Are Subsidies for Coffee Farmers Inclusive in India? Evidence and Implications from a Household Survey

Abstract

Using newly collected data from a household survey of 575 coffee farmers in traditional coffee growing regions of India, this article answers policy-relevant questions regarding (a) the nature, extent and intensity of inclusiveness of subsidies to coffee farmers and (b) responsiveness of subsidies to constraints of coffee farming by small farmers. The analyses are disaggregated by states (Karnataka, Kerala and Tamil Nadu) and districts in Karnataka (Chikmagalur, Hassan and Kodagu). Subsidies refer to explicit support by the Government of India for water augmentation, quality upgrading and coffee replantation. A subsidy policy is distinguished between inclusive and intensely inclusive by high proportion of small, poor, and socially, economically and educationally disadvantaged beneficiaries of the subsidies. Inclusiveness is measured by both individual indicators and a composite index. The results offer strong evidence for inclusiveness of subsidy for coffee replantation and, in particular, subsidy for clean replanting. Other subsidies are inclusive but intensity of inclusiveness shows remarkable variations by the components of subsidies and across regions. Furthermore, the subsidies are found to be partially responsive to the coffee farming constraints of small farmers only under coffee replantation. These analyses and results have implications for developing taxonomy of subsidies as a basis for designing a more inclusive and responsive subsidy policy for household coffee farmers by traditional coffee regions in India, especially during the Twelfth Five Year Plan of India (2012–17).

Keywords

Coffee Arabica small farmers subsidies caste poverty

Introduction

A farmer with up to 10 hectares of coffee estate is considered a small farmer. Within the small farmers, smaller (2–4 ha) and smallest (up to 2 ha) are distinguishable. Furthermore, small and non-small farmers are distinguishable by their socio-economic status in terms of being below or above the poverty line; their belonging to social categories, such as Scheduled Caste (SC), Scheduled Tribe (ST), or Other Backward Classes (OBCs); and their literacy and level of education. In general, a subsidy policy is strongly inclusive if small, poor and socially, economically and educationally disadvantaged farmers are major beneficiaries of subsidies.

A broad policy vision and strategy for inclusive growth in India’s economic planning is best outlined in the Planning Commission (2008: Ch. 1). In this policy framework, the most widely researched area of inclusiveness in India is related to inter-temporal changes in poverty, mean per capita monthly consumption and inequality across socio-religious groups of households (Thorat and Dubey 2012) and social groups of households (Jayaraj and Subramanian 2012; Suryanarayana 2012). Social groups are distinguished by SC, ST and OBCs. Religious groups include Hindus, Muslims and other religious minorities (e.g., Christians).¹

India’s plantation sector, including coffee, has many researchable issues, such as inclusiveness, livelihood of workers and small and marginal holders, balanced regional development, environment, system of production, domestic trade and marketing, exports and innovation. In general, these non-subsidy issues in the plantation sector are analytically discussed by Joseph (2010), while key non-subsidy issues in the coffee sector are discussed by Upendranath (2010), Sumitra (2012), Upendranath and Subbaiah (2012, 2013).

Under the Eleventh Five Year Plan (2007–12), the Government of India (GoI) has been financially supportive of coffee farmers through the explicit subsidies, including for water augmentation, quality upgrading, and coffee replantation in traditional coffee growing regions (Karnataka, Kerala and Tamil Nadu). These subsidies aim to promote long-term investment for sustained increase in coffee production and value addition with special reference to small and smaller farmers. To our knowledge, analysis of inclusiveness of these subsidies for household coffee farmers, and responsiveness of these subsidies to farming constraints for small farmers, is not available at the national level of aggregation or state/district level of disaggregation.² However, this article is an attempt to fill in this policy research gap and draw implications for more inclusiveness and responsiveness of the subsidization policies for coffee farmers in India.

The main objectives of this article are to (a) construct individual indicators and a composite index for the nature and extent of inclusiveness of the subsidies by the GoI to household coffee farmers and (b) analyse the responsiveness of the subsidies to farming constraints with special reference to small farmers, by using newly collected data from a household survey of 575 coffee farmers in traditional coffee growing regions of India. To gain deeper insights, inclusiveness of the subsidies is distinguished by their types, components and intensity; and disaggregated by states (Karnataka, Kerala and Tamil Nadu) and districts in Karnataka (Chikmagalur, Hassan and Kodagu). In addition, responsiveness of subsidies is explained by select constraints of coffee farming, such as diseases, insect and pests, inputs and equipments and marketing. Thus, the results of this research have important implications for the promotion of subsidy-specific and region-specific inclusiveness and responsiveness of the subsidy programmes, especially for small coffee farmers, during the Twelfth Five Year Plan of India (2012–2017).

The rest of the article is organized as follows. The section ‘Database and Data Descriptions’ describes the database and socio-economic background of household coffee farmers as they relate to the measurement of inclusiveness. The section ‘Nature and Regional Distribution of Subsidies’ outlines the types and components of subsidies and the nature and extent of inter-regional distribution of beneficiaries or recipients of subsidies. The section ‘Measurement and Analyses of Inclusiveness of Subsidies’ measures the inclusiveness of the subsidies and its intensity. The section ‘Responsiveness of the Subsidies to Coffee Farming Constraints’ analyses the responsiveness of the subsidies to the farming constraints of small coffee farmers, while the major conclusions and implications are presented in the final section.

Database and Data Descriptions

Database

A nationally representative database on recipients of the subsidies by their socio-economic background is not available in India. Thus, a new database was created through a sample survey of 575 farmers in traditional Arabica coffee growing regions, conducted in February–August 2010. The traditional coffee growing states are Karnataka, Kerala and Tamil Nadu. These traditional regions contributed about 98 per cent of total coffee production, or 94 per cent of total Arabica coffee production, by post-monsoon estimates as well as post-blossom estimates in 2010–11. Furthermore, Karnataka is the largest producer with 80 per cent of total production of Arabica coffee in India. Major coffee growing districts in Karnataka are Chikmagalur, Hassan and Kodagu. The national share of three districts of Karnataka is equal to 40, 22 and 18 per cent respectively. Other major Arabica coffee growing regions include Pulneys, Shevroys and Annamalais in Tamil Nadu and Nelliampathis in Kerala.

The selection and allocation of sample farmers/growers is based on multi-stage and simple random sampling method. The multi-stage sample design is distinguished by three stages. In Stage I, total sample is allocated to three states in proportion of their average share by five variables: (a) Planted area (Arabica) in 2007–08, (b) Planted area (Arabica) in 2008–09, (c) Production of coffee (Arabica) in 2007–08, (d) Production of coffee (Arabica) in 2008–09 and (e) Production of coffee (Arabica) in 2009–10.³ In Stage II, the sample size in Stage I is allocated in each state in proportion to the distribution of farmers by estate size of planted area under Arabica coffee. In Stage III, sample farmers are ultimately drawn from all the Liaison Zones of the Coffee Board of India in each state/district. In the absence of a complete household listing of coffee farmers, however, the entire fieldwork is implemented with the guidance of officials and staff in extension services of the Coffee Board.

Structured questionnaire is the instrument of collection of primary data from the sample farmers. Trained investigators canvassed the questionnaire by direct personal interview with the farmers at their estates. The questionnaire sought information including socio-economic background of farmers and recipients of subsidies by the GoI between April 2007 and August 2010. Thus, all descriptions and analyses of subsidies in this article refer to the recipients of the subsidy up to August 2010 of the Eleventh Five Year Plan of India.

