka, pepper and areca nut are the main intercrops in arabica coffee, while pepper dominated as intercrop in arabica holdings of Coorg region. In contrast, arabica holdings in Tamil Nadu had higher degree of diversification with orange, pepper, banana, cardamom, lemon,

Crop	Chikmagalur				Coorg				Tamilnadu
-	Gross Income	Cost of Cultivation	Net returns	% to total Income	Gross Income	Cost of Cultivation	Net returns	% to total Income	Gross Income	Cost of Cultivation	Net returns	% to total Income
Robusta	43,050	30,195	12,855	60.48	57,660	31,626	26,034	64.48	36,090	29,864	6,226	74.77
Black	-	-	-	-	-	-	-	-	-	-	-	-
Pepper	10,075	2,000	8,075	14.15	25,505	4,000	21,505	28.52	8,850	1,750	7,100	18.34
Orange	0	0	0	0	2,575	1,250	1,325	2.88	0	0	0	0
Arecanut	17,300	7,000	10,300	24.30	2,482	1,000	1,482	2.77	2,100	800	1,300	4.35
Cardamom	350	100	250	0.49	750	200	550	0.84	Negligible	Negligible	Negligible	0.26
Other Crops	400	150	250	0.56	450	150	300	0.5	1,100	500	600	2.28
Total	71,175	39,455	31,730	100	89,422	38,226	51,196	100	48,265	32,964	15,301	100

Av.sixze of farm (ha)	15.70	7.31	21.92
B:C ration of robusta monocrop	1.43	1.82	1.21
B:C ration of robusta intercrop	1.8	2.34	1.46

destinations around the world. During 2004-05, the MNEB exports account for 1,000 MT and RKR exports account for approximately 4,200 MT.

'Flavour of India -

The Fine Cup competition

In 2002 the Coffee Board launched an annual competition the "Flavour ofIndia - The Fine Cup competition" aimed at cncouraging the production of high quality coffces/specialty coffees for exports. The competition is open for all categories of growers and the samples are evaluated in four different stages by experienced coffee quality experts. In the final round of evaluation, an international jury of 12 members selects. the finest coffees in the categories of arabica, robusta and specialty coffees. Many of the award winners in the competition have been successful in exporting their coffees at very attractive premiums. This competition has greatly contributed to the quality image of mainstream Indian arabicas and robustas in the world market, leading to the disappearance of discounts fot Indian arabicas in New York and increased premiums for Indian washed robustas in London tern1inals.

2.2.2 Private Initiatives

both at domestic level and international level. Some of the pri v·a te in i tiati ves in vertical diversification in Indian coffee are detailed below.

Estate Branded coffees

During 1998, the Coffee Board identified a group of highly enterprising coffee estates across different coffee growing regions of Karnataka and for 2 years worked in close association with them in imparting hands on training on improved on-farm processing practices and cup tasting skills. The significance of cupping as a tool for improving quality of coffee, by way of identifying the defects in processing and eliminating them by fine tuning the on-fann processing, was inculcated among the growers and estate managers. Subsequently, thcse growers formed the Specialty Coffee Association of India (SCAl) during 1999 with an objective of producing high quality coffees for export. Many among them have succeeded in creating their own estate brands. Also a few members have succeeded in establishing their identity in the organic and biodynamic coffee segments. Today, the members of SCAI export estate branded specialty coffees to the Europe, USA and Japan at very attractive premiums.

Organic coffee

lndian coffee is characterised by a large number of tribal, marginal and smallholdings, almost all of which do not use any chemical inputs and could be considered as organic by default. Bombay Burmah Trading Company, a corporate plantation group successfully ventured into production of certified organic coffee in 1993. Initially, awareness regarding the requirements for organic coffee certification wasApart from these public efforts, there were hardly any private efforts by individuals or groups towards vertical diversification of their coffees until after the Iiberalisation of coffee marketiJ1g in 1994. Post liberalisation there were many private initiatives at both individual and collective growers' level, aimed at enhancing returns through value addition. Although many individual growers/groups started vertit:al diversification, only a few have succeeded in reaching their targets rather low among coffee growers.

'During 1994 the Coffee Board launched specific programmes on organic coffee covering research for developing a package of practices for cultivation, and dissemination of technology and market related information to the needy growers in certain identified potential areas. This has resulted in increased awareness among the growers about the production requirements of certified organic coffee. But owing to several constraints, mostly relating to the high cost of certification, cumbersome procedures of book keeping for certification and lack of ready market access and very unattractive premiums, the production of certified organic coffee in the country is rather limited. As of 2005, a small area of about 1,300 ha is under certified organic coffee production with an estimated output of about 525 MT of which only a small quantity of 300 MT is being exported mostly to Germany, USA and Japan.

