By KHALIL A SATTAR
Chairman, Pakistan Poultry Association
May 14 - 20, 2001
The estimated world export trade of eggs in 1999
stood at 7.2 billion eggs; total value being $500 million (Source:
USDA). The hatching eggs exports of Netherlands during Jan.-June. '99
(i.e. 6 months) stood at 86.2 million eggs. Out of this, the importing
countries of our interest and within our reach are Kuwait, Saudi
Arabia, UAE and Libya, who imported approximately 20.34 million eggs
during the 6 months' period of a value of 8.28 Dutch Guilders or,
$2.09 million, which works-out to approximately $0.16 per egg. These
imports are probably 20% of the total annual imports of these
countries. The other exporters to these countries are France and
India, with India gaining progressively larger share. The potential of
exports to Libya, Kuwait, Saudi Arabia, UAE, Malta, Yemen, Muscat and
Bangladesh is estimated at over 225 million hatching eggs annually, of
a value of approximately $45 million.
Pakistan in the first year, if given the necessary
support, could easily take 15% share of this market, i.e. about 34
million hatching eggs valued at $6.75 million. It may further be added
that due to various constraints, it is not unusual for countries to
face a sudden shortage in their own production; though Iran not a
large importer of hatching eggs, went extremely short of eggs in 1997
and Philippines went short of eggs in 1999, their requirements were
much larger than the requirements of the countries discussed above.
Constraints
The international trade price of hatching eggs
hovers around an FOB price of $0.16 per eggs and the C&F price is
$0.20 per egg. However, our cost of production being $0.19 to $0.20
per egg, and packing and forwarding cost of $0.01 and freight cost
from Lahore/Islamabad to UAE/Saudi Arabia at an average rate of Rs.
39/- per kg would be $0.04 per egg (Rs 39 x 25 kg/360 eggs/61.00 =
$0.04) which would push the C&F cost to $0.25 per egg against the
prevailing price of $0.19. Thus at current cost of production and
freight cost, there is a loss of $0.6 per egg. In order to be
successful in exports, this loss must be replenished.
Exports in the past
During the past export of hatching eggs from
Pakistan have taken place at price below cost and only at times when
prices of day-old chicks produced from hatching eggs have fallen in
the domestic market far below the cost of production and yielding
revenue of even less than what is recovered through exports of
hatching eggs. Thus exports have not been a regular feature for
profits, but only a mean to mitigate losses.
Competitors' edge
In the potential areas for Pakistan, India would be
our closest competitor. In competition on quality, we stand as good a
chance as India, if not better. However, on the basis of cost of
production, India would have an edge over us, and some of the reasons
for our higher cost are:
a. Higher Feed Prices:
Poultry feed ingredients to Feed Mills in Pakistan
are available at a higher price than to the feed mills in India. Soy
Bean Meal (SBM) — an essential ingredient of poultry feed, is
included in the breeder feed for production of hatching eggs at an
average inclusion rate of 25%. SBM which is imported from India is
available to Indian feed mills at an equivalent of Pak Rs. 9,850/- per
metric ton, whereas, to feed mills in Pakistan, it is available at Rs.
17,000/- per metric ton. This is primarily due to an exorbitant rate
of import duty of 35% plus other taxes and costs, and also arbitrary
higher valuation by customs for the purpose of import duty. The total
impact being about 45%. The cost of other ingredients too are higher
than India. Rapeseed Meal and Sunflower Meal are available in India at
an equivalent of Pak Rs. 6,160/- and Rs. 6,500/- per metric ton
respectively, whereas, in Pakistan, it is available at Rs. 7,500/- and
Rs. 9,000/- per metric ton; ex-works, respectively. Other ingredients
such as Vitamins, Amino-acids are also available at a higher cost in
Pakistan because of import duties. Poultry feed constitutes 65% - 75%
of the cost of production of hatching eggs, as such it's cost has a
very substantial bearing on the total cost and feasibility of exports.
The impact of import duties on all the items given in graph 'D', which
are input components in production of hatching eggs, would work out to
2.0 cents per egg, as per detailed in table 'C'. It may be highlighted
that none of these items are locally produced.
b. Lower Capacity Utilization:
The cost of production in Pakistan has gone up
substantially due to the Marriage Ordinance (Prohibition of Wasteful
Expenditure), which has banned serving of food at Marriage related
functions as a result of which 40% demand for poultry products has
been lost forcing lower production, thereby increasing the cost as a
result of increased overhead cost on account of lower capacity
utilization.
c. Higher Electricity Tariff:
The electricity tariff in Pakistan is higher than
that of India. The electricity tariff for poultry in Pakistan, for
some unearthly reasons, is higher than available to any other
industry; irrespective of the fact whether poultry unit falls within
the same category of consumers or not. For instance, consumers
qualifying for B-1 or B-2 tariff, are required to pay 3% and 1% of the
total units consumed at commercial tariff A-2 respectively, whereas
poultry farms, though qualifying and having B-1 and B-2 connections
are required to pay 10% of the total units consumed at commercial
tariff A-2. Poultry has been singled out, there is no other industry
that is required to pay 10% of the total units consumed at commercial
tariff. This penal application unnecessarily increases our cost —
making us less competitive.