Data Descriptions

Table 1 gives the select socio-economic background characteristics and their regional distribution by states and districts. The characteristics are the size of estates, status of poverty, educational attainments and social categories of farmers. Of the total 575 sample farmers, about 73 per cent belong to Karnataka, 18 per cent to Tamil Nadu and the remaining 9 per cent to Kerala. Of the 417 sample farmers within Karnataka, the distribution by districts is as follows: Chikmagalur (44 per cent), Kodagu (31 per cent) and Hassan (25 per cent).

Farmers with estate size of less than 10 hectares or about 25 acres are called small farmers. They constitute the highest share of total farmers at the national, state and district levels. For instance, the share of small farmers is equal to 90 per cent at all India level. Within Karnataka, this share varies from about 86 per cent in Chikmagalur, to 94 per cent in Hassan, and to 94 per cent in Kodagu. In particular, the sample is dominated by the smallest farmers with less than five acres of estate size, or smaller farmers with less than 10 acres. For instance, the share of smallest (or smaller) farmers is equal to about 43 (or 24) per cent in Karnataka, 81 (or 7) per cent in Kerala, 64 (or 14) per cent in Tamil Nadu and 51 (or 21) per cent at all India level.

The ration card is a source of availing the benefits of subsidized foodgrains through public distribution system. It aims at providing poorer sections of society with food security and reduction in consumption poverty.⁴ Thus, households are identifiable as poor by their possession of a ration card, and nature and extent of poverty is measurable by types and number of ration cardholders, respectively. Accordingly, about 94 per cent of household farmers are poor because they are holders of ration cards (APL+BPL) in all the states, with the highest proportion in Tamil Nadu (about 98 per cent). Of the types of ration cards, holders of APL cards are higher in Karnataka and Kerala, while BPL cardholders are higher in Tamil Nadu. In Karnataka state, holders of BPL cards are about 20 per cent in all districts.

Table 1:

Select Socio-economic Background Characteristics of Household Coffee Farmers in India

Socio-economic Background Characteristics	Karnataka				Kerala (N = 54)	Tamil Nadu (N = 104)	Total (N = 575)
Socio-economic Background Characteristics	Chikmagalur (N = 185)	Hassan (N = 104)	Kodagu (N = 128)	Total (N = 417)	Kerala (N = 54)	Tamil Nadu (N = 104)	Total (N = 575)
1. Total size of estate or land owned
Less than 5 acres	45.95	48.08	35.16	43.17	81.48	64.42	50.61
More than 5 acres but less than 10 acres	25.41	19.23	27.34	24.46	7.41	14.42	21.04
More than 10 acres but less than 15 acres	9.19	16.35	9.38	11.03	1.85	5.77	9.22
More than 15 acres but less than 20 acres	4.32	6.73	15.63	8.39	0.00	5.77	7.13
More than 20 acres but less than 25 acres	1.62	3.85	6.25	3.60	0.00	0.96	2.78
More than 25 acres but less than 50 acres	8.11	4.81	3.13	5.76	0.00	0.96	4.35
More than 50 acres but less than 100 acres	2.70	0.96	3.13	2.40	1.85	0.96	2.09
More than 100 acres but less than 200 acres	2.16	0.00	0.00	0.96	7.41	6.73	2.61
More than 200 acres	0.54	0.00	0.00	0.24	0.00	0.00	0.17
2. Economic status
Holder of ration card (APL+BPL)	92.43	96.15	94.53	94.00	94.44	98.08	94.78
Holder to APL card	72.43	75.96	74.22	73.86	55.56	39.42	65.91
Holder of BPL card	20.00	20.19	20.31	20.14	38.89	58.65	28.87
3. Highest education completed
Non-formal education (e.g., adult education)	6.49	15.38	4.69	8.15	1.85	13.46	8.52
Primary school education	8.11	10.58	10.94	9.59	9.26	6.73	9.04
Upper primary or middle school education	22.16	13.46	16.41	18.23	16.67	10.58	16.70
High school education	35.14	29.81	27.34	31.41	44.44	30.77	32.5
Higher secondary or pre-university education	7.57	13.46	14.06	11.03	12.96	13.46	11.65
Graduate in non-professional education	15.68	17.31	18.75	17.03	12.96	18.27	16.87
Postgraduate in non-professional education	0.54	0.00	0.78	0.48	0.00	3.85	1.04
Graduate or postgraduate in professional education	2.16	0.00	5.47	2.63	0.00	0.96	2.09
Diploma holder	2.16	0.00	1.56	1.44	1.85	1.92	1.57
4. Social caste
Scheduled Caste and Scheduled Tribe	8.65	7.69	0.78	6.00	16.67	37.50	12.70
Other Backward Classes	63.78	39.42	42.19	51.08	70.37	61.54	54.78
Others	27.57	52.88	57.03	42.93	12.96	0.96	32.52

Source: Author.

Note: All figures under each background characteristic are per cent to total number of sample growers in the respective State/District.

Educational background of household heads with completed levels of education show interesting variations. A higher number of household heads has completed primary, upper primary, high school and higher secondary levels of education. Non-professional graduates are highest in completed levels of higher education. Household heads with non-formal education are highest in Tamil Nadu and Hassan district in Karnataka. In the absence of non-formal education, however, these farmers would have been left with illiteracy. Of the total farmers, the share of farmers with non-formal education and primary education (or up to high school) accounts for about 18 (59) per cent in Karnataka, 11 (70) per cent in Kerala and 20 (48) per cent in Tamil Nadu. Overall, they account for about 18 (or 58) per cent of total farmers in India.

The distribution of farmers by social categories is different across states. Farmers belonging to OBCs are highest in all states and in Chikmagalur district.⁵ At all India level, estates belonging to OBCs are equal to about 55 per cent. The SC and ST (or SCST) and OBCs together account for about 87 per cent and 99 per cent of estates in Kerala and Tamil Nadu. Among the states, estates belonging to the others (i.e., farmers who do not belong to SCST and OBCs) are highest in Karnataka (about 43 per cent). Within Karnataka, estates which belong to the others are highest in Kodagu (about 57 per cent).

It is important to note that the proportion of ration cardholder (APL+BPL) exceeds the proportion of small growers in all coffee growing regions. This implies that all the small growers are identifiable as poor. At the same time, the presence of large number of growers (a) in non-SCST and OBCs categories (about 53 per cent at all India level) and (b) with completion of non-higher education (about 80 per cent at all India level) suggests that small coffee growers are fit to be the targets of inclusiveness.

Nature and Regional Distribution of Subsidies

The nature and eligibility criteria for the subsidies are summarized in Table 2.⁶ These subsidies are applicable to coffee farmers in the traditional coffee growing regions in Karnataka, Kerala and Tamil Nadu.⁷ The subsidies are broadly grouped under water augmentation, quality upgrading and coffee replanting. Water augmentation subsidies are related to construction of water storage tank, borewell including installation of submersible pump, open well/ring well including installation of pump set and sprinkler/drip irrigation equipment. Quality upgrading subsidies are directed to construction of pulper unit, drying yard and godown. Coffee replantation subsidies are aimed at clean replanting, interlining Arabica in Arabica areas and conversion of Arabica area to Robusta. The subsidies can be availed by farmers either individually or jointly. Corporate and cooperatives are not eligible for the subsidies. Furthermore, farmers with holding size up to 20 hectares are eligible for support under the water augmentation and quality upgrading subsidies. In contrast, all individual growers are eligible for support under the coffee replantation subsidies. Subsidies for coffee replantation and quality upgrading distinguish the scale of subsidies by size of coffee estate. For instance, under the quality upgrading subsidy, a farmer with up to two hectares is eligible for a maximum of ₹25,000 and a minimum of ₹5,000. In contrast, a farmer with 10–20 hectares is eligible for a maximum of ₹2,900,000 and a minimum of ₹58,000. On the other hand, under coffee replantation, a farmer with up to two hectares is eligible for subsidy of 40 per cent of the unit cost, as compared to 25 per cent for a farmer above 25 hectares. All the subsidies are aimed at promoting long-term investment for increasing production and income of coffee farmers in general and small farmers in particular. However, none of the subsidies is exclusively reserved for the small farmers, particular regions, disadvantaged social groups of farmers and poorer farmers.