Coffee Board of India IS implementing a scheme for providing support for certification of organic coffee estates since 2002, wherein the small growers associations/ co-operatives are eligible to get 90% of cost certific'ation of their holdings. However, this scheme has not greatly helped the cause of formation of associations/ c;ooperatives among the producers mainly due to lack of ready market access and very unattractive premiums for organic coffee produced in the country.

2.2.3 Value added coffees

Soluble coffee

India has a strong tradition of producing soluble coffee mostly for exports. There are five major companies nvolved in production of soluble coffee. They are

M/s.Nestle India Ltd., M/ s.Hindustan Lever Ltd., M/s.Tata Coffee Ltd., Mls.Continental Coffee Products (India) Ltd. and Mls.Narasu Coffee Company, the latter being launched a couple of years ago. Among these, only M/s.Tata Coffee Ltd. own dedicated plantations from which they source. Almost all the companies, in addition to using Indian coffees, import raw coffee beans from Indonesia and Vietnam for manufacturing soluble coffee.

Soluble coffee exports increased from about 24,000MT in 1996 to about 54,000MT in 2005 in terms of green bean equivalent (GBE) India imported about 21 ,OOOMT of green beans during 2005 mostly for manufacturing soluble coffee. But export earnings have not increased in commensurate with the quantities exported; they have only increased from about INR2.6 billion in 1996 to INR3.9 billion in 2005. Most of the soluble coffee produced in the country is exported mainly to the Russian Federation, Ukraine, Malaysia, Finland, Singapore and Latvia (Anon.2006).

The soluble coffee manufacturing

activity managed by big

multinational and national companies is playing an important role in creating a market for the coffee produced in the country .

Grower promoted Roast & Ground Brands

Liberalisation of coffee marketing and the subsequent boom in coffee prices also encouraged the launching of many single origin Roast & Ground (R&G) coffee products by individual growers/family ventures, corporate plantations and growers associations. Some of the initiatives by coffee growers include Ginimao coffee, Hunkel Heights, Cafe Coffee Day, Kalmane Coffee etc.

2.2.4 Impact of Vertical Diversification Initiatives

Increase in export of Monsooned coffee from about 1,400 MT in 1996 to 3,500 MT in 2005

Increase in export of Monsooned coffee from about 1,400 MT in 1996 to 3,500 MT in 2005

The Flavour of India - The Fine Cup competitions have greatly helped in projecting the potential of India as a supplier of high quality coffees and certain unique specialties to the world market. This has in effect helped in improving the rating of Indian arabicas from about minus 16 to minus one or on-par at NYCE. The premiums for washed robustas have also gone up from about US$200 to US$350-400 in the past 4-5 years.

All these initiatives have resulted in increased returns to growers who have the capabilities of producing special/specialty coffees.

Impact of Private Initiatives

There is no systematic evaluation of

the impact of various private vertical diversification initiatives on Indian coffee. However, many of the private initiatives, especially in the cafe and vending segments have created vast employment potential. A conservative estimate by industry sources indicate that about 20,000 jobs have been created by the booming cafe and coffee vending segments in the last decade. In addition, the cafe boom has helped to boost sagging gomestic coffee consumption and helped improve the image of coffee among- the consumers in non-traditional markets. In fact, the cafe trend has set up a perfect platform for the booming coffee culture in India, which is being projected as a major market for global goods/services due to its strong economic growth.

3. Conclusions

Coffee plantations are vital for the survival of the ecosystem in the ecologically sensitive Western Ghats, which is recognised as one of the biodiversity hotspots of the world. Coffee is also ideally suited and already established as an important crop for afforestation of Eastern Ghats, which suffer from 'shifting cultivation' practices adopted by native tribal people. The shade grown conditions prevailing in coffee plantations, offer good scope for diversification with many intercrops. The only non-coffee activity that could be promoted is eco-tourism. Thus, the diversification initiative should be 'within' the coffee plantations rather than' from coffee'.

On the vertical diversification front, there is a very good scope for improving the returns to the growers through value addition.

The SWOT analysis presented below throws light on the prospects of diversification in coffee holdings in India.

Strengths

1. Ideal conditions for growmg many plantations crops within the coffee holdings.

2. Many distinct agro-climatic zones and varieties suitable for prodUCtion of high quality specialty coffees.

Weaknesses

1. High percentage of marginal, small and tribal growers who are vulnerable to price fluctuations in coffee and intercrops.

