Technical Note
Stories of Change – Knowledge Partnership Programme
Potential Gains by Uganda and India by Including Coffee in the Duty Free Tariff
Preference Scheme
A.
Duty Free Trade Preference (DFTP) Scheme of India
In August 2008, Government of India (GoI)
has launched a Duty Free Tariff
Preference (DFTP) schemei – the first of its
kind among emerging economies – to
stimulate exports by Least Developed
Countries (LDC) to India and thereby help
them to break away from vicious circles of
underdevelopment (Box 1). The DFTP has
unilaterally granted preferential market
access on India‟s tariff lines (i.e. items of
import) that comprise 92.5% of global
exports of all LDCs.ii The Department for
International Development (DFID), UKAid
through
its
Knowledge
Partnership
Programme (KPP) has commissioned a
study to critically examine the design,
coverage, implementation, and degree of
utilization of the scheme and assesses its
impact on trade relations between India
and the LDCs. The International Centre for
Trade and Sustainable Development
(ICTSD), a Geneva-based think tank has
conducted this research study during
March 2013-June 2014 with a funding
support of £ 120,422.iii
Box 1. Salient Features of India’s DFTP
Scheme
 Duty Free Items: On about 98% of India‟s total
tariff lines (468 items), applied customs duty was
removed over a period of 5 years with 20%
reduction each year. The number of tariff lines in
the exclusion list has shrunk from 326 to 97. The
new MOP list features 114 tariff lines compared to
468 originally.
 Positive List: In addition to the above,
preferential market access as per Margin of
Preference (MOP) is made available on about 9%
of the tariff lines. The MOP ranges from 10% to
100% on different items and is available on the
applied rate of duty as on the date of imports.1
 Products of immediate interest to Africa,
which are covered under DFTP, include cotton,
cocoa, aluminium ores, copper ores, cashew nuts,
cane-sugar, ready-made garments, fish fillets and
non-industrial diamonds.
 Coverage: The scheme is open to all 48 LDCs
(including 33 LDCs in Africa); currently, 29 LDCs
are benefiting from it (22 in Africa, 7 in Asia-Pacific
region).
1
In total six trance tariff reductions and/ or removal has
been effected since August 2008.
The study has identified number of positive impacts of DFTP on the overall exports by the
beneficiary LDCs. For example, in the post-DFTP period (i.e. 2008 onwards) export of
preference products as well as select items that are not included in the scheme (e.g. coffee) by
the LDCs to India has increased.iv However, the research has also postulated that the full
potential of the scheme is yet to be achieved, because of: (i) exclusion of certain commodities
that are heavily exported by some of the LDCs; (ii) lack of awareness in the LDCs; (iii) non-tariff
barriers; (iv) low production and export capacity of the LDCs; etc. Major items of export by LDCs
which are excluded from the DFTPs‟ benefits are coffee, fruits and vegetables, cereal, spices,
tea, tobacco and some select metals. Through a detailed analysis of the trading patterns
between India and three DFID focused LDCs in Africa (Ethiopia, Tanzania, and Uganda),
who are also the participants in the scheme, the study has recommended inter alia for a
relook at the exclusions list for the DFTP scheme. The present Story has critically
examined the plausibility of this recommendation of the ICTSD study, taking export of
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Technical Note
Stories of Change – Knowledge Partnership Programme
coffee by Uganda to Indiav as a case due to the relative importance of the product in the
bilateral tradevi. Coffee export from Ethiopiavii is not considered here, as it is mostly absorbed in
the European market. On the other hand, Tanzania, which has been traditionally exporting gold
or other precious metals to the world, is not taken up here as India is not big market for the
country.
B.
Coffee Market in India and the Trade with Uganda
India is one of the major players in the international coffee market as per its volume of
production, domestic consumption and export. In 2012-13, India‟s total domestic production and
consumption of coffee was 318.2 thousand MT and 115.0 thousand MT respectively; and the
volume of export and import in the same period were 299.3 thousand MT and 71.2 thousand MT
respectively (Figure 1).viii
Figure 1: Indian Coffee Market, 2008-13 (in 000 MT)
350.0
300.0
250.0
200.0
150.0
100.0
50.0
0.0
2008-09
2009-10
Production
2010-11
Consumption
2011-12
Export
2012-13
Import
Estimates based on the data from the Coffee Board of India (“Database on Coffee - May/June
2014”), show that the average annual growth in domestic production and consumption during
2009-13 were 4% and 5% respectively. At the same time, average annual growth in import and
exportix of Indian coffee were 27% and 13% respectively. Clearly growth in export of
processed Indian coffee is very much linked with its import of raw or greenx coffee from
other countries.
