How Poultry Became India’s Fastest Growing Agriculture Sector with Siraj Hussain
What is the secret to the success of poultry in India?
In this conversation, journalist Puja Mehra speaks to former secretary with the Ministry of Agriculture Siraj Hussain about the rapid growth of India's poultry sector and how it has outpaced other agricultural sectors like fisheries and livestock. They discuss the rise of the integrator model in poultry farming, the challenges and benefits of contract farming, the poultry sector versus other crops, how supply regulation in poultry helps stabilize prices and much more.
ABOUT SIRAJ HUSSAIN
Siraj Hussain joined the IAS in 1979 and served the Govt for 37 years. He has worked as the Secretary, Ministry of Food Processing and as Secretary in the Ministry of Agriculture. At present, he is Chairman of the Board of Directors of National e-Repository Limited, a director on the board of Shri Renuka Sugars Limited and also a trustee of World Food Programme Trust for India. He writes regularly on agriculture and food policy for various reputed publications.
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TRANSCRIPT
Puja Mehra: Within the Indian agriculture sector, poultry it seems is the fastest growing. Not many people know but the sector is doing very well. Today I wanted to talk to you about what is the story of the poultry sector, how is it doing so well, what are the factors and how is it different from everything else that makes headlines all the time such as wheat and rice.
Siraj Hussain: So, it is true that poultry has been growing very fast as compared to other sectors in the agricultural economy. In the last 10 years from 2015 to 2023, the poultry meat grew by about 9.2%, which was the highest as compared to fisheries or livestock or mainly crop sector etc. And this is despite the fact that from time to time we have restrictions on consumption of eggs, consumption of meat.
So, right now, you know, the shops are closed in UP for example and even in southern states which are the largest producing states for poultry, as you know, the eggs are not sold in the midday meal scheme in several states. Of course, now they have started in Karnataka. So, despite all this, the consumption of eggs and meats has been going up and there are a couple of reasons but I think there are two or three reasons which are very important.
One is the contribution of Dr. B. V. Rao who started the National Egg Coordination Committee and initiated this campaign of consumption of eggs.
I remember that about 25-30 years back, there used to be full-page advertisements in newspapers encouraging people to consume eggs and highlighting the nutritional value. So, that is one reason due to which the consumption of eggs went up. Of course, at that time, the eggs were largely coming from backyard poultry.
Not only that, his company also invested in the science in the poultry sector. So, better quality of seed, better quality of chicks, etc. There was a lot of scientific intervention which resulted in more scientific management.
And thirdly was the entry of this contractual system of farming under which the integrators came and they took a lot of risk of the poultry producers. As a result of these factors, I think the poultry consumption has been going up and the farmers have done well. The poultry producers have done well to meet that demand and in fact, we have also been exporting a little bit of poultry products.
Puja Mehra: Right. And you said something very interesting. You said that contractual farming has changed the risk dynamics for farmers in the poultry sector.
Could you explain that because that's probably very interesting, especially when we compare poultry with other crops such as wheat, rice, pulses, etc. where farmers do not want to take that much risk. They want to depend on subsidies from government.
Siraj Hussain: So, about 20% of the poultry production is still coming from independent producers who are not a part of the contractual system. And in fact, the government of India wants to promote the non-contractual system. Having said this, the integrator model provides one-day-old checks to farmers.
They provide feed, they provide veterinary services, vaccines, etc. And they also take responsibility for marketing of the eggs and broilers. And the price risk is borne by the integrator.
So, as a result of this, the farmers and the poultry producers in many areas of India, Tamil Nadu, Andhra Pradesh, Punjab, Haryana have taken to this system of poultry production, which shields them from risk, both price risk, disease risk, etc. However, those who are really interested in this subject must read a paper which was published by the University of Michigan and IGLO jointly in 2014, which found that the income of producers who are participating in the integrated system is less as compared to independent producers. In fact, there were a lot of negatives which this paper had highlighted.
However, despite that, the system has worked well. It is a successful example of contract farming.
