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I. Poultry Industry in India[58]

Poultry is one of the fastest growing segments of the agricultural sector in India today. While the production of agricultural crops has been rising at a rate of 1.5 to 2 percent per annum, that of eggs and broilers has been rising at a rate of 8 to 10 percent per annum. As a result, India is now the world's fifth largest egg producer and the eighteenth largest producer of broilers. Driving this expansion are a combination of factors - growth in per capita income, a growing urban population and falling real poultry prices.

In the context of this emerging scenario, questions are being raised about the impact of the scaling up of production-through structural factors, externalities and policies-on small-scale producers. Do the transaction costs, policy distortion and environment externalities place the small-scale producer at a disadvantage? Why do some poultry farms have higher income than others? Do large farms earn more profit per unit of output than small ones? What explains the differentials in profitability? This report *, which forms part of an ongoing international comparison study on poultry, seeks to address these questions. It attempts to assess the impact of policy and environmental factors on the scale of poultry operations in India as well as the implications of that impact for small-scale production. The study aims to collect and analyze consistent data.

* See Mehta R., Nambiar R. G.,, itLivestock Industrialization, Trade and Social - Health Environment Impact in Developing Countries: A Case Study of Indian Poultry Sectorle, (Mimeo) Phase I project report submitted to IFPRI, May 2002.

The report is organized into eight chapters. Chapter 1 provides a short review of the poultry industry in India - how it has grown over the past two or three decades, the structure of the industry, changes in the scale of operations, and so on. Chapter 2 discusses the objectives and scope of the study, along with hypotheses to be tested. Chapter 3 provides details about data and survey, focusing on survey location, sample size, timing of the survey, and problems encountered. In Chapter 4 the approach for estimating efficiency and scale economies is reviewed. Chapter 5 then presents data based on analyses of sample information about the accessibility of sample units to information, accessibility to assets, technology, production practices, environment, and marketing. These results are followed by estimates of mass balance results in Chapter 6. The empirical results based on application of the model outlined in Chapter 4 are discussed in Chapter 7. Finally, conclusions and policy discussions follow in Chapter 8.

1.1 Transformation from a Backyard Activity to a Major Commercial Activity[59]

The poultry sector in India has undergone a paradigm shift in structure and operation. A significant feature of India's poultry industry has been its transformation from a mere backyard activity into a major commercial activity in just about four decades. This transformation has involved sizeable investments in breeding, hatching, rearing and processing. Farmers in India have moved from rearing non-descript birds to today rearing hybrids such as is Hyaline, lt is Shaver, ll and in Babcock, lt which ensure faster growth, good liveability, excellent feed conversion and high profits to the rearers. The industry has grown largely due to the initiative of private enterprise, minimal government intervention, considerable indigenous poultry genetics capabilities, and considerable support from the complementary veterinary health, poultry feed, poultry equipment, and poultry processing sectors. India is one of the few countries in the world that has put into place a sustained Specific Pathogen Free (SPF) egg production project.

1.2 Regional Variation in Poultry Development

Another important aspect of poultry development in India is the significant variation in the industry across regions. Figure 1.1 illustrates egg production in India by state during 1998-99. The four southern states - Andhra Pradesh, Karnataka, Kerala and Tamil Nadu - account for about 45 percent of the country's egg production, with a per capita consumption of 57 eggs and 0.5 kg. of broiler meat. The eastern and central regions of India account for about 20 percent of egg production, with a per capita consumption of 18 eggs and 0.13 kg. of broiler meat. The northern and western regions of the country record much higher figures than the eastern and central regions with respect to per capita availability of eggs and broiler meat. Figure 1.2 shows egg production in India by region during 1992-93.

1.3 Growing Production of Eggs and Broilers

Table eggs and broiler meat are the major end products of the poultry sector in India. Presently production of eggs is estimated to number about 37 billion, that of broilers 895 million, and that of poultry meat 735,000 tonnes. The value of egg and poultry production in India during 1980-2000 is illustrated in Figure 1.3. In addition, organized facilities have been set up over the years for the manufacture of egg powder and frozen, processed broiler meat essentially to cater to export markets and markets in the metropolitan areas of India.

1.4 Increasing Scale of Operation

The growth of the poultry sector in India is also marked by an increase in the size of the poultry farm. In earlier years broiler farms had produced on average a few hundred birds (200-500 chicks) per cycle. Today units with fewer than 5,000 birds are becoming rare, and units with 5,000 to 50,000 birds per week cycle are common. Similarly, in layer farms, units with a flock size of 10,000 to 50,000 birds have become common. Small units are probably finding themselves at a disadvantage because of high feed and transport costs, expensive vaccines, and veterinary care services and the non-availability of credit. Some small units are reported to be shifting from layer to broiler production because output in broiler units can be realized in six weeks.

1.5 Structure of the Poultry Industry

The structure of India's poultry industry varies from region to region. While independent and relatively small-scale producers account for the bulk of production, integrated large-scale producers do account for a growing share of output in some regions. Integrators include large regional firms that incorporate all aspects of production, including the raising of grandparent and parent flocks, rearing DOCs, contracting production, compounding feed, providing veterinary services, and wholesaling.

1.6 Concentration of Poultry Units Around Cities and Urban Centers

There has also been a growing tendency for poultry units to be concentrated around urban areas because of the existence of ready markets for the end products of poultry production.