Table 2:

Subsidies to Coffee Farmers in India’s Eleventh Five Plan of India (2007–12)

Subsidies	Eligibility	Total Unit Cost (₹)	Subsidy Amount (₹)
1. Water augmentation
i) Water storage tank	All individual coffee growers with up to 20 hectare holding size.	Depends on the size of water tank and size of holding.	Depends on size of holding and ranges from ₹6,750 to a maximum of ₹1,000,000 per holding.
ii) Borewell including installation of submersible pump		Maximum ₹70,000 per holding.	Maximum ₹17,500 per holding.
iii) Open well/Ring well including installation of pump set		Maximum ₹30,000 per holding.	Maximum ₹7,500 per holding.
iv) Sprinkler/Drip irrigation equipment		Varies from ₹30,000 to ₹5,000,000 depending on the size of holding.	Ranges from ₹7,500 to ₹1,250,000 depending on the holding size.
2. Quality upgrading
i) Pulper unit
a) Upto 2 ha	All individual coffee growers with up to 20 hectare holding size.	₹25,000	₹5,000
b) 2–4 ha		₹1,460,700	₹29,340
c) 4–10 ha		₹2,210,300	₹44,260
d) 10–20 ha		₹2,900,000	₹58,000
ii) Drying yard		Depends on size of the drying yard and holding size	Varies from ₹6,000 to ₹90,000 depending on the holding size.
iii) Godown		Depends on size of the godown and holding size	Ranges from ₹5,200 to ₹80,000 depending on size of holding.
3. Coffee replantation	All individual coffee growers irrespective of the size of the holding. Arabica coffee plants aged over 30 years and Robusta coffee plants aged over 40 years and 15 years old plants in case of Cauvery variety.	The total unit cost for four years considered for the purpose of the scheme is ₹1,000,000 per hectare in case of Arabica and ₹70,000 per hectare in case of Robusta.	For the growers with less than 2 hectare of total holdings—40 per cent of the unit cost. For the growers with 2 to 10 hectare of total holding—30 per cent of the unit cost. For the growers with more than 10 hectare of total holdings—25 per cent of the unit cost.

Source: Compiled from Coffee Board, www.indiacoffee.org, accessed 18 January 2013.

Notes: (a) ₹ stands for Indian rupee; (b) the exchange rate between ₹ and US$ was ₹45.57 per dollar in 2010–11 (GoI 2012).

The water augmentation subsidy underlines the importance of water requirements to farming and wet processing activities, such as pulping, fermenting and washing. The quality upgrading subsidy emphasizes machine-based pulping, construction of drying yard (relevant for both wet and dry process) and building godown for storing activities. Thus, water augmentation and quality upgrading subsidies are complementary and aim to increase value addition in post-harvest of coffee cherries. On the other hand, the coffee replantation subsidy is a pre-harvest subsidy to encourage replantation by farmers, especially when coffee trees are uneconomical due to ineffective management of coffee diseases, pests and insects.

Table 3 presents the distribution of farmers by types and components of subsidies in 2009–10. Within each district/state, quality upgrading and coffee replantation subsidies are most popular and widely availed in Karnataka, as compared to subsidies for water augmentation. For instance, within Karnataka, about 29 per cent of farmers have availed the subsidies for quality upgrading and about 16 per cent of farmers for coffee replantation. Within the water augmentation (or coffee replantation) subsidy, beneficiaries of the subsidy for the borewell including installation of submersible pump (or clean replanting) are the highest. On the other hand, within quality upgrading subsidies, the highest number of farmers has availed subsidies for construction of drying yard and godown in Karnataka. Subsidies for coffee replantation, especially for clean replantation, are received by 24 per cent of the farmers in Tamil Nadu and 15 per cent in Kerala. Thus, remarkable inter-regional variations are evident in the distribution of beneficiaries by all types and components of subsidies.

Figures in parentheses of Table 3 show the inter-regional distribution of total beneficiaries by types and components of subsidies. In total, 287 farmers, or about 50 per cent of the total sample farmers, have availed three major subsidies. Of the 287 recipients, about 46 (or 35) per cent are recipients of the quality upgrading (or coffee replantation) subsidy. Of the regions, Karnataka (or Kerala) has the largest (or least) number of beneficiaries by all the subsidies. Hassan (or Chikmagalur) district in Karnataka has relatively higher number of beneficiaries of the water augmentation (or quality upgrading and coffee replantation) subsidy (or subsidies). In fact, Kerala has no recipients of the quality upgrading subsidy.

Table 3:

Distribution of Farmers and Interregional Distribution of Beneficiaries by Types and Components of the Subsidies

Subsidies	Karnataka				Kerala (N = 54)	Tamil Nadu (N = 104)	Total (N = 575)
Subsidies	Chikmagalur (N = 185)	Hassan (N = 104)	Kodagu (N = 128)	Total (N = 417)	Kerala (N = 54)	Tamil Nadu (N = 104)	Total (N = 575)
1. Per cent of farmers who availed subsidies for water augmentation	7.02 (23.64)	22.12 (41.82)	9.38 (21.82)	11.51 (87.27)	1.85 (1.82)	5.77 (10.91)	9.57 (100.00) [55]
Water storage tank	1.08 (20.00)	5.77 (60.00)	1.56 (20.00)	2.40 (100.00)	0.00 (0.00)	0.00 (0.00)	1.74 (100.00) [10]
Borewell including installation of submersible pump	2.70 (20.00)	7.69 (32.00)	4.59 (24.00)	4.56 (76.00)	1.8 (54.00)	4.81 (20.00)	4.35 (100.00) [25]
Open well/Ring well including installation of pump set	0.54 (50.00)	0.00 (0.00)	0.00 (0.00)	0.24 (50.00)	0.00 (0.00)	0.96 (50.00)	0.35 (100.00) [2]
Sprinkler/Drip irrigation equipment	2.70 (27.78)	8.65 (50.00)	3.13 (22.22)	4.32 (100.00)	0.00 (0.00)	0.00 (0.00)	3.13 (100.00) [18]
2. Per cent of farmers who availed subsidies for quality up gradation	30.81 (43.51)	36.54 (29.01)	20.31 (19.85)	29.29 (2.37)	0.00 (0.00)	9.62 (7.63)	22.78 (100.00) [131]
Pulper unit	2.16 (33.33)	2.88 (25.00)	2.34 (25.00)	2.40 (83.33)	0.00 (0.00)	1.92 (16.67)	2.09 (100.00) [12]
Drying yard	17.30 (43.24)	21.15 (29.73)	12.50 (21.62)	16.79 (94.59)	0.00 (0.00)	3.85 (5.41)	12.87 (100.00) [74]
Godown	11.35 46.67	12.50 (28.89)	5.47 (15.56)	9.83 (91.11)	0.00 (0.00)	3.85 (8.89)	7.83 (100.00) [45]
3. Per cent of farmers who availed subsidies for coffee replantation	14.59 (26.73)	20.19 (20.79)	15.63 (19.80)	16.31 (67.33)	14.81 (7.92)	24.04 (24.75)	17.57 (100.00) [101]
Clean replanting	8.65 (25.40)	8.65 (14.29)	5.47 (11.11)	7.67 (50.79)	14.81 (12.70)	22.12 (36.51)	10.97 (100.00) [63]
Interlining	4.86 (37.50)	5.77 (25.00)	5.47 (29.17)	5.28 (91.67)	0.00 (0.00)	1.92 (8.33)	4.17 (100.00) [24]
Arabica in Arabica areas	0.54 (11.11)	2.88 (33.33)	3.91 (55.56)	2.16 (100.00)	0.00 (0.00)	0.00 (0.00)	1.57 (100.00) [9]
Conversion of Arabica area to Robusta	0.54 (20.00)	2.88 (60.00)	0.78 (20.00)	1.20 (100.00)	0.00 (0.00)	0.00 (0.00)	0.87 (100.00) [5]

Source: Author.