2. Poor economic condition of marginal, tribal and small growers to make investments for quality improvement.

3. Failure of small coffee growers to form co-operatives/groups that would help them in producing 'quantities with quality', negotiate prices for their products and move up in the value chain.

Opportunities

1. Massive consumer base with good purchasing power for promoting coffee consumption within the country. This provides an opportunity for the coffee growers to enter upstream in the value chain.

2. Great scope for promoting ecotourism, leisure and adventure tourism in coffee hills, to improve the overall economic conditions of the coffee areas.

Threats

1. Emergence of new origins with high efficiency and low production costs, has greatly affected the prices not only of coffee but also of various other plantation crops grown in coffee estates as intercrops e.g. pepper, cardamom, vanilla etc. Presently, the prices of the main crop coffee and the various intercrops remain economical thus enabling the growers to sustain their livelihoods and plantations. If prices of coffee and other inter crops fall to uneconomical levels, then the growers may abandon their plantations, thus having an adverse effect on the environment.

Apart from price fluctuations, the rapid changes in weather conditions including recurring droughts lead to reduced crops and the flare up of pests and diseases. Growers are unable to control the pests and diseases, without government intervention, due to their poor economic condition.

Thus, although the conditions are favourable and wide opportunities are existing for both horizontal and vertical diversifications in the Indian coffee industry, very few growers have the economic resources,

. stability and market acumen to succeed in the export of high quality specialty coffees and/or move up the value chain. The vast majority of marginal, small and tribal growers are unable to benefit from the opportunities.

One of the major weaknesses of the marginal and small growers is their inability to form groups/cooperatives. Efforts should be made to encourage the community approach to creating infrastructure facilities for quality improvement, product storage and value addition. The subsidy extended for the processing/storage infrastructure is common for all categories of growers and is also unattractive. There should be a differential scale of support for smallholdings to encourage them to adopt quality up-gradation. Efforts aimed at facilitating certification of marginal, tribal and small holdings under 'Fair Trade' label and creating market linkages for such coffees would also be highly rewarding in the long run. Another initiative could be at the level of identifying economically viable, new intercrops and subsidiary activities (dairying, apiary etc.) suitable for small and marginal growers.

Acknowledgements

I express my sincere gratitude to Mr G. VKrishna Rau, Chairman, Coffee Board and D,: Jayarama, Director of Research, Coffee Board for providing me this opportunity of participating in this· study on diversification initiatives in Indian coffee. I am also thanliful to Mr. Ashok Kuriyan, President of Specialty Coffee Association of India, Mr Steven Rebello, Ginimao Estate, Mr Avinash Prabhu, Mis. Kalmane Group of Estates, Mr. Nandan Gowda, Hunkel Heightsfor readily providing information on their diversification efforts. I would also like to acknowledge the assistance of my colleague Dr.D.R.Babu Reddy, Agril. Economist in collection of literature on horizontal diversification aspects. References:

Anonymous, 2105. Coffee Guide. Coffee Board Research Department, Coffee Board, India. 2005. 130-13lp.

Anonymous, 2006. Database on Coffee. Econoniic and Market Intelligence Unit, Coffee Board, Bangaglore, India. March 2006. 92p.

Hanumantha Rao, H 1975. Diversification in coffee. Indian Coffee. Janaury 1975. 16-18 and 28.

Hanumantlza Rao, H 1978. Diversification farm, Chettalli. Indian Coffee. Janaury 1978. 11 - 1 5.

Korikanthimath, Vs., Kiresur, V, Hiremath, G.M, Rajendra Hegde, Ravindra Mulige and M.M.Hosamani. /998. Economics of mixed cropping of peppel; Coorg mandarin and cardamom in Robusta coffee. J. Plantation Crops. 26 (2): 149-155.

Mayne; WW 1951. Report on cardamom Cl/ltivation in South India. ICAR Bull. 50, pp52.

Reddy, D.R.B., Raghuramulu, Y and R.Naidu. 2004. Impact of Diversification in Indian coffee plantations- A sustain

able approach. In Proc. of 2(Jh International Conference on Coffee Science (ASIC), 2004, Bangalore, India, p.1l29-1135.

www.cafecofJeeday.com

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Dr. Y. Raghuramulu, Head, Division of Agronomy, Central Coffee Research Institute, Coffee Research Station -577 117, Chikmagalur Dist., Karnataka, India

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