Puja Mehra: How is it that it is playing out well in the poultry sector? If you could explain the economics of it, if you could explain why is contract farming proving successful in poultry and why could this be replicated for other stuff?
Siraj Hussain: It has been replicated to a great extent for seed production. As you know, seed production for many crops is done in contract mode and the seed companies sign contracts with farmers and they produce seeds and they supply it to seed companies. Now, in this case, as I mentioned, this University of Michigan study had found that the average net return per bar was about 11 rupees.
Of course, it is a 2014 study and for non-contractual production, it was 17 rupees. So, there was a margin of about 6 rupees per bird which was going to the integrator. The integrators are getting advantage of that.
Now, basically, it shows that the farmers and the poultry producers are in such a weak position that they cannot take the risk of marketing and the risk of price fluctuation and therefore they participate in this. Now, it is true that going forward, there is a need to educate the farmers, bring more transparency to the contract shouldering because the contracts are quite one-sided. Actually, my boss in the agriculture ministry, Mr. Nankumar and Dr. Gulati, they have written a chapter on poultry in their book on value chains. So, that chapter is quite enlightening as to what actually goes on in poultry production. But taking the overall situation into consideration, the integrator model has been successful, I would say, because it has resulted in increase in poultry production and better marketing. And also, because it is dominated by a few companies, they regulated this supply of eggs and broilers in the market.
So, which means that they do not allow the prices to fall to very low levels. Unlike agricultural crops, where too much of arrival takes place at the same time and it depresses the KPMC prices, in case of poultry, they regulate the supply and therefore the prices do not crash to very low levels. So, that is the major difference between poultry and other agricultural commodities.
Puja Mehra: What you are saying is that the other agricultural crops follow this harvest cycle. So, when suddenly the harvest comes, then because supply is greater than demand, the market price sort of falls, sometimes even crashes. But how are the prices in the poultry sector regulated?
Does the government get involved? Is there a role for policy here or there is something else happening?
Siraj Hussain: One can say that fortunately, the government involvement is not very high, because if that was there, then there would be inspectors who would be going to various poultry producing units and harassing the producers and so on. So, that is not there. However, there is a different kind of involvement of the government and that is through the fixation of price of products which go into poultry feed.
So, for example, maize, soybean. Now, we know that the prices of maize have been rising in the domestic market because the government has been encouraging diversion of maize to ethanol, as a result of which some 5 lakh tons of maize have to be imported. So, the poultry producers, given representations to the Department of Animal Husbandry and Dairy and asking for more import of maize so that the base prices do not rise very high, because that will mean that the egg production and poultry production will also be impacted.
So, there is no direct involvement of the government by way of regulation of poultry production, but there is involvement through trade policy and this diversion to ethanol. I have been writing very clearly that India does not have surpluses of food grains to be diverted for ethanol.
Puja Mehra: Right. And what about farmers who are not part of this integrator model? How does that work?
Are they very large farmers? Is that market operating separately?
Siraj Hussain: No. Actually, they are small farmers. The poultry producers who are part of the integrator model are larger farmers in terms of land holdings and investment, etc., because that is an industrial model where a large shed has to be constructed and there has to be proper electrification, water supply, visit of veterinary doctors, supply of antibiotics. So, it is an industrial model of poultry production. They provide better quantity of Monday old chicks, etc. Also, the management is more scientific.
They take labor from outside. In case of non-contractual farming, the labor is usually provided by the households, but non-contractual farming is not organized. So, the Department of Animal Husbandry has been trying to provide better organizational ability to non-contractual poultry production also.
I do not think it has succeeded much, but that is the effort, because the backyard poultry also needs to be better connected to the markets. And I think they are the role of FBOs, etc. make up.
Now that we have ONDC platform for direct marketing of agricultural produce, I can imagine that going forward, there is a strong possibility that people will go for backyard poultry and they may be willing to pay a higher price. In fact, in big cities, we do find many people preferring backyard poultry, especially because of the fear that poultry production uses too much of antibiotics. And therefore, when you buy chicken meat in the market, it may be laden with antibiotics and so on.