Notes: (a) All figures are per cent to total number of sample growers in the respective State/District; (b) figures in parentheses are per cent total number of beneficiaries of the respective subsidy at national level; (c) figures in square brackets are total number of beneficiaries of the subsidy.

It is important to note that a farmer may be eligible to receive (provided he/she fulfils the eligibility criteria as given in Table 2) more than one type or component of subsidy. For instance, at the all India level, the proportion of farmers who received more than one component of subsidy is 33 per cent of the total recipients for water augmentation and 53 per cent of total recipients for quality upgrading. In contrast, no recipient of subsidy for coffee replantation has received more than one component. On the other hand, the proportion of farmers who received more than one type of subsidy is 60 per cent of the combined total recipients of subsidies for water augmentation and quality upgrading; 24 per cent of combined recipients of subsidies for water augmentation and coffee replantation; 49 per cent of combined recipients of subsidies for quality upgrading and coffee replantation; and 60 per cent of combined recipients of subsidies for water augmentation, quality upgrading and coffee replantation. Of all the states, the proportion of recipients of more than one component or type of subsidy is highest in Karnataka. That is, 24 per cent for water augmentation, 36 per cent for quality upgrading; 51 per cent for water augmentation and quality upgrading; 32 per cent for water augmentation and coffee replantation; 45 per cent for quality upgrading and coffee replantation; and 58 per cent for water augmentation, quality upgrading, and coffee replantation. Thus, the subsidies are analysed by each type and component in order to account for its inclusiveness.

Measurement and Analyses of Inclusiveness of Subsidies

An Approach Paper to the Twelfth Five Year Plan of India by the Planning Commission (2011) underlines that inclusiveness is a multidimensional concept, and approaches to its assessment by many indicators, such as lower incidence of poverty, broad-based and significant improvement in health outcomes, increased access to higher education, better opportunities for livelihood with particular attention to the needs of socially backward caste populations, such as SCST and OBCs. The emphasis on small, poor, lower educated, SCST and OBCs farmers are ways of capturing the inclusiveness of subsidies to coffee farmers in this article. In other words, our approach to measurement of inclusiveness of the subsidies to coffee farmers and its intensity is by per cent of recipients or beneficiaries of subsidies in each coffee region by four groups: (a) social categories of beneficiaries; (b) economic status of beneficiaries; (c) educational attainment of beneficiaries; and (c) size of estate of beneficiaries.

Inclusiveness of Subsidies by Individual Indicators

Inclusiveness and intensity of subsidies to coffee farmers are measured by select indicators as given in Table 4. These indicators represent how broadly the benefits of subsidies are shared by four groups of farmers. This approach is useful, among others, for comparison of inter group and horizontal inclusiveness of the subsidies.⁸

Table 4:

Indicators for Measurement of Inclusiveness of Subsidies and its Intensity to Coffee Farmers

Indicators of Inclusiveness	Measurement of Inclusiveness	Measurement of Intensity of Inclusiveness
1. Social categories	Per cent of SCST and OBCs recipients of a subsidy	Per cent of SCST recipients of subsidy
2. Economic status	Per cent of BPL and APL cardholding recipients of a subsidy	Per cent of BPL cardholding recipients of a subsidy
3. Educational attainment	Per cent of recipients of a subsidy who completed non-formal, primary upper primary and high school education	Per cent of recipients of a subsidy who completed non-formal, primary and upper primary school education
4. Size of estate	Per cent of recipients of a subsidy whose estate size is equal to or less than 25 acre	Per cent of recipients of a subsidy whose estate size is equal to or less than 10 acre

Source: Author.

Regional distribution of recipients of three types and 11 components of the subsidies by two social categories of farmers (OBCs and SCST) are given in Table 5. A subsidy is more inclusive by social categories of farmers if it has a higher combined share of SCST and OBCs recipients than in other subsidies. Inclusiveness of a subsidy is more intense if the share of SCST recipients is higher than in other subsidies. The results show remarkable variations in inclusiveness by components of subsidy and regions, that is, subsidies for open well/ring well and conversion of Arabica into Robusta in Chikmagalur; clean replanting in Hassan; sprinkler/drip irrigation equipment in Kodagu; open well/ring well in entire Karnataka; clean replanting in Kerala; all the subsidies in Tamil Nadu (because the recipients belonging to SCST and OBCs is closer to 100 per cent); and subsidy for open well/ring well at all India. However, the inclusiveness of is less intensive for two important reasons. First, the SCST recipients are less than OBCs. For instance, SCST recipients are zero in water augmentation and quality upgrading subsidies in all the districts and states except in Tamil Nadu. Second, the combined share of SCST and OBCs recipients of water augmentation and quality upgrading subsidies is less than the rest of farmers in Karnataka (particularly in Hassan and Kodagu). A notable exception is coffee replanting and interlining subsidies for which the combined share is more than the rest of recipients in Karnataka and Kerala.

Table 6 gives the distribution of recipients of subsidies by economic status as indicated by the possession of BPL and APL cards. In general, the APL cardholders dominate the total recipients of all subsidies in all regions. Except for the coffee replantation subsidy, BPL cardholding recipients or intensity of inclusiveness is remarkably lower by all subsidies and in all regions except Tamil Nadu.

Inclusiveness by literacy and educational attainments of farmers is presented in Table 7. Educational attainment is distinguished by two levels of education: (a) completed non-formal, primary, and upper primary education and (b) completed high school education. In general, recipients by (a) is lower than by (b). However, the combined share of recipients by (a) and (b) is higher than the rest of recipients. Thus, subsidies are inclusive but their intensity is low by completed education levels of coffee farmers.

Table 8 gives the distribution of recipients by small farmers who are distinguished by very small farmers (having less than 10 acres of estate) and smaller farmers (having more than 10 acres but less than 25 acres). Interestingly, very small farmers are the major recipients of the subsidies. The combined share of recipients by the very small and smaller farmers varies from 70 per cent to 99.4 per cent at all India level. Thus, in terms of size distribution of coffee estates, subsidies are inclusive with high intensity.