Vietnam, Indonesia and Uganda are traditionally the three top countries exporting green coffee to
India. During the five-year period 2009-13, these countries have a share of 85% in the total
import in value terms (Vietnam 54%, Indonesia 27% and Uganda 10%).xi,xii Also, it is evident that
the growing export demand of Indian processed coffee are mostly met from the ever increasing
imports from Vietnam and Indonesiaxiii.
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Technical Note
C.
Stories of Change – Knowledge Partnership Programme
Potential Gain if Coffee is brought under DFTP Inclusion List
Notably, the Uganda is the only LDC that featured in the list of major importers; however,
its import has increased at a relatively lower pace (an annual rate of 5% in the last five
years, 2009-13xiv). If import duty on coffee is removed, Indian importers will find Ugandan green
coffee more attractive because of price advantage. In that scenario, India may go for higher
volumes of import from Uganda without affecting the bilateral trades with Vietnam or Indonesia.xv
A simulation exercise comparing business usual scenario (5% annual growth in import of
Ugandan coffee following historical trend) with a projected annual growth of 10% has
revealed that Uganda may earn an additional £ 838 thousand from the increased bilateral
trade of green coffee in the medium term (2013-15) if the same is brought under the DFTP
scheme.xvi (Table 1) At the same time, gross savings by the Indian importers will be to the
tune of £ 1,400 thousand. The above analysis establishes that in case of green coffee, Uganda
and India both can benefit, albeit marginally, by revising the inclusion list of the DFTP scheme.
However, ICTSD 2014 study was generalistic in nature and did not assess the product specific
gains by individual LDCs and India. Consequently, a policy recommendation for revision of the
list requires an in-depth commodity and country specific analysis.
Table 1: Potential Gains from Bilateral Trade of Green Coffee between Uganda and
India through DFTP Scheme
A. Existing Scenario 2009-13
i. Average annual export of green coffee by Uganda to India during
5,657,834 kg
2009-13a
ii. Unit price of green coffee earned by Ugandan exporter @ CIF in 2009£ 0.99 per kg
13b
iii. Average annual export income from green coffee from India by
£ 5,589,590
Uganda in 2009-13 [i × ii]
c
iv. Import duty paid by Indian importers on Ugandan coffee in 2009-13
£ 0.13 per kg
v. Average annual expenditure by Indian importers on Ugandan green
£ 6,300,003
coffee in 2009-13 [ i × (ii+ iv)]
B. Medium-term Projections for 2013-15: Business Usual Scenario
vi. Average annual export of green coffee by Uganda to India during
5,940,726 kg
2013-15 assuming 5%d annual growth rate
vii. Unit price of green coffee earned by Ugandan exporter assuming price
£ 0.99 per kg
remains stable in the medium term (2013-15) [same as ii]
viii. Average annual export income from green coffee export to India by
£ 5,869,070
Uganda in 2013-15 [vi × vii]
ix. Import duty paid by Indian importers on Ugandan coffee in 2013-15,
£ 0.13 per kg
assuming duty remains stable [same as iv]
x. Average annual expenditure by Indian importers on Ugandan green
£ 6,615,003
coffee in 2013-15 [vi × (vii+ix)]
B.1 GROSS INCOME FROM EXPORT OF GREEN COFFEE BY
£ 17,607,210
UGANDA IN 2013-15 [viii × 3]
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B.2 GROSS EXPENDITURE BY INDIAN IMPORTERS OF UGANDAN
£ 19,845,009
GREEN COFFEE, 2013-15 [x × 3]
C. Medium-term Projections for 2013-15: Assuming 10% Growth of Ugandan Green
Coffee Import
xi. Average annual export of green coffee by Uganda to India during
2013-15 assuming 10% annual growth rate due to weaver of import
6,223,618 kg
duty
xii. Unit price of green coffee earned by Ugandan exporter assuming price
£ 0.99 per kg
remains stable in the medium term (2013-15) [same as ii]
xiii. Average annual export income from green coffee export to India by
£ 6,148,550
Uganda in 2013-15 [xi × xii]
xiv. Duty paid by Indian importers in 2013-15 if green coffee is brought
£ 0.00
under DFTP
xv. Average annual expenditure by Indian importers on Ugandan green
£ 6,148,550
coffee in 2013-15 [xi × (xii+ xiv)]
C.1 GROSS INCOME FROM EXPORT OF GREEN COFFEE BY
£ 18,445,650
UGANDA in 2013-15 [xii × 3]
C.2 GROSS EXPENDITURE BY INDIAN IMPORTERS OF UGANDAN
£18,445,650
GREEN COFFEE, 2013-15 [xv × 3]
D. Potential Gains
D.1 ADDITIONAL EXPORT (GROSS) INCOME BY UGANDA FROM
DUTY WAIVER AND INCREASED BILATERAL TARDE, 2013-15
£ 838,440
[C.1 – B.1]
D.2 SAVINGS (GROSS) BY INDIAN IMPORTERS DUE TO DUTY
£ 1,399,359
WAIVER, 2013-15 [B.2 – C.2]
a
Calculated from the UN Comtrade Database for 2009 to 2013.
