Poultry producers concerned over pricing formula proposed twice in 2013 and 2014 budgets
Despite the government’s move of introducing a pricing formula replacing price control on chicken through a 2014 budget proposal, the viability of poultry industry is at stake due to its dependency on feed prices, as it is the dominant production cost, leading poultry industrialists said.
The very same proposal of a pricing formula was made in the 2013 budget but it was not properly implemented as the complicated formula involves so many sectors, they revealed.
The government is again proposing a pricing formula without clarifying the modalities of calculating the new formula, they said, adding that the removal of price controls on poultry is welcomed by the industry but they have doubts on the implementation of a pricing formula based on cost structure introduced twice from two different budgets for 2013 and 2014.
Yakooth Naleem, Chairman, Standing Committee on Dairy and Livestock at the National Chamber of Commerce of Sri Lanka, told the Business Times, the industry would have preferred no price control whatsoever and instead the authorities could have resorted to control supplies to protect the interests of the consumers since this would have been a faster way to give relief to both producers and consumers.
Mr. Naleem, also Bairaha Group Managing Director and joint coordinator of the Poultry Producers Forum, said in any case the industry expects the authorities to implement early the proposal contained in the 2014 budget to give much needed relief to the producers of chicken in the form of a higher price to reflect cost escalation.
In regard to support producers to export chicken and eggs, again the producers expect early action by authorities to implement the proposal in the budget so that the excess supplies in the market can be reduced and encourage feed millers buy substantial volume of maize and other raw materials from the Maha crop from the farmers.
Mr. Naleem said it is the feed costs basically which is eating up all the profits and to raise a healthy chicken it is the feed that is essential so when the basic feed cost is high the farmers are pushed into a situation to increase the prices.
Another factor for the increase in cost of production of poultry products was the devaluation of the rupee, increased electricity tariffs, labour and transportation costs.
He noted that poultry producers have to pay VAT, NBT and income tax excluding other duties and indirect taxes, in particular tax (CESS) on maize and other consumables, which are also substantial in amount.
The industry is paying Rs.6 billion per year as VAT alone to the Treasury and the government should provide some concessions to producers who have to purchase all raw material including maize locally paying comparatively high prices.
The replacement of the price ceiling with a formula based method (2013 and 2014 budget proposals) would not help poultry firms to absorb their costs, another poultry industrialist who wished to remain anonymous said, adding that the government should take measures to tackle the cost of production issue rather than introducing plaster solutions.
He said that the industrialists demand a price increase of Rs. 80 per kg to compensate for the increased cost of production but it went unheeded by the Consumer Affairs Authority.
Dr. Athula Mahagamage, President of the World’s Poultry Association – Sri Lanka Branch disclosed that the consumption of chicken meat in the country is 11,000 metric tons per month and the demand for chicken has been rising rapidly when compared to other kinds of meat.
Therefore the government should give some kind of assistance to boost the industry, he suggested.
At present an average of 10,000 MT of chicken meat and 100 million eggs are produced monthly. The monthly per capita availability is 6 kg. The target for 2016 to be self-sufficient in the industry is the production of 18,000 MT of chicken meat and 280 million eggs per month. In order to achieve this target the government should provide facilities along capital investment grants but not pricing formulas, he added.