New thrust in Indian poultry industry

By Naren Karunakaran
A short case study for Oxfam GB

SUMMARY
The Indian poultry industry has made good progress in increasing production over the years. But processing and marketing lag behind, making exports uncompetitive. In 2003-2004, Indian poultry exports stood at a mere Rs 20,239.82 lakh -- less than 1% of world trade in poultry products.

Now the poultry industry is gearing up for a big export push. But in order to succeed, it has to change the way it does business.

In 1996, the Indian poultry sector reared around 660 million birds; today there are around 1,400 million birds. Yet, only 4.5% of the birds produced in India are processed, the rest are sold live. There are therefore very few chicken-processing units.

The two biggest players in this sector are Venky’s Ltd (of the Venkateshwara Hatcheries Group, which has an annual turnover of Rs 3,123 million/FY 2004) and Godrej Agrovet Ltd (annual turnover: Rs 4,764 million/FY 2003). A couple of smaller players operate in southern India .

Contract farming

All over India , poultry is raised mainly by individual farmers under contract with poultry companies. In Tamil Nadu, over 90% of birds are reared on contract farms. In the Pune district of Maharashtra, another major poultry rearing area, almost all the 6,000 poultry farms are on contract either with Venky’s or with Godrej.

Under the contract system, ‘growers’ or poultry farmers provide land, building, equipment, utilities and labour to raise birds to a marketable age. The companies, or integrators, supply them with day-old chicks (DoC), feed, medication and the necessary technical support. The companies pick up the birds when they are ready for market (it usually takes 42-45 days for a bird to weigh two kilos). The farmers are paid a rearing fee.

This system suits both the company, which does not have to invest in land and other infrastructure, and the farmer who gets a steady income and the necessary inputs and does not have to worry about marketing the product.

In reality though, the system is loaded against the farmer. Contracting companies draw up contracts with their own interests in mind. There are no poultry associations or collectives that would strengthen the farmer’s bargaining ability.

Often, the infrastructure that the company is supposed to provide is not forthcoming. Doctors do not visit regularly, feed may be of poor quality, or the breed of birds inferior. Moreover, the farmer has to bear any losses resulting from inputs supplied by the company.

This situation has not helped the industry. As a consequence, poultry companies have begun looking at other production models -- one of them ‘backyard farming’-- practised in countries like Bangladesh .

The backyard model

In this system, the poultry farmer rears a small number of birds, say around 25. These birds not require much by way of infrastructure as they eat whatever is around and require only minimal shelter. However, experiments with this kind of poultry rearing show that what rural farmers find difficult to handle is rearing the day-old chicks (DoCs).

Fine-tuning this model, companies have introduced a key intermediary (the mother unit), a small, rudimentary poultry farm that buys DoCs from the breeding unit to rear them for a period of three to four weeks. These four-week-old chicks -- vaccinated, fed and strong enough to survive the harsh rural conditions -- are then distributed to below poverty line (BPL) families for a price or free of cost in the initial period.

Modifying the backyard model

A pilot project based on this model has been started by Venkateshwara Hatcheries (VH) in association with the Rajiv Gandhi Foundation (RGF) and ICICI Bank. The project is being undertaken in Amethi and Rae Bareilly in Uttar Pradesh, a state almost untouched by the poultry wave.

The nucleus of the project will be the mother unit, or central brooding and growing unit. This will be under the tutelage of the RGF, during the initial stages of the project. The idea is to transfer the mother unit to a cooperative or association of farmers as the project matures.

The unit will have the capacity to rear over 30,000 birds a year. The initial focus will be on egg-producing layer birds, not broilers for meat. Satellite poultry farms, owned and run by entrepreneurs, will be built around the mother unit nucleus.

The mother unit will rear chicks up to 16 weeks, after which the birds will be passed on to the satellite farms owned by individual farmers. Around 1,000 birds will be placed in each farm, where they will be reared for 56 weeks, till the end of the egg-laying cycle.

A satellite poultry farmer under the project (with a batch of 10-20 beneficiaries) could earn between Rs 96,000 and Rs 100,000 within a cycle of 12-13 months. This works out to around Rs 7,500-Rs 8,000 a month. He is expected to scale up operations with the technology, financial and marketing support extended by the VH-RGF-ICICI combine.