Coffee output in India is set to rise by at least 4 percent this year, thanks to early rains.

The monsoon rains reached the southern Indian Kerala state four days earlier than normal.

Coffee Board vice chairman N Bose Mandanna told reporters that the coffee harvest starting in October may reach three lakh metric tonne from the 288,000 tonne.

He said weather conditions are better this year for a bigger harvest. "Good rains will lead to a better output in coffee this year," Mandanna said.

India produces around 3 lakh tonne of coffee and the domestic consumption is only 80,000 tonne a year. But the problem is that a major part of the Indian coffee is mixed with 25,000-30,000 tonne of chicory.

Prices of the bitter-tasting robusta beans reached an eight-year high last week partly because of concerns that growing demand may outpace supplies from Vietnam and Indonesia, the world's biggest producers of coffee. India's the world's sixth-biggest coffee producer.

Meanwhile, traders said the appreciating rupee has hit India's coffee exports, as prevailing domestic rates are higher than the overseas markets.

As the rupee rises and the dollar weakens, harvested coffee beans are piling up in local curing works and warehouses in India.

Traders said the impact has been most on Arabica coffee variety as the prevailing domestic rates are higher than the overseas markets. Currently, exporters are hesitating to take overseas orders for Arabica plantations and continue doing Robusta in little quantities.

According to K D Kumar of Astra Exports, the Arabica Plantation A grade prices touched Rs 110-112 per kg in the domestic market, while it hovers around Rs 95-96 per kg in the export market.

"So there is a major difference of Rs 14-16 between the local and export markets. This has forced exporters delay in taking overseas orders," he told Commodity Online.

Coffee Board officials said export permits issued during the past two months (April 1-May 21) have declined by 24 per cent to 34,283 tonne from 45,201 tonne a year ago.

During the same period, coffee exports tumbled by 57 per cent to 18,553 tonne compared to 43,759 tonne pulling down the foreign exchange by 58 per cent to $33 million from $81.35 million.