India should permit coffee imports at low tariffs to improve the health of the ailing industry through increased domestic consumption by offering consumers a better brew, a top trade official said on Tuesday. India, which produces 4.5 percent of the world's coffee and exports 70 to 80 percent of that, saw production slide to 260,000 tonnes in the year to March from a high of 301,000 in 2001/02.
Exports too have fallen to 189,000 tonnes from 235,000 tonnes during the same period.
"The younger set is attracted to soft drinks and domestic consumption of coffee can be increased only with good brew made available," Arun Bidappa, chairman of the Karnataka Coffee Brokers Ltd, told Reuters in a phone interview from Bangalore.
"What we get in India now, barring the south, is push-button coffee."
Bidappa said the government should allow imports of better coffee, such as Columbian or Kenyan varieties, at lower duties, which could be mixed with local varieties to make tastier coffee.
While tea, which is easier to brew, and soft drinks were making inroads in the huge Indian consumer market, coffee consumption had only remained steady over the past decade.
"The market for coffee in southern India is saturated and unless the north chips in, it will be difficult for domestic coffee consumption to grow," said Bidappa, who heads a group of coffee growers and traders.
He said most of India's good coffee was exported and domestic consumers had to be content with sub-standard coffee.
"If plenty of good coffee is available in the market, consumption will automatically grow and there is no need to restrict imports," he said.
India currently permits duty-free coffee imports only if it is for re-export after value addition. Otherwise, coffee imports are hit with a 100 percent duty.
Bidappa said Indian exports of coffee would not suffer as a result of imports because they cater to a different market in Europe, the main consumer of Indian coffee.
He estimated India's coffee output in 2004/05 at about 290,000 tonnes, including 220,000 tonnes of exports.
Industry officials say India's coffee production and export growth are likely to remain subdued with growers deep in debt and a limited availability of land for new plantings.
Coffee growers in Karnataka, India's main growing belt, are finding it tough to repay some 10 billion Indian rupees ($220 million) of loans because of heavy losses suffered in the past few years following a sharp drop in global coffee prices.
Growers have demanded a financial package from the government to help repay the loans, but no final decision has yet been made.