Table 5:

Beneficiaries of the Subsidies by Social Categories of Farmers

Type of Subsidies	Karnataka				Kerala	Tamil Nadu	Total
	Chikmagalur	Hassan	Kodagu	Total	Kerala	Tamil Nadu	Total
	Per cent of Beneficiaries by SCST [OBCs]
1. Water augmentation	0 [76.92]	0 [17.39]	0 [41.67]	0 [39.58]	0 [0]	0 [100]	0 [45.45]
Water storage tank	0 [100]	0 [0]	0 [100]	0 [39.97]	0 [0]	0 [0]	0 [39.98]
Borewell including installation of submersible pump	0 [60.06]	0 [25.01]	0 [17]	0 [31.55]	0 [0]	0 [99.95]	0 [43.98]
Open well/Ring well including installation of pump set	0 [100]	0 [0]	0 [0]	0 [99.92]	0 [0]	0 [100]	0 [99.38]
Sprinkler/Drip irrigation equipment	0 [80.08]	0 [22.23]	0 [49.92]	0 [44.41]	0 [0]	0 [0]	0 [44.45]
2. Quality upgradation	0 [66.67]	0 [23.68]	0 [26.92]	0 [29.75]	0 [0]	40 [60]	3.05 [32.06]
Pulper unit	0 [25.03]	0 [33.39]	0 [33.39]	0 [29.98]	0 [0]	0 [100]	0 [41.61]
Drying yard	0 [71.86]	0 [22.73]	0 [31.25]	0 [47.13]	0 [0]	49.95 [49.95]	2.70 [47.30]
Godown	0 [66.67]	0 [23.08]	0 [14.28]	0 [0.00]	0 [0]	49.95 [49.95]	4.44 [4.44]
3. Clean replantation	6.25 [51.85]	0 [33.33]	0 [30]	3.13 [39.71]	0 [75.00]	0 [100]	1.59 [57.43]
Clean replanting	3.70 [62.49]	0 [44.46]	5 [42.85]	2.94 [53.15]	0 [75.02]	0 [99.98]	1.98 [72.93]
Interlining	0 [33.37]	0 [33.33]	0 [28.56]	0 [31.79]	0 [0]	0 [100]	0 [37.54]
Arabica in Arabica areas	0 [0]	0 [0]	19.98 [19.98]	11.10 [11.10]	0 [0]	0 [0]	11.08 [11.08]
Conversion of Arabica area to Robusta	0 [100]	0 [33.33]	0 [0]	0 [40]	0 [0]	0 [0]	0 [40]

Source: Author.

Table 6:

Beneficiaries of the Subsidies by Economic Categories of Farmers

Type of Subsidies	Karnataka				Kerala	Tamil Nadu	Total
	Chikmagalur	Hassan	Kodagu	Total	Kerala	Tamil Nadu	Total
	Per cent of Beneficiaries by BPL [APL] Cardholders
1. Water augmentation	7.7 [92.3]	8.7 [91.3]	0 [100]	6.3 [93.8]	0 [100]	66.7 [33.3]	12.7 [87.3]
Water storage tank	0 [100]	16.7 [83.3]	0 [100]	10 [89.9]	0 [0]	0 [0]	10 [90]
Borewell including installation of submersible pump	0 [100]	0 [100]	0 [100]	0 [99.9]	0 [100]	60 [40]	12 [88]
Open well/Ring well including installation of pump set	0 [100]	0 [0]	0 [0]	0 [99.9]	0 [0]	100 [0]	49.7 [49.7]
Sprinkler/Drip irrigation equipment	20 [80]	11.1 [88.9]	0 [99.8]	11.1 [88.8]	0 [0]	0 [0]	11.1 [88.9]
2. Quality up gradation	1.8 [98]	10.5 [86.8]	0 [100]	4.1 [95]	0 [0]	30 [70]	6.1 [93.1]
Pulper unit	0 [100]	0 [100]	0 [100]	0 [99.9]	0 [0]	0 [100]	0 [99.9]
Drying yard	3.1 [96.9]	9.1 [90.9]	0 [100]	4.3 [95.7]	0 [0]	25 [74.9]	5.4 [94.6]
Godown	0 [100]	15.4 [76.9]	0 [100]	4.9 [92.7]	0 [0]	50 [50]	8.9 [88.8]
3. Coffee replantation	7.4 [92.6]	14.3 [85.7]	10 [90]	10.3 [89.7]	37.5 [62.5]	56 [44]	23.8 [76.2]
Clean replanting	6.2 [93.7]	0 [100]	14.3 [85.7]	6.3 [93.8]	37.5 [62.5]	60.9 [39.1]	30.1 [69.8]
Interlining	0 [100]	33.3 [66.7]	0 [100]	9.1 [90.8]	0 [0]	0 [100]	8.3 [91.8]
Arabica in Arabica areas	0 [100]	0 [100]	20 [79.9]	22.2 [77.7]	0 [0]	0 [0]	22.2 [77.5]
Conversion of Arabica area to Robusta	0 [100]	33.3 [66.7]	0 [100]	20 [80]	0 [0]	0 [0]	20 [80]

Source: Author.

Table 7:

Beneficiaries of the Subsidies by Levels of Completed Education of Farmers

Type of Subsidies	Karnataka				Kerala	Tamil Nadu	Total
	Chikmagalur	Hassan	Kodagu	Total	Kerala	Tamil Nadu	Total
	Per cent of Beneficiaries by Completed Primary and Upper Primary [High school] Education
1. Water augmentation	7.7 [38.5]	39.1 [26.1]	16.7 [0]	25 [22.9]	0 [100]	0 [33.3]	21.8 [33.3]
Water storage tank	50.1 [0]	33.3 [33.3]	0 [0]	30 [20]	0 [0]	0 [0]	30 [0]
Borewell including installation of submersible pump	0 [60.1]	25 [25]	34 [0]	21 [26.3]	0 [0]	0 [40]	16 [40]
Open well/Ring well including installation of pump set	0.0 [100]	0 [0]	0 [0]	0 [99.9]	0 [0]	0 [0]	0 [0]
Sprinkler/Drip irrigation equipment	0 [20]	55.6 [22.2]	0 [0]	27.8 [16.7]	0 [0]	0 [0]	27.8 [0]
2. Quality upgradation	19.3 [33.3]	7.9 [42.1]	7.7 [23.1]	13.2 [33.9]	0 [0]	0 [50]	12.2 [50]
Pulper unit	0 [0]	0 [33.4]	0 [0]	0 [10]	0 [0]	0 [50.1]	0 [50.1]
Drying yard	21.9 [40.6]	9.1 [45.5]	12.5 [31.3]	15.7 [40]	0 [0]	0 [50]	14.9 [50]
Godown	19.0 [28.6]	7.7 [38.5]	0 [14.3]	12.2 [29.3]	0 [0]	0 [50]	11.1 [50]
3. Coffee replantation	33.3 [25.9]	33.3 [38.1]	20 [35]	29.4 [32.4]	25 [50]	8 [36]	23.8 [36]
Clean replanting	31.2 [25]	44.5 [33.3]	0 [28.6]	28.1 [28.1]	25 [50]	4.3 [39.1]	19 [39.1]
Interlining	22.2 [33.4]	33.3 [50]	28.6 [42.8]	27.3 [40.9]	0 [0]	50 [0]	29.2 [0]
Arabica in Arabica areas	100 [0]	0 [33.4]	20 [40]	22.2 [33.3]	0 [0]	0 [0]	22.2 [0]
Conversion of Arabica area to Robusta	100 [0]	33.3 [33.3]	100 [0]	60 [20]	0 [0]	0 [0]	60 [0]

Source: Author.

In general, the above analysis indicates that subsidies to coffee growers are inclusive but their intensity is less, except by the indicator of size distribution of estate. This result implies that an approach to increase the inclusiveness of the subsidies is to focus on small farmers who belong to SCST and OBCs with attainment of education up to high school and possession of BPL or APL cards. At the same time, a targeted approach to inclusiveness is to extend benefits of the subsidies for very small and smaller farmers who belong to SCST with attainment of education up to upper middle school and possession of BPL. This targeted approach is complementary to increasing the intensity of inclusiveness among the beneficiaries of the subsidies.

Table 8:

Beneficiaries of the Subsidies by Farmers’ Size of Coffee Estate

Type of Subsidies	Karnataka				Kerala	Tamil Nadu	Total
	Chikmagalur	Hassan	Kodagu	Total	Kerala	Tamil Nadu	Total
	Per cent of Beneficiaries by Size of Estate of Less than 10 acres (more than 10 acres and less than 25 acres)
1. Water augmentation	30.8 [30.8s]	60.9 [26.1]	25 [50]	43.8 [33.3]	100 [0]	100 [0]	50.9 [29.1]
Water storage tank	0 [50.1]	50 [33.3]	0 [50.1]	30 [40]	0 [0]	0 [0]	30 [40]
Borewell including installation of submersible pump	60.1 [20]	62.5 [25]	34 [51.1]	52.6 [31.6]	100 [0]	100 [0]	64 [24]
Open well/Ring well including installation of pump set	0 [100]	0 [0]	0 [0]	0 [99.9]	0 [0]	100 [0]	49.7 [49.7]
Sprinkler/Drip irrigation equipment	20 [20]	66.7 [22.2]	25 [49.9]	44.4 [27.8]	0 [0]	0 [0]	44.5 [27.8]
2. Quality upgrading	45.6 [31.6]	50 [42.1]	34.6 [57.7]	44.6 [40.5]	0 [0]	70 [20]	46.6 [38.9]
Pulper unit	0 [50.1]	66.8 [33.2]	0 [100]	20 [60]	0 [0]	50 [50]	25 [58.2]
Drying yard	46.9 [31.2]	40.9 [40.9]	43.8 [50]	47.1 [38.6]	0 [0]	74.9 [25]	48.6 [37.8]
Godown	52.4 [28.6]	46.2 [46.2]	28.6 [57.1]	46.4 [39]	0 [0]	74.9 [0]	48.9 [35.5]
3. Coffee replantation	44.4 [33.3]	71.4 [14.3]	60 [35]	57.4 [27.9]	87.5 [0]	64 [32]	61.4 [26.7]
Clean replanting	31.2 [50]	77.8 [11.1]	42.8 [42.8]	46.9 [37.5]	87.5 [0]	65.2 [30.4]	58.7 [30.1]
Interlining	55.6 [11.1]	66.2 [16.7]	85.7 [14.3]	68.1 [13.6]	0 [0]	50 [50]	66.7 [16.7]
Arabica in Arabica areas	100 [0]	100 [0]	59.9 [40]	77.7 [22.2]	0 [0]	0 [0]	77.5 [22.2]
Conversion of Arabica area to Robusta	100 [0]	33.3 [33.3]	0 [100]	40 [40]	0 [0]	0 [0]	40 [40]

Source: Author.

Inclusiveness of Subsidies by a Composite Index

Analysis based on results in Tables 5 through 8 treats each indicator and its measure of inclusiveness independently. An alternative measure is to construct a composite index of inclusiveness, or an integrated and combined measure of inclusiveness by the above four broad indicators as explained further.

We assume that all indicators are equally important and assign equal weight (equal to unity) for all indicators of inclusiveness for all subsidies and regions. Next, we rank each subsidy in each region by proportion of beneficiaries by assigning rank one if the per cent of beneficiaries is highest and rank five if the per cent of beneficiaries is lowest or zero. Finally, the ranks of different indicators are aggregated for each subsidy to arrive at total rank score for each subsidy by regions. A subsidy with lowest (or highest) total rank score is considered the most (or least) inclusive, or the most (or least) intensively inclusive. Finally, a district or state is most (or least) inclusive if its share in total rank scores of all districts or at all India in each subsidy is lowest (or highest). Using the aforementioned calculations, inclusiveness and its intensity by types of subsidy and region are determined and results are given in Table 9.

Of the three types of subsidy, coffee replantation subsidy is the most inclusive in all districts of Karnataka and in all states of India. Of the components of subsidy, the clean replantation subsidy is most inclusive, except in Tamil Nadu where subsidy for pulper unit is most inclusive and in Chikmagalur district where subsidies for open well/ring well and conversion of Arabica in Arabica are most inclusive. At the same time, the least inclusive subsidy also varies across regions. For instance, the subsidy for open well/ring well is least inclusive in Hassan and Kodagu; the subsidy for pulper unit in Chikmagalur; subsidy for construction of godown in Karnataka as a whole; all subsidies except subsidy for borewell including installation of submersible pump set and clean replantation in Kerala; subsidies for water storage tank, sprinkler/drip irrigation equipment, Arabica in Arabica areas and conversion of Arabica to Robusta in Tamil Nadu; and subsidy for water storage tank at all India level. These variations imply that inclusiveness by components of subsidy is specific to both the subsidy and region in India.

Table 9:

Inclusiveness of Subsidies to Coffee Farmers in India

	Chikmagalur	Hassan	Kodagu	Karnataka	Kerala	Tamil Nadu	All India
	Total Rank Scores by Types of Subsidy
a) Water augmentation	8 (10)	8 (9)	8 (11)	8 (10)	6 (10)	6 (9)	9 (9)
b) Quality upgradation	7 (9)	8 (11)	8 (11)	10 (11)	12 (12)	6 (9)	9 (10)
c) Coffee replantation	6 (6)	6 (7)	5 (4)	4 (4)	6 (7)	6 (8)	4 (5)
	Total Rank Scores by Components of Subsidy
1. Water storage tank	15 (35)	22 (24)	16 (44)	26 (28)	44 (44)	44 (43)	33 (30)
2. Borewell including installation of submersible pump	14 (35)	15 (32)	23 (29)	24 (30)	24 (35)	12 (28)	17 (26)
3. Open well/Ring well including installation of pump set	4 (44)	44 (44)	44 (44)	6 (44)	44 (34)	14 (28)	21 (28)
4. Sprinkler/Drip irrigation equipment	19 (31)	14 (20)	16 (40)	25 (29)	44 (44)	44 (41)	26 (29)
5. Pulper unit	27 (44)	11 (36)	16 (44)	31 (44)	44 (39)	4 (44)	20 (44)
6. Drying yard	12 (25)	14 (28)	17 (30)	12 (38)	44 (36)	13 (24)	13 (28)
7. Godown	16 (32)	16 (29)	24 (39)	28 (38)	44 (37)	15 (22)	28 (25)
8. Clean replanting	12 (13)	8 (26)	14 (28)	11 (13)	5 (18)	11 (19)	13 (16)
9. Interlining	19 (29)	12 (20)	12 (26)	19 (32)	44 (40)	5 (25)	19 (25)
10. Arabica in Arabica areas	14 (14)	20 (34)	19 (8)	20 (19)	44 (44)	44 (34)	28 (10)
11. Conversion of Arabica area to Robusta	4 (24)	14 (25)	17 (34)	15 (25)	44 (44)	44 (42)	28 (25)

Source: Author.

Note: Figures in parentheses are total rank score for intensity of inclusiveness.

Figures in parentheses in Table 9 refer to the composite index of intensity of inclusiveness. Of the types of subsidy, intensity of inclusiveness is highest for the coffee replantation subsidy. Of the components of subsidy, clean replantation subsidy is unambiguously intensely inclusive in all states and in Chikmagalur district. However, the subsidies which are less intensively inclusive differ by components and regions. For instance, less intensity of inclusiveness is evident for the subsidy for open well/ring well including installation of pump set in all districts of Karnataka; the subsidy for water storage tank, sprinkler/drip irrigation equipment, Arabica in Arabica areas and conversion of Arabica area to Robusta in Kerala; and the subsidy for pulper unit in Tamil Nadu and at all India level. These results imply that intensity of inclusiveness is remarkably different by components of subsidy and regions.

