Poultry farmers complain companies are underpaying them for rearing birds

The contract farming model isn't benefiting the growers anymore, they allege

For years, Praveen, who owns a broiler chicken farm in Haryana's Panipat district, bred and reared about 50,000 birds that were later picked up by leading poultry companies for forward sale to consumers.

His business was running smoothly and was sometimes referred to as a highly successful model of contract farming between companies and farmers.

However, of late, Praveen says that the model is showing signs of cracking.

And poultry companies are backing off from the prescribed format or trying to pass extra expenditure on to the farmers.

“Normally, the agreement is that once the birds are fully developed after 35-40 days, the company will pick them up from the farm within a day or two. But companies often don’t pick up the birds for days together, which leads to mortality and excess weight gain in them, for which the farmer isn’t compensated,” Praveen said over phone.

He said ideally such an arrangement should be built into the agreement, but this isn't the case with poultry farmers.

Over 70 per cent of the poultry business in India comes under a system of contract farming in which companies bear the expenses of the chicks, feed and vaccination, while all other costs are to be borne by the farmer.

Once the chicks are fully developed after 35-40 days, the company pays the farmers a fixed rate and gets the birds for onward sale.

Farmers say that the total cost they incur on rearing a bird is about Rs 12-13 per kg, while they are paid about Rs 8 per kg by the integrators, which are the big companies.

“This is not contract farming. This is just job work that we are doing for the companies, because if it was contract farming, then there would have been transparent pricing between farmers and companies and clearly laid down rules and regulations,” Ranpal Dhanda, President of Poultry Federation of India told Business Standard.

Interestingly, contract farming in the poultry sector was touted as an ideal and a strong working relationship between farmers and companies by several commentators and experts during the year-long farmers’ agitation.

Dhanda said sometimes companies don't even compensate the farmer for the expenses he incurs in maintaining and running the poultry farm.

“Poultry rates are down for nine months in a year and the farmer usually does not get any incentive. But when he does get an incentive, it is as low as Rs 1.5 per kg sometimes,” Dhanda said.

The Poultry Federation of India (PFI) held a meeting of all its members to dwell on the issuelast month.

In the meeting, the members complained that neither are the expenses on feed and medicine provided by the integrators or companies sufficient nor do the inputs meet quality standards. This, according to the PFI, leads to low FCR (Feed Conversion Ratio) which is then used by integrators to underpay the farmers.

“As a result, farmers have to invest in quality feed and medication for higher FCR and pay from their own pockets. Farmers are at a loss due to these circumstances and often have to resort to unfair means (like stealing electricity) in order to raise the livestock,” the Poultry Federation said.

The matter is expected to reach the government as well, with the Poultry Federation of India planning to uree the Department of Animal Husbandry to fix a remuneration for broiler production job work or contract farming at Rs 24.26 per kg, in order to meet all expenses and costs.

Earlier this month, Union Minister of State for Animal Husbandry, Sanjeev Balyan, dwelt on the issue of low price realisation in poultry rearing and warned that the government might intervene in case private firms continued to exploit farmers.

The Minister also directed his department to call a meeting of all stakeholders to address this issue.

"We (Government of India) will have to intervene if small poultry farmers are exploited. The issue of market integration of poultry farmers with companies needs to be addressed,” Balyan had said.

Balyan said even a 2005 study by Ludhiana-based Guru Angad Dev Veterinary and Animal Science University has found that the poultry farmers were paid way below the cost of production.

As a result of poor market integration and lower price realisation, the minister said there hasn't been a single profitable poultry farm during the past ten years.

Balyan directed his department secretary to hold a meeting of stakeholders to address this issue and ensure better market integration.

Unless the issue is resolved it could put the health of the big poultry sector in India at risk and, with it, the livelihood of millions of growers.