1.7 Low Per Capita Consumption

Even though India is the world's fifth largest egg producer and the eighteenth largest producer of broilers, its per capita consumption of these products is poor - 37 eggs and 1 kg. of poultry meat per capita per annum. Here, again, there is considerable variation in per capita consumption between rural and urban areas and also across the region. Per capita consumption of eggs is only 7.7 per annum in rural areas compared with 17.8 per annum in urban areas. In seven states, per capita consumption is less than 3.5 per annum. Similarly, per capita consumption of poultry meat is 0.24 kg. in rural areas and 1.08 kg. in urban areas.

1.8 Slow Changes in Consumption Habits

An analysis of consumption data originating from National Sample Survey (NSS) rounds reveals many interesting facts. First, 42 percent of households are vegetarian in that they do not eat fish, meat or eggs. The remaining 68 percent of households are non-vegetarians. Over time there has been a gradual shift from vegetarianism to non-vegetarianism. The change is more visible in rural areas than in urban areas. For instance, between 1987-88 and 1999-2000, the proportion of households consuming only one of the three items - fish, meat or eggs - increased by only one percent in urban areas, while in rural areas this proportion increased by four percent. Second, calculation of income elasticity of demand for different commodity groups shows that the commodity group that includes meat, fish or eggs ranks second in the quantity of commodities consumed in rural areas (milk and milk products rank first), while in urban areas consumption of the meat, fish, or egg commodity group ranks third. The estimated income elasticity is 1.01 in rural areas and 0.66 in urban areas. Third, the price elasticity also follows the same order. Meat, fish or eggs have the high price elasticity of 0.75 in rural areas and 0.68 in urban areas. Fourth, estimates of income and price elasticities calculated for each of the four expenditure groups show that those elasticities tend to decline as one moves from the poor to the non-poor and the wealthy. The income elasticity is low for the wealthy - 0.5 in rural areas and 0.6 in urban areas. The other two income groups in rural areas have high-income elasticity - greater than unity. Price elasticities are greater than unity for the very poor and the poor in rural areas, and for the very poor in urban areas. A significant policy implication of these consumption habits is that there is lot of scope in raising the demand for poultry products in rural areas.

1.9 Exports

Exports of poultry products from India comprise table eggs, meat, live birds and value-added products such as egg powder and frozen yolk. The value of aggregated exports was Rs. 1,683 million in 1996-97. Exports were expected to reach the level of Rs. 5 billion by the year 2000.

1.10 Employment

Three decades ago, when egg and broiler production was 10 billion and 30 million, respectively, the total employment numbers in the poultry sector were not so encouraging. As income and employment in the crop sector started diminishing, the non-crop sector, which includes dairy and poultry, underwent a significant shift. With the demand for poultry increasing and production reaching 37 billion eggs and 1 billion broilers, this sector now employs around 1.6 million people. At least 80 percent of employment in the poultry sector is generated directly by these farmers, while 20 percent is engaged in feed, pharmaceuticals, equipment and other services required by the poultry sector. Additionally, there may be a similar number of people roughly 1.6 million who are engaged in marketing and other channels servicing the poultry sector.

1.11 Issues Relating to Animal Welfare and Environmental Pollution

Issues relating to animal welfare and environmental pollution by poultry units have been of increasing concern in developed countries such as the U.S. and the European Union (E.U.). But in India these issues have not yet emerged as critical although they are discussed at length in various seminars and forums on poultry production. Considering globalization and the international trade in poultry products, however, these issues may assume significance in a few years because of pressures from importing countries such as those in the E.U.

1.12 Constraints on the Growth of the Poultry Industry

A major constraint affecting the growth of the poultry industry in India is the lack of basic infrastructure such as storage and transportation, including cold chain. As a result, there are wild price fluctuations in the prices of poultry products, i.e., eggs and broilers. Another constraint to growth is an inefficient marketing system. The presence of so many market intermediaries harms both the producer and the consumer. A third problem relates to the price availability of feed resources. Maize or corn plays a major role in broiler production, as it constitutes 50 to 55 percent of broiler feed. As the broiler industry is growing at the rate of 15 percent per annum, the demand for maize is thus likely to increase. Presently India grows only 11 million tonnes of maize and only 5 million tonnes are available for poultry, which is not sufficient if the current growth rate of the industry is to be maintained.

1.13 Policy Measures

The policy measures that are required to improve the poultry industry must involve: (a) improving infrastructure facilities, which will help not only to stabilize the price of poultry products in the domestic market, but will also make them available in remote areas; (b) creating an efficient marketing channel that will help provide remunerative prices to producers (in other words, India's marketing set-up should also grow along professional lines); and (c) increasing maize production, which will involve using GM (genetically modified) seed varieties or, alternatively, will necessitate finding other sources of feed ingredients that can replace maize.

Figure 1.1 Egg Production in India by State, 1998-99

Source: Mehta, (2002)

Figure 1.2 Egg Production in India by Region, 1992-93 and 1997- 98

Source: Mehta, (2002)

Figure 1.3 Production of Eggs and Poultry in India, 1980-2000

Source: Mehta, (2002)

[58] The contents of this chapter are drawn from an earlier study by the authors. See Mehta R, Nambiar R. G., et. al.. op.cit.
[59] The contents of this chapter are drawn from an earlier study by the authors. See Mehta R, Nambiar R. G., et. al.. op.cit.

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