Recommendations
a. Reduction in Cost of Production by a Stroke of a
Pen
Since cost of production, being higher than the
export price, as described under "Constraints" above, is a
major constraint, there is a need to reduce the cost of production if
it is desired to have a continuous sizeable export Endeavouring to
reduce cost of locally produced feed ingredients to reduce cost of
poultry feeds, would be a long-term remote possibility, and in fact,
may even not be desirable, as it may end-up as a disincentive to the
agricultural crop grower. A reduction of 2.0 cents per egg can be
brought about by a stroke of pen by providing all inputs given in 'E',
at zero duty, as per worked out in table 'C'.
b. Reduction in Electricity Tariff
A reduction can be brought about by removing
anomaly and the penal tariff applicable to poultry. This too requires
a store of pen.
c. Controlled Environment Holding Rooms at Airports
Hatching eggs, being live embryos, are required to
be held at a temperature of 65oF to maintain quality for hatchability.
There being no such facilities at present, there is a need to make the
same at Karachi, Lahore and Islamabad airports. We estimate
air-conditioning expense of a room of 600 sq ft at approximately Rs.
500,000 for each.
d. Alternate Suggestion to 'ZERO' Rate Import Duty
In case it is not possible to provide all the items
under Table 'E' on Zero duty, a rebate/restitution may be paid against
export @2.0 cents per egg. This recommendation is based in view of the
fact that the hatching eggs producer will, under no circumstances, be
able to reconcile th input of tax with the export consignment, as he
has no access to the tax paid by upstream producers/importers of items
given in table 'E'.
A detailed working has been provided under Annex
— 'C', which can be confirmed by a technical committee. Since
hatching eggs cannot be produced, without the input of these items,
upon confirmation of the committee, the same may be given us as
rebate/restitution.
We feel quite confident that if above
recommendations are accepted, Pakistan's poultry industry could
progressively take a larger share of the market. Achieving an export
target worth US$50/- million would not be too ambitious a figure it
still would be less than 1% of the world exports.
|
Table: Cost
of production of broiler hatching eggs |
|
. |
In Rs. |
|
Feed 69 kg @ Rs. 10.44 |
758.00 |
|
Parent Stock Rs. 175/- + 10% Mortality |
193.00 |
|
Medication/vaccination |
92.00 |
|
Electricity per pullet |
104.00 |
|
Labour per pullet |
52.00 |
|
Other |
53.00 |
|
Management, Financial, Administration |
83.00 |
|
Total cost |
1,335.00 |
|
Average Eggs produced |
110.00 |
|
Cost per Hatching Eggs |
12.14 |
|
Cost in US$ (@ Rs.61/-/$) |
0.20 |
|
Table: Basis
of calculation of duty draw back |
|
1. |
Soyabean meal |
|
Rate of duty 35% |
|
H.S. code 2304.000 |
|
Exchange rate Rs 61.00 |
|
Soyabean Meal consumed in feed per pullet |
17.25 kg. |
|
C+F cost of soyabean meal ($200/m.t) |
$0.20/kg |
|
C+F price of soyabean meal per pullet (17.25 kg
@ $0.20) |
$3.45 |
|
Duty on Soyabean meal per pullet ($3.45 x 35%) |
$1.21 |
|
Duty in Rupees per pullet ($1.2075 @ Rs. 61/-
per $) = Rs. |
73.66 |
|
|
Duty per egg |
0.67 |
|
2. |
Vitamin / mineral / antioxident / growth
promoters etc. |
|
