January 21, 2009

India's poultry sector is now in a tough situation with cash flow problems, as banks and financial institutions stopped funding the industry amid the financial crisis.

The lack of fund injection could lead to lower production of eggs and chickens, and hamper expansion of the sector, said industry sources.

Last year saw the poultry sector ravaged by skyrocketing production costs and bird flu outbreaks, both of which squeezed margins and eroded capital. Reports also suggest that many poultry farmers were trapped into debts they could not repay.

Shrinking margins have forced out many poultry farmers and many others were unable to repay their earlier debts, but banks are not coming forward with assistance, according to Anuradha Desai, chairman of the National Egg Coordination Committee (NECC).

Desai said that there is no fresh capital now, and profit margins have decreased to 5 percent from the once 25 percent. Desai also said replacement of layer birds has declined by 15 percent.

I N Kulshrestha, the assistant commissioner of Animal Husbandry in Maharashtra, said the chicken and egg prices have not increased in proportion with the rise in input costs.

In the meantime, minimum support price of corn has increased to Rs840 per quintal from Rs630 last year, which will further hurt the margins of poultry farmers.

Desai warned that if the situation remains as it is, egg prices may reach Rs3.50 per piece before mid-year from the current Rs2.5 to Rs3 per piece.

The government should provide financial assistance such as interest subsidies to the industry if actual growth is to come back, Desai added.

US$1 = Rs48.6500 (Jan 21)