The earlier results are useful for developing a simple taxonomy of inclusiveness and intensity of subsidies by regions. Such taxonomy can be an empirical basis for targeted policy interventions to improve inclusiveness by types and component of subsidies by regions.

Responsiveness of the Subsidies to Coffee Farming Constraints

Constraints faced by small coffee farmers are many and diversified. Knowledge of these constraints is important for understanding whether subsidies are responsive to constraints and for suggesting corrective policy interventions to improve production, productivity, and sustainable income generation from coffee farming. Select constraints are summarized in Table 10.

Table 10:

Select Constraints of Coffee Farming by Small Farmers

Indicators of Farming	Karnataka				Kerala (N=49)	Tamil Nadu (N = 95)	Total (N = 522)
Indicators of Farming	Chikmagalur (N = 160)	Hassan (N = 98)	Kodagu (N = 120)	Total (N = 378)	Kerala (N=49)	Tamil Nadu (N = 95)	Total (N = 522)
1. Diseases
Coffee leaf rust	100.00	100.00	97.50	99.21	81.63	96.84	97.13
Other diseases	20.63	14.29	8.33	15.08	2.04	1.05	11.30
2. Insects and pests
Coffee stem borer	94.38	97.96	96.67	96.03	48.98	57.89	84.67
Coffee berry borer	72.50	86.73	62.50	73.02	59.18	46.32	66.86
Mealy bugs	41.88	38.78	23.33	35.19	8.16	17.89	29.50
3. Inputs and equipment
Inorganic fertilizers	69.38	76.53	79.17	74.34	2.04	4.21	54.79
Farm yard manure	62.50	67.35	58.33	62.43	18.37	4.21	47.70
Chemicals/pesticides/fungicides	39.38	64.29	42.50	46.83	0.00	2.11	34.29
Implements	36.88	54.08	30.83	39.42	0.00	1.05	28.74
4. Marketing related
Transportation	13.13	17.35	1.67	10.58	0.00	8.42	9.20
Payment	10.63	17.35	0.83	9.26	0.00	0.00	6.70
Storage	14.38	23.47	6.67	14.29	8.16	0.00	11.11
Others (specify)	7.50	9.18	0.83	5.82	0.00	0.00	4.21

Source: Author.

Note: All figures are per cent to total number of sample small growers in the respective State/District.

First, coffee leaf rust (CLR) disease, along with other coffee diseases, is relevant for coffee faming in the entire study area. The extent of occurrence of CLR is about 99 per cent in Karnataka, 82 per cent in Kerala and 97 per cent in Tamil Nadu. Within Karnataka, CLR is faced by all farmers in Chikmagalur and Hassan, and by about 98 per cent of farmers in Kodagu. Other diseases (such as block rot, root disease and coffee trunk canker) constrain the coffee farming for about 15 per cent of growers in Karnataka. This is higher than in Kerala (about 2 per cent) and Tamil Nadu (about 1 per cent). Within Karnataka, other diseases are reported higher in Chikmagalur (about 21 per cent) as compared to Hassan (about 14 per cent) and Kodagu (about 8 per cent).

Second, coffee stem borer, coffee berry borer and mealy bugs are the most widely known insects and pests which constrain coffee farming. Karnataka has the highest occurrence of all insects and pests problems as compared to other states; and all districts in Karnataka have a higher occurrence of them as compared to Tamil Nadu and Kerala. For instance, of the total farmers in Karnataka, about 96 per cent face stem borer, about 73 per cent face berry borer and about 35 per cent face mealy bug problems. In the same way, of the farmers in Chikmagalur district, this percentage is 94 for stem borer, 73 for berry borer and 42 for mealy bugs. Within Kerala (or Tamil Nadu), the occurrence of berry borer (or stem borer) is higher as compared to others insects and pests.

Third, timely availability and quality of inorganic fertilizers, farm yard manure and chemicals/pesticides/fungicides are major input constraints, mainly faced by small coffee farmers in Karnataka. Constraint on timely availability and quality of chemicals/pesticides/fungicides inputs are relevant for management of CLR and other coffee diseases. About 47 per cent of farmers in Karnataka (and 64 per cent of farmers in Hassan district) face this input constraint. Constraint of availability of equipment is faced by about 40 per cent of farmers in Karnataka and by about 54 per cent of farmers in Hassan. Thus, input and equipment constraints are of special problems for coffee farmers in Karnataka.

Fourth, marketing problems (including transportation, payment and storage) are faced by less farmers than those facing input and equipment constraints in Karnataka. Marketing problems are not reported in Kerala and Tamil Nadu except for storage problems (by about 8 per cent of farmers). In contrast, farmers in all districts in Karnataka face all marketing related problems, especially by about 14 per cent in Chikmagalur and 23 per cent in Hassan.

The subsidies to coffee farmers (Table 2) are explicitly responsive to constraints in coffee farming with regard to storage problem under quality upgrading. Implicitly, the subsidies under coffee replantation are responsive to long-term management of coffee diseases and pests, which result in uneconomical yields from diseased and pest affected coffee trees. Thus, the current subsidies to coffee farmers are partially responsiveness to coffee farming constraints faced by small farmers in India.

Future Needs of Subsidies

The sample survey of coffee farmers did include questions regarding the future needs of subsidies by household farmers. They are summarized in Table 11 by the supply- and demand-side needs of subsidies.

On the supply side, major subsidies needed by coffee farmers are related to low interest on loans from bank/cooperatives, extended repayment period on existing loans, input prices and introduction of minimum support price for coffee. For instance, management of CLR, other diseases, pests and insects are economically costly in terms of chemical and labour costs. At present, no subsidy for chemical inputs is available, especially for small farmers who grow CLR tolerant varieties (e.g., the S.795 variety by about 81 per cent in Karnataka, 69 per cent in Kerala and 89 per cent in Tamil Nadu). This signifies the need for inputs (e.g., chemicals) for coffee farmers. On the other hand, there has been no minimum support price policy for coffee in India. Given the fluctuations in production (for reasons including environmental factors and shortage of labour) and prices in domestic and global markets, a need for a price support policy for coffee, especially for small growers, assumes special significance in the context of inclusiveness. However, to lessen the dependence on export demand, a need for publicly-funded promotional measures to increase domestic market demand for coffee is strongly felt by farmers.

Table 11:

Future Needs of Subsidies by Coffee Farmers

Farmers’ Needs of Subsidies	Karnataka				Kerala (N= 54)	Tamil Nadu (N = 104)	Total (N = 575)
Farmers’ Needs of Subsidies	Chikmagalur (N = 185)	Hassan (N = 104)	Kodagu (N = 128)	Total (N = 417)	Kerala (N= 54)	Tamil Nadu (N = 104)	Total (N = 575)
Supply Side	Per cent of Farmers
1. Financial (low interest on loans from bank/cooperatives)	83.24	100	100	92.57	94.44	88.46	92
2. Financial (extended repayment period on existing loans)	46.49	46.15	44.53	45.80	62.96	63.46	50.61
3. Input price subsidies	79.46	71.15	75.78	76.26	87.04	85.58	78.96
4. Minimum support price for coffee	81.62	78.85	91.41	83.93	96.30	55.77	80
Demand Side	Per cent of Farmers
1. Promotional measure to increase domestic demand for coffee	54.05	66.35	67.19	61.15	92.59	87.5	68.87

Source: Author.

