Poultry farmers looking down wrong end of the barrel
while still trying to recover from the bird flu scare, poultry farmers of Alibag -- a sub-division of Raigad in Maharashtra -- have suffered another jolt. Some poultry companies have refused to buy the batches of chicken for which they had signed buyback contracts with farmers.
This has underlined how the present model of contract poultry farming makes the farmers vulnerable when confronting large poultry companies (otherwise known as integrators). In Alibag, the excuse these companies give for not accepting the contracted batches of birds is that they are on a 'hatching holiday' to bridge the gap between supply and negligible demand. But the farmers are helpless, because they cannot enforce the contract. The problem with the present model of contract farming is that the farmers can actually do little if companies violate their contracts. Given that the companies are powerful and hold the right cards, few poultry farmers dare to speak against the companies, because at the end they have to go back to them for chicks to breed. So while the companies can refuse to buy back the birds, as they have done, the farmers are not free to sell their birds elsewhere.
More than 60 per cent of the poultry business in Alibag runs on contracts under the aegis of large integrators such as Venkateshwara Hatcheries (vh), Godrej Agrovet Ltd (gal) and Premium Hatcheries and Farms Ltd (phfl). Most farmers opt for contracts out of desperation. "I was doing open farming till about two years back when the bird flu scare crashed the market. I incurred a loss of Rs 80,000 and had no money to buy fresh chicks," says a poultry farmer from Alibag. "That is when a company approached me and said it would give me free chicks, medicine and feed, only if I signed a contract with it," he adds. This year, following the company's refusal to buy back, he has again incurred a loss to the tune of Rs 241,000.
"Given a choice, all the poultry farmers would like to do open farming," says Raman Patil, a poultry farmer from Akshi village in Alibag. Patil has killed his 5,000 birds a few weeks back since there were no buyers and keeping the birds alive would have just meant more expenses on feeding. The options are watching the birds peck each other to death or die of hunger.
Setting up a poultry business on their own is beyond the capacity of Alibag's small farmers, particularly since banks are reluctant to support them. "A farmer needs to have at least Rs 30 per bird to set up his own poultry farm, which means a small 1,000-bird farm requires a minimum capital of Rs 30,000," explains Pandav. That is why the large poultry companies, as Patil says, "now control the entire market, right from supplying the chicks, to the feeds and the medicines; contract poultry farmers merely conform to the rules set by these companies".
According to the contract farming system, all the farmers involved are to sign an 11-month contract with the company. The agreement, is actually a buyback contract, under which the company has to supply one-day-old chicks, medicines and feed to the poultry farmers free and buy back the birds when they are ready. The farmer, in turn, rears the chicks and pays for electricity, water, labour and poultry sheds. Payment is made on the basis of feed-conversion ratio (fcr), which means a chick has to grow to a minimum weight of 1.8 kg by consuming 1.7 kg of feed in about 35 days.
"In case, the bird consumes more than 1.7-kg feed to attain 1.8-kg weight, a penalty is levied on the farmer; but if it feeds on less and achieves the same weight, he gets a bonus. The penalty or bonus may range from 20 to 25 paise per kg," says Ganesh Puro, a large poultry farmer in Alibag. The final payment is made on the basis of the weight attained by the ready bird, which may fetch between Rs 2.65 and Rs 5 per kg-weight.
The deal
On the face of it, the deal sounds fair. "But a close look reveals that while the contract stipulates exact outputs from the farmer, it hardly mentions any such parameters for the company," says Pandav. Variables such as water and electricity are major hindrances for the farmer. "For instance, Alibag's hard water affects these birds' health or they catch cold and lose weight. The companies thus supply medicines, but the quality is often poor and is hardly of any help. Besides, the one-day-old chicks need a regulated temperature (electrical power ranging from one to two watts) during the initial 15-20 days for proper growth. But recurrent power cuts in Alibag -- minimum six hours every day -- force the farmers to opt for expensive energy modes like lpg cylinders to maintain the poultry temperature," says Pandav. None of these are factored into the contract. Nor are acts of god -- like avian flu.
There are also allegations of sharp practices. At times, companies supply chicks weighing only 25-30 gm, though the ideal weight is 40 gm. The companies don't even specify the minimum protein and energy level in the feed supply. All these affect the final fcr . But farmers can do little about it, as the contract does not specify standards for the quality of chicks and feeds supplied by the companies.
"What we get at the end is Rs 2.80 per kg of the bird," says Samar Parshuram Mhatre, a contract poultry farmer in Alibag. "Of the Rs 5,000 payment per batch of 1,000 birds, almost Rs 3,000 goes into paying the electricity bill, buying paddy waste and as labour cost. The net income in 35 days of breeding is Rs 2,000," he says.
Under contract farming, poultry farmers are left with no option to make the market work for them: high demand does not benefit them, and they cannot sell birds weighing less than 1.8 kg at the market price. "On the contrary, we have to pay a penalty for the bird's low fcr as well as high mortality rate," says Pandav.
The only benefit they enjoy is the assurance that the birds will be bought back by the company, without fail. But with the companies reneging in Alibag, that assurance has also been lost.
Sources in the poultry industry admit that the present model of contract farming system is biased and favours large companies. But contract farming is the only way ahead for the poultry business in India, they say. Others differ. "Individual farmers cannot stand up against these large integrators, since they don't have anything except sheds," says a poultry industry insider. "Hence, it is time that the contract model gets reframed keeping the farmer's interest in view," he adds. Officials of gal and phfl could not be contacted for comment, despite repeated attempts.
If changes are not made soon, poultry farmers may join the ranks of cotton, tomato and onion farmers who have committed suicide in Maharashtra in larger numbers. Avian flu has already caused nine.
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