Policy on payment of Growing Charges to AP 1 Farmers

A. SCOPE:
 The policy and procedures herein stated provides guidelines for the
payment of Growing Charges to be calculated based on Standard
Production Cost.

 Earlier we have considered moving average methodology for

calculating the Growing Charges whereas in this policy we have
amended the methodology of calculating the growing charges based
on Standard Production Cost.

 The policy also provides guidelines for calculation of Market Rate

Incentive and Grading of farmers

 This policy shall be in force until it is duly withdrawn by or

specifically superseded by another policy.

 The terms and the rates fixed herein shall be changed from time to
time which shall be adopted as amendments hereto.

B. EFFECTIVE DATE:

 This policy is effective from 20th Nov 2009 for the chicks placed there
from.

C. OBJECTIVE:

 The objective of this policy is to provide guidance for payment of

growing charges to farmers for rearing of broiler birds.

D. APPLICABLE REGION:

 The said policy is applicable to Andhrapradesh 1 region

E. GROWING CHARGES:

 Growing charges payable to a farmers for rearing of broiler birds is

inclusive of basic growing charges and production incentives or
penalties recoverable there from to be arrived at as follows ;

 The basic growing charges payable per Kg for rearing of broiler bird Rs
2.95 per kg

F. INCENTIVES OR PENALTIES:

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 Policy on payment of Growing Charges to AP 1 Farmers

Method of Calculation of Incentives or Penalties

1. The incentives/penalties payable/recoverable to farmer for rearing of broiler
bird shall be calculated based on either of the following methods :

 Standard Production Cost Basis

 Market Rate Incentive

2. Meaning & Basics :

The calculation of production cost will be based on the following Input

costs;
Inputs Description UOM Amount
Chick Cost Per Day Old Chick Rs.14.00
Feed Cost Per kg of feed Rs.19.00
Administration Cost Per Bird Placing Rs.1.50
Medicine Cost Per kg of LB Actual Expenditure

3. Standard production cost to be considered:

 The Standard Production Cost of Rs 44 per kg to be considered for the

purpose of calculating the Growing Charges.

 Standard Production Cost includes Chick Cost, Feed Cost, Medicine

Cost and Administration Cost and excludes Minimum Growing Charges.

4. Incentives or Penalties :
 Standard production cost per kg of broiler Live Bird to be considered as
described above.
 Incentives/Penalty shall be considered at the prescribed percentage of
savings/excess in the production cost (comparing to standard cost)
to the farmer.
Incentive / Penalty Pattern:

Incentive/ Penalty shall be paid/ recovered from the basic growing charges
towards savings/excess in production cost. The incentive is termed as
follows:

A: Basic Production Incentive

 The incentives payable or penalties recoverable shall be on the

difference between actual cost of the batch (to which incentives

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Policy on payment of Growing Charges to AP 1 Farmers

payable or penalties recoverable) and the standard cost (arrived at as

herein stated). At the ratio’s stated hereunder

 It shall be ensured for payment of growing charges a minimum of Rs

2.00/- per kg of broiler bird at any point of time even after levy of
penalties for increase in cost of production. Therefore in no case the
penalties recoverable from farmers levied by which growing charges
will reduce below Rs.2.00/- per kg of broiler bird.
 However Manager is having discretion to waive off the minimum
growing charges in case of any discomfort with and or excess
production cost spent by farmers

How to calculate the incentive/Penalties?

Incentives or penalties shall be payable at the prescribed percentage on
incremental savings/excess in the production cost compared to the
standard production cost to the farmers as follows.
Sl Incremental Savings/ Excess in Incentive /
No Production Cost compared to Penalty
Standard Production Cost
1 Upto Rs.1 + / - 30%
2 From Rs.1.01 to 2.00 + / - 40%
3 Above Rs.2 +/ - 50%

Practical Illustrations & Examples:

Companies Inputs for Calculation
14.0
Chick Cost Per DOC 0
Per kg of 19.0
Feed Cost Feed 0
Administration
Cost Per bird 1.50
Actu
Medicine Cost Per Kