This is the first initiative taken by the Board to provide an opportunity for better price realisation
Coffee Board of India, an autonomous body under the ministry of commerce, has signed a memorandum of understanding with National Spot Exchange (NSEL) to launch a warehouse receipt based electronic spot market for coffee beans. This is the first of its kind initiative taken by the Board to provide an opportunity for better price realization and educate them about quality assessment.
Currently, over Rs 2,000 crore worth of coffee is traded in physical form at the farm gate level. Agents of exporters collect the beans at the estates and transport it for curing. Earlier, ABN AMRO and ITC had tried to provide online trading platforms for coffee, which did not work well, the coffee growers said.
As per the MoU, the NSEL will conduct online trading of coffee beans for both raw and cleaned coffee. It has tied up with coffee curing companies for curing of coffee post the online transaction. NSEL has set up two warehouses at Kushalnagar in Kodagu district and Chikmagalur in Chikmagalur district for storing coffee on behalf of the growers.
“The aim of this partnership is to ensure that small and medium coffee growers get an opportunity to sell their coffee online. We will provide them quality assessment and grading facilities at their farm gate with the help of Coffee Board. The growers are free to fix their own prices. There will be no fee to the growers for online trading. We will charge the buyers a small commission,” an official of NSEL said.
The partnership between Coffee Board and NSEL is also aimed at providing market linkages and relevant back-end infrastructure, education, training and technical advice to growers. The Coffee Board will carry a mobile laboratory to conduct the grading of coffee beans at the farm gate. The price will be discovered based on transparent electronic bidding. After the online trading is carried out, NSEL will deliver the beans at the doorstep of buyers or curing works through its transport network, he said.
The NSEL is also in the process of providing finance. Federal Bank, Standard Chartered and ICICI Bank among others have approached NSEL for providing finance on the warehouse receipts.
Ramesh Rajah, president, Coffee Exporters’ Association of India said, “It is an excellent idea. The seller will know how much price he will get for his coffee. However, there are many glitches involved in online trading.”
He said issues like Rule 7B, VAT and transaction costs would have to be sorted out properly. As the sale of cured coffee attracts taxation, the growers will not come forward to sell through online platform. The NSEL and Coffee Board will have to sort out these issues, he said.
NSEL has till now added 54 commodities on its online spot-trading platform.
source: http://www.business-standard.com / Business Standard / Home> Companies> News / by Mahesh Kulkarni / Bangalore – June 28th, 2013