„CIF‟ (Cost Insurance Freight ) means the price actually paid or payable to the exporter for the product
when the product is loaded out of the carrier, at the port of importation. The price value includes the
cost of the product, insurance and freight necessary to deliver the product to the named port of
destination. The UN Comtrade Database provides import data for any country for any commodity in
„CIF’ terms.
c
Indian importers have to pay the CIF price to the exporters and additional charges like import duty to
the government. Because of these additional duties/charges, preferential rates or complete duty waiver
are beneficial from an importer‟s point of view. The average per unit annual import duty on green coffee
is calculated from the free on-line application provided by the Cybex Exim Solutions Pvt Ltd.
(http://www.cybex.in/).
d
See Section B
b
i
The GoI‟s DFTP scheme was in line with the „Hong-Kong Ministerial Declaration of December 2005‟ that
has proposed for extension of Duty Free Quota Free (DFQF) access to the Least Developed Countries
(LDCs). India was the first country to implement such scheme among the emerging economies in the
world. Source: “Duty Free Tariff Preference (DFTP-LDC) Scheme announced by India for Least Developed
Countries (LDCs)” as on Jan 2012. http://commerce.gov.in/trade/international_tpp_DFTP.pdf (Accessed in
Sept, 2014)
ii
ibid
iii
ICTSD (Feb 2014): Deepening India‟s Engagement with the Least Developed Countries: A Critical
Analysis of India‟s Duty-free Tariff Preference Scheme (Draft Report)
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iv
Following are some of the positive effects of DFTP as analyzed by the ICTSD study: (i) Exports of
preference products to India by beneficiary LDCs in the post-DFTP (2008 onwards) period are higher than
in the pre-DFTP (before 2008) period; (ii) Exports of preference products increased more than exports of
non-preference products during this period in aggregate; (iii) Exports of preference products to India postDFTP increased faster than to the rest of the world. Consequently, the share of India in beneficiary LDCs‟
exports of preference products increased post-DFTP; (iv) Share of beneficiary LDCs‟ exports of preference
products in India‟s global imports increased post-DFTP.
v
Uganda mostly exports coffee to India of the variety that is not roasted or decaffeinated, also called green
coffee.
vi
Uganda is the third largest exporter of green coffee to India. Source: Author‟s analysis from the
UNComtrade database.
vii
Coffee has the largest share in the Ethiopia‟s total commodity export. Source: ICTSD (Feb 2014)
viii
“Database on Coffee - May/June 2014”, Market Research and Intelligence Unit, Coffee Board, India.
ix
Mostly processed coffee
x
About 99% of India‟s import of coffee consists of the green variety. Source: Author‟s analysis based on
data from “Database on Coffee - May/June 2014” Market Research and Intelligence Unit, Coffee Board,
India.
xi
Trends in Coffee Import by India - 2009-13
Coffee
Coffee, not roasted, not decaffeinated
Source
Net weight
(kg)
Trade
Value (£)
Net weight
(kg)
Vietnam
27,201,403 31,377,207 27,193,401
Indonesia 13,090,466 15,375,547 13,090,296
Uganda
5,657,834
5,589,590
5,657,834
World
50,233,101 58,318,531 50,146,637
Source: Based on data available from UN Comtrade
Sept 2014
Country- Countrywise
wise
Trade
Share
Share
Value (£)
(by
(by
Value)
quantity)
31,365,069 1.15 100.0% 54.3%
54.2%
15,375,132 1.17 100.0% 26.6%
26.1%
5,589,590
0.99 100.0% 9.7%
11.3%
57,711,170 1.15 99.0%
Database (http://comtrade.un.org/data/); accessed in
Unit
Price
(£)
Share
in Total
Coffee
Import
xii
UN Comtrade Database provides data by calendar year
Import from these countries grew at an annual rate of 12% and 19% during 2009-13 respectively.
Source: Based on data available from UN Comtrade Database (http://comtrade.un.org/data/)
xiv
Author‟s analysis from the UNcomtrade database
xv
One needs to add a caveat that Ugandan green coffee has been criticized for poor quality as compared
to large Asian or African producers. However, coffee is the most important cash crop of Uganda and
majority of the production is exported to several Asian and European markets. Realizing its importance for
the economy, the Government of Uganda (GoU) has put in several reform measures to improve the quality
in recent times. For more details, see Ugandan Coffee Development Authority, Ministry of Agriculture,
Animal Industry and Fisheries, GoU. (http://ugandacoffee.org/).
xvi
The simulation exercise is conducted assuming: (i) stable unit price of coffee in the international market;
(ii) import duty remains either constant or completely waivered; and (iii) international exchange rate
remains stable @ US$ 1= £ 1.573 (historical average for the period 2009-13).
xiii
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