Introduction
India became the world’s fifth largest coffee exporter during 2021-22, with 6% of the global output during FY22. Indian coffee is one of the best coffees in the world owing to its high quality and pertains to be premium in the international markets. India produces two types of coffee: Arabica and Robusta. Arabica has high market value than Robusta coffee due to its mild aromatic flavour. Robusta coffee is mainly used in making various blends due to its strong flavour. Robusta is a majorly manufactured coffee with a share of 72% of the total production of Indian coffee. India is considered the fifth largest producer of Robusta coffee globally. The industry provides direct employment to more than 2 million people in India. Since coffee is mainly an export commodity for India, domestic demand and consumption do not drastically impact the prices of coffee.
Coffee is largely produced in the southern part of India. Karnataka is the largest producer accounting for about 70% of the total coffee production in India. Kerala is the second-largest producer of coffee but accounts only for about 23% of the total production. Tamil Nadu is the third-largest producer with 6% of India’s total coffee production. Nearly half of Tamil Nadu’s coffee is made in the Nilgiri district, a major Arabica growing region. Orissa and the north-eastern areas have a smaller proportion of production.
Export Trend
Coffee is one of the world’s most popular commodities, and as of 2022, the export of Indian coffee was valued at US$ 1.05 billion. India majorly exports Robusta coffee beans, a coffee bean species with low acidity and high bitterness compared to Arabica coffee. Apart from green coffee beans, preparations of coffee (31% of which is instant coffee) also have a significant share in India’s export basket. Almost one-third of the country’s total coffee exports constitute instant coffee. Over the past 10 years, until FY20, instant coffee has experienced a CAGR of 4%. The export of instant coffee increased by 16.73 % to 35,810 tonnes in 2022 from 29,819 tonnes in the previous year.
In recent years, India’s speciality coffee has become a popular product, garnering interest from global coffee enthusiasts. Speciality coffee is distinguished by careful cultivation practices, a clear origin, a routine of plucking, special processing, branding, handling, and appearance.
According to The Food and Agriculture Organization (FAO) statistics, India is the eighth largest exporter of coffee by volume. Indian coffee exports display a seasonality, with exports peaking from March to June. The country exports over 70% of its production. In 2021-22, the total exports recorded a 42% rise to US$ 1.04 billion from the previous year. In March 2022, exports of coffee were valued at US$ 114.7 million, a 22% growth from February 2022. In FY23 (until December 2023), export of coffee stood at US$ 525.25 million. This strong growth in the export of coffee has improved realizations for coffee growers in key states.
Top Export Destinations
India exports coffee to more than 50 countries around the world. Italy, Germany, Belgium, and the Russian Federation are the largest importers of coffee from India, with an average total share of about 45%. The other coffee importing countries are Libya, Poland, Jordan, Malaysia, the US, Slovenia, and Australia.
Italy, India’s largest export market, accounts for 20% of bean coffee exports. Europe, where people prefer comparatively more bitter and stronger flavours of the Robusta blend, makes up 42% of India’s exports. Arabica coffee blend has high demand from the Middle East region, which can be traced back to the Arabia region. In 2019-20, Russia, Poland, the USA, Turkey, and Malaysia imported coffee preparations produced in India, worth close to US$ 141 million. Also, the Government of Japan’s assurance to purchase all the coffee produced in the Manipur state will drive mass-scale coffee production in areas like Chandel, Litan, and Nongmaiching Hills, which were once regarded unsuitable for coffee production.
India’s exports of green coffee beans to Germany saw a 5% CAGR during the 2015-19 period. Indian exporters continue focusing on building a significant market share in Poland and the USA for instant coffee. India is the third-largest exporter of coffee to Poland, while coffee preparations exported to the USA grew at a 9% CAGR.
Government Initiatives
The Government of India took the initiative to provide subsidies to the farmers between US$ 2,500-US$ 3,500 per hectare for developing coffee in the traditional areas. Additional assistance for water augmentation, equipment, marketing, and promotion is also provided under the schemes. The government also supports the non-traditional coffee-growing regions under Coffee Development Programmes (CDP). Additionally, in accordance with the national policy of tribal development, coffee cultivation is being encouraged in non-traditional areas such as Andhra Pradesh, Orissa, Maharashtra, the north-eastern states, and Andaman and the Nicobar Islands. Under various export promotion initiatives, transit and freight assistance are provided to help maximize export earnings.
Export Promotion scheme - Providing Export incentive
The scheme aims to maximize export earnings by enhancing the market share of value-added coffees and high-value differentiated coffees in important high-value international markets. The government provides an export incentive of Rs. 2/- per kg for exporting high-value green coffees to high-value markets such as the USA, Canada, Japan, Australia, New Zealand, South Korea, Finland, and Norway. There is also an incentive of Rs. 3/- per kg for the export of value-added coffees in retail consumer packs exported as “India Brand” calculated on the green coffee utilized for preparation at the maximum rate of 2.6 kg for instant/soluble coffee and 1.19 kgs for Roasted coffee seeds and R & G Coffees.
Government Body
Coffee Board of India
The Coffee Board of India is an organization managed by the Ministry of Commerce and Industry and was established in 1942. The primary activities of the board are to promote sales and consumption in the domestic and international markets, conduct research and provide financial assistance, etc. After the discontinuation of pooling in 1996, Coffee Board serves as the friend, philosopher and guide to the coffee sector covering the entire value chain. The board plans various activities which aim at the enhancement of production, productivity, and quality. It also aimed at promoting export for achieving higher value returns for Indian coffee and to support the domestic market as well.
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