Vitamins |
H.S. Code 2304 |
Rate of duty 10% |
|
Mineral |
H.S. Code 2602 |
Rate of duty 10% |
|
|
Others |
Relative head |
Rate of duty 10% |
|
3. |
Vaccine / medicine / biological etc. |
|
H.S. Code 3003,2000 |
|
Rate of duty 10% |
|
4. |
Electricity |
|
Detail is self explanatory |
|
5. |
Parent stock |
|
H.S. Code 0105.1110 |
|
Rate of duty 15% |
|
Cost per P.S. |
$2.500 |
|
Mortality (10%) |
$0.250 |
|
Value for Custom ($2.50+0.25) |
$2.750 |
|
Custom duty ($2.75 x 15%) |
$0.413 |
|
Duty factor per egg |
$0.004 |
|
Duty factor per egg in Rs. (0.0039 @ 51.9) |
$0.020 |
|
6. |
Packing materials |
|
Detail is self explanatory |
|
PARAMETERS |
|
* |
Parent stock age |
0 - 65 weeks |
|
* |
Feed consumed /bird |
68 kg |
|
* |
Soyabean meal incorporation in feed |
25% |
|
* |
Hen housed hatching produced / pullet |
110 |
|
* |
Hen housed day old chicks produced /pullet |
90 |
|
1. |
Duty draw back |
|
|
Pak Rs. |
US$ |
|
Soyabean Meal per Bird |
Kg. |
17.25 |
|
|
|
SOYABEAN MEAL USED PER PULLET |
|
Value of Meal @ Rs. 12,200/- |
|
Duty on Soyabean @ 35% per pullet |
Rs. |
73.660 |
|
|
|
DUTY FACTOR CALCULATE/HATCHING EGGS |
|
|
0.670 |
0.011 |
|
2. |
Vitamin / Mineral / Antioxidant |
|
Growth promoter etc. (premix) |
|
Value of Premix per kg. feed |
Rs. |
1.000 |
|
|
|
Premix used per Pullet |
Kg. |
1.380 |
|
|
|
Value of Premix per Pullet |
Rs. |
69.000 |
|
|
|
Duty of Premix per Pullet |
Rs. |
6.900 |
|
|
|
DUTY FACTOR PER HATCHING EGGS |
|
|
0.063 |
0.001 |
|
3. |
Vaccine Medicine / Biological etc. |
|
Amount used per Pullet Housed |
Rs. |
92.000 |
|
|
|
Duty M. Material |
Rs. |
9.200 |
|
|
|
DUTY FACTOR PER HATCHING EGGS. |
|
|
0.084 |
0.001 |
|
4. |
Electricity |
|
Electricity units used per Pullet |
|
12.000 |
|
|
|
Cost of Electrical unit per Pullet |
Rs. |
72.000 |
|
|
|
Sales Tax charges per Pullet |
Rs. |
10.800 |
|
|
|
SALES TAX
FACTOR PER HATCHING EGGS |
|
|
0.098 |
0.002 |
|
5. |
Parent stock |
|
C & F P{rice per P.S. |
$ |
2.500 |
|
|
|
Duty P.S. Hen Housed |
$ |
0.413 |
|
|
|
DUTY FACTOR PER HATCHING EGGS |
|
|
0.229 |
0.004 |
|
6. |
Packing Material Egg Boxes |
|
Sales Tax per box 360 eggs |
Rs. |
8.400 |
|
|
|
SALES TAX PER EGG |
|
|
0.022 |
0.001 |
|
7. |
Paper Egg Trays |
|
DUTY AND SALES TAX PER TRAY IMPORTED |
|
C & F price $3.00 per 140 Trays |
|
Duty @ 35% & Sales Tax 18% on Duty paid
value @ 25 eggs per tray |
Rs. |
0.770 |
|
|
|
DUTY & SALES TAX FACTOR PER EGG. |
|
|
0.030 |
0.001 |
|
|
Total Duty & Draw Back |
|
1.196 |
0.020 |
|
|
Table: List
of proposed raw materials to be imported at 'Zero' duty for
poultry industry |
|
S.# |
Item of import |
H.S. Code |
Statutory
Rate of Duty |
Concessionary
Rate of Duty |
Proposed
Rate of Duty |
|
1. |
Soya bean meal |
2304.0000 |
35% |
31.5% |
0% |
| . |
. |
. |
. |
(SAARC Origin) |
. |
|
2. |
Grandparent Day-old Chicks |
0105.1190 |
15% |
- |
0% |
|
3. |
Vitamins |
2936.0000 |
10% |
- |
0% |
|
4. |
Anti-Coccidials |
3003.2000 |
25% |
10% |
0% |
| . |
. |
. |
. |
(On Regd. Item) |
. |
|
5. |
Growth Promoters |
3003.2000 |
10% |
- |
0% |
|
6. |
Vet. Medicines/Vaccines |
3003.2000 |
25% |
10% |
0% |
| . |
. |
. |
. |
(On Regd. Item) |
. |
|
7. |
Amino Acids |
2922.4100 |
10% |
- |
0% |
|
8. |
Other Chemicals |
Misc. |
35% |
- |
0% |
|
9. |
Disinfectants |
3808.4019 |
25% |
- |
0% |
|
