The Coffee Board had complete control over the marketing of the good both in India and overseas before India’s economy was liberalized in 1991 And centre plans to replace Decades –Old Coffee Act
The new Coffee (Promotion and Development Bill), 2022, which has been scheduled for the monsoon session of Parliament, is intended to replace the 80-year-old Coffee Act.
In order to shield the ailing Indian coffee industry from the war’s negative economic effects, the Old Coffee Act, 1942 was originally adopted during World War II. The government is currently attempting to repeal the law because it feels that many of the provisions are unnecessary and overly restrictive.
To make conducting business easier and encourage the growth of these industries, the government has also recommended repealing the decades-old laws on tea, spices, and rubber and replacing them with new regulations.
“These are extremely ancient rules, and the goal is just to make them simpler, make it easier to conduct business, and ensure that the little people in various industries, such as coffee and tea growing, are not burdened with onerous levels of compliance.,” says Commerce and Industry Minister Piyush Goyal.
The origin of the Coffee Act, 1942
The Indian coffee industry was dealing with serious issues in the 1930s, including extensive damage from pests and diseases as well as the Great Depression’s effects on the world economy. Due to the significant losses suffered by coffee planters, the government approved the Coffee Cess Act (XIV of 1935) and established the first Indian Cess Committee in November 1935 to promote the sale of coffee and increase local and global coffee consumption.
Due to poor demand and the loss of international markets brought on by the start of World War II, these issues from the 1930s were made worse. The government established the Coffee Board through the adoption of the Old Coffee Act, 1942, under the supervision of the Ministry of Commerce and Industry since the Cess Committee was unable to address the industry issue. The Act’s main goal was to make provisions for the growth of the coffee industry. The Board was responsible with assisting the sector with marketing, consumption promotion, funding, and Research & Development.
The pooling system
The Coffee Board had complete control over the marketing of the good both in India and overseas before India’s economy was liberalized in 1991. Previously, it was also in charge of collecting, storing, processing, and selling on behalf of the growers.
The Coffee Act established a pooling system, under which each planter was forced to contribute their whole crop—aside from the meagre amounts allowed for domestic consumption and seed production—to a surplus pool run by the board.
The coffee had to be harvested, dried, and sent to a curing plant where the producer would be paid in advance. The Coffee Board would pay registered private contractors to clean, sort, and grade coffee using a point system in exchange for a charge, which would then be subtracted from the grower’s payment. According to Takamasa Akiyama, a World Bank economist, the board then divided the remaining pool into two separate auctions, selling 30% for domestic markets and 70% for export. The cost of domestic coffee was purposefully kept low to encourage domestic consumption.
In accordance with the amount of points their coffee received at the curing factory, the board pooled the proceeds from these auctions and paid the producer in instalments over the course of the year.
The changes since liberalization
The board no longer maintains its monopoly grip over the marketing of Indian coffee, even though it still serves as the primary government agency responsible for overseeing the business. The Board’s power was gradually diminished through amendments, and in 1996 the pooling system was eliminated and growers were permitted to sell directly to processing companies. The growers were exposed to the free market, and the coffee business was completely deregulated. Since liberalization, the Coffee Board has taken on a more consultative role and attempts to boost output while fostering further exports and the growth of the home market.
Why does the government want to scrap the law?
The government will eliminate the “respective and redundant” elements and introduce a simpler version of the Act to meet the current needs of the industry in order to promote growth and ease of doing business, according to an official announcement. Goyal further pledged that the government would not shut down the coffee board but rather move it from the Ministry of Commerce to the Ministry of Agriculture in order to guarantee that coffee farmers would receive benefits from all agricultural programmes.
The Old Coffee Act of 1942’s core provisions, which deal with pooling and marketing of the commodity, have reportedly become superfluous or inoperative, according to the draught Coffee (Promotion and Development) Bill, 2022, which was originally published in January of this year. The primary goal of the new legislation is to encourage the sale and consumption of Indian coffee, including through e-commerce platforms, with fewer limitations from the government. In order to bring the Indian coffee sector in line with “global best practices,” it also wants to promote further economic, scientific, and technical research.
While the Coffee Board’s limited marketing control continues, exporters will still need a certificate from the statutory organisation.