So, there is this fear in the minds of people, especially the well-off sections of society, who may prefer backyard poultry produce. But it is not yet organized. So, maybe it will get organized.
Puja Mehra: If you travel, at least I've seen that traveling through a rural Karnataka, almost every household, every shop has stacked up these iron. I think it's very common, poultry raising is very common in rural South India, but we don't see that so much in rural UP, for instance.
Siraj Hussain: You are right. Actually, a majority of poultry production is coming from Tamil Nadu, Andhra Pradesh, Punjab, and Haryana. So, these are the 4-5 states which produce majority of poultry production, and other states are net importers of poultry.
Also, it is perhaps linked to the pre-convalescence and the majority of non-vegetarian population in southern states as compared to northern states. But having said this, we must remember, Haryana is a very important center of poultry production, and so is Punjab. Because one reason is that this provides diversification of farmers' incomes.
Of course, many a times they suffer losses. As we were entering COVID-20, I remember that there was a rumor in January of 2020 that it may be causing COVID. And therefore, the poultry farmers suffered huge losses, and the market crashed.
I had written an article at that time as to how this rumor, which was totally wrong, damaged the poultry farming program. But since governments are not involved, they came back, and again the supply chains re-emerged.
Puja Mehra: So, I suppose the lesson to some extent, for some segments of agriculture at least, is that if the government stays away, farmers have a better chance at prosperity.
Siraj Hussain: Actually, that is a lesson which is quite well understood in case of many other agricultural produce items. For example, banana. Now, the government involvement is minimum.
Banana production has increased. India has become the largest producer. Banana is available around the year in every part of India, and its prices have not been rising.
They continue to be available for 5 to 6 rupees per banana, so even poor people can afford it. It is highly successful. Similarly, other vegetables also, the production has substantially gone up.
Potato production has gone up, etc. A lot of investment has gone into courgette. But having said this, I do think that, Pooja, you know that this government has been investing a lot of money in infrastructure, and we keep reading about it.
A lot of credit is given to the government for that, that railways, highways, ports, airports, etc. So much of investment has come. But we do not see similar kind of government investment in the agricultural infrastructure.
Of course, agriculture infrastructure fund has been created where the government is giving interest of venture. Government is not investing directly. So, there is hardly an APMC where you would see a modern cold chain.
So, that kind of investment is needed, and if you visit Kazipur-Bandi in Delhi, I visit there during winters to buy fish. You know, there is a lot which can be done for creating better infrastructure there, so that the hygiene levels have improved, there are better cold chain facilities, better platforms for selling of fish, and you know, the whole management can be much better.
Puja Mehra: What is the kind of such investment needed by the poultry sector?
Siraj Hussain: I am sorry, I would not know that. But I can only say that about 90% of poultry meat is consumed in wet form, and there is very little processing of poultry products. And in the last few years, some exports have also started to Middle Eastern countries.
There is demand for poultry products there. But you see, in our country, from time to time, you see controversies of different kinds. So, halal meat becomes a controversial issue, and these countries would like halal certification.
There is nothing, you know, which can be found objectionable there. Of course, there is an issue of animal welfare and so on. But now, I would imagine that there is a need to promote processing of poultry products so that India can realize better value from exports, and these export opportunities are very much there in Middle Eastern countries, West Asian countries, our neighbors, Bangladesh, Malaysia, Indonesia, etc.
So, these opportunities are very much there. And processing can bring better value addition to India, and Indian products may perhaps be exported to European countries at some point of time in future.
Puja Mehra: And do we have data to tell us how poultry farming, the incremental difference it's making to agriculture household incomes?
Siraj Hussain: Yes, the situation assessment survey, I do not have the figures right now, but situation assessment survey had found that only 30% of farmers' income is coming from crop, and a substantial part is coming from wages. Of course, for small and marginal farmers, wages is an important component, but milk production is an important component. And in some states, as I mentioned in four or five states, poultry production is also an important contributor.
I do not have data with me, but that is very much there.
Puja Mehra: Right. Thank you. Thank you so much.
Siraj Hussain: Thank you, Pooja.