It might be added here that India’s domestic and export marketing of coffee underwent major changes in the early 1990s due to several liberalization measures, including the introduction of Free Sale Quota in 1993. These liberalization measures have been analysed in Narayana (1997). In particular, the measures resulted in doing away with the pooling and auctioning of coffee by the Coffee Board and the introduction of free marketing of coffee by individual farmers, growers’ associations, and exporting organizations. At the international level, the International Coffee Agreement broke down in 1989, and was not resumed subsequently. One of the important consequences of these changes has been the fluctuation in market-based determination of coffee prices in domestic and global markets. For instance, ICO indicator prices for Arabica coffee (in US cents per pound) showed an upward movement from 1993, peaking in 1997 at 185, thereafter varying remarkably to the beginning years of the Eleventh Five Year Plan in 2007–08 (Figure 1). Overall, the standard deviation of the price fluctuations from 1991 to 2008 was 37, but fluctuations were higher from 1991 to 1997, with standard deviation of 41.⁹ Other things being equal, downward price fluctuations result in less revenue and returns to investment in coffee cultivation, especially affecting the livelihood of small farmers, as their source of household income is mainly dependent on income from coffee. Thus, farmers’ demand for minimum support prices for coffee may be considered for an output price subsidization policy to insulate from the negative income effects of coffee price fluctuations.

Figure 1:

Source: Author; based on basic data in Coffee Board (2011).

Conclusions and Implications

This article provides a framework to analyse the nature and implications of inclusiveness of GoI subsidies to coffee farmers. Using the data from a sample survey of 575 household coffee farmers in traditional coffee growing regions, four simple indicators are constructed, both individually and compositely, to measure the nature and intensity of inclusiveness of the subsidies. The major conclusions and implications of the analyses are as follows.

Of the subsidies, subsidy for coffee replantation is most inclusive with highest intensity. Of the components of subsidy, clean replantation is most inclusive and intense. In contrast, the least inclusive and intensive subsidies show strong variations across the components and regions. Overall, the major conclusion is that inclusiveness of subsidies to coffee farmers is less intensive.

The main results and conclusions imply that a policy for the promotion of inclusiveness and its intensity needs a holistic approach. For instance, promotion of inclusiveness may focus on small farmers who belong to SCST and OBCs with attainment of education up to high school and possession of BPL or APL cards. At the same time, a promotion policy on intensity of inclusiveness may target subsidies for very small farmers who belong to SCST with attainment of education up to upper middle school and possession of BPL. This targeted approach may aim at a particular component or components of subsidy in a particular region or regions. In this context, the results of this article are policy useful to develop taxonomy of region-specific subsidies to enhance and strengthen its inclusiveness and intensity of inclusiveness. However, this approach to subsidization calls for the redesigning of the existing subsidization policy which is not focused/targeted by any or all of the indicators of inclusiveness in this article.

This article has included the subsidies to coffee farmers which were started in the Eleventh Five Year Plan in 2007. They are now being continued until a new subsidization policy is designed for implementation during the Twelfth Five Year Plan (2012–17). Thus, the implications of this article are of relevance and applicability for the formulation of new subsidization policies as they relate to increasing the inclusiveness and its intensity.

Small farmers face many constraints in coffee farming, such as diseases, pests and insects; inputs and equipments; and marketing related problems. The nature and composition of existing subsidies are partially responsiveness to the constraints under coffee replantation subsidies. However, the subsidies may have to be more responsive, especially to overcome other constraints of coffee farming by small farmers, especially in regard to non-labour inputs for management of coffee diseases, pests, and insects. In particular, provision for a non-labour input subsidy for management of CLR and other diseases for small farmers with built-in inclusiveness or intensity of inclusiveness is a strong policy imperative in India’s Twelfth Five Year Plan.

The entire analysis in this article is based on cross-sectional data of a random sample of coffee farmers in traditional coffee growing regions in India. A similar or larger survey in the near future would be useful to determine the changes in inclusiveness of subsidies to coffee farmers and to generalize the conclusions and implications of this article.

Footnotes

Acknowledgements

The author is grateful to: (a) two anonymous referees of this Journal for constructive comments on an earlier version of this article; (b) the Coffee Board of India (Bangalore) for funding this research under the project on Socio-economic analysis of increasing resilience of coffee production to Leaf Rust Disease, at the Institute for Social and Economic Change (Bangalore); (c) Professor Jayarama and Dr. N. Surya Prakasha Rao at Central Coffee Research Institute (Chikmagalur) for useful discussions and suggestions on survey data collection; and (d) Mr Sabyasachi Tripathi for research assistance. However, the usual disclaimers apply.

Notes

References

Asian Development Bank (2011). Framework of inclusive growth indicators: Key indicators for Asia and the Pacific 2011. Manila: Asian Development Bank.

Coffee Board (2011). Database on coffee. Bangalore: Market Intelligence and Statistical Unit, Coffee Board.

GoI [Government of India] (2012). Economic survey, 2011–2012. New Delhi: Oxford University Press.

GoK [Government of Karnataka] (2011). Annual report, 2010–2011. Bangalore: Food, Civil Supplies and Consumer Affairs Department.

Jayaraj

Subramanian

(2012). On the ‘inclusiveness’ of India’s consumption expenditure growth, Working Paper No. 57/2012, UNU-WIDER, Helsinki.

Joseph

K. J.

(2010). Towards a new paradigm for plantation development in India: An analysis of the system of production and innovation from an inclusive growth perspective, NRPPD Discussion Paper No. 1, Centre for Development Studies, Trivandrum.

McKinley

Terry

(2010). Inclusive growth criteria and indicators: An inclusive growth index for diagnosis of country progress, ADB Sustainable Development Working Paper Series No. 14 (June), Manila: Asian Development Bank.

Narayana

M. R.

(1997). Impact of liberalization measures on India’s coffee sector: An economic analysis. Journal of Indian School of Political Economy, 9(3), 490–514.

Planning Commission (2008). Eleventh five-year plan, 2007–2012, Vol. 1. New Delhi: Oxford University Press.

10.

Planning Commission (2011). Faster, sustainable and more inclusive growth: An approach to the twelfth five-year plan. New Delhi: Government of India.

11.

Srivastava

D. K.

Bhujanga

Rao, C.

Chakraborthy

Pinaki

Rangamannar

T. S.

(2003). Budgetary subsidies in India: Subsidising social and economic services. New Delhi: National Institute of Public Finance and Policy.

12.

Sumitra

(2012). Bringing in, living in and falling out: Labour market transitions of Indian plantation sector—A survey, NRPPD Discussion Paper No. 14, Centre for Development Studies, Trivandrum.

13.

Suryanarayana

M. H.

(2012). What is exclusive about ‘inclusive growth’? Economic and Political Weekly, 43(43), 93–101.

14.

Thorat

Sukhdeo

Dubey

Amaresh

(2012). Has growth been socially inclusive during 1993–94 to 2009–10? Economic and Political Weekly, 47(10), 43–53.

15.

Upendranath

(2010). Coffee conundrum: Whither the future of small growers in India, NRPPD Discussion Paper No. 3, Trivandrum: Centre for Development Studies.

16.

Upendranath

Subbaiah

C. A.

(2012). Small growers and coffee marketing: Issues and perspectives from the field, NRPPD Discussion Paper No. 15, Trivandrum: Centre for Development Studies.

17.

Upendranath

Subbaiah

C. A.

(2013). Labour shortage in coffee plantation areas: Coping strategies of small growers in Kodagu district, NRPPD Discussion Paper No. 30, Trivandrum: Centre for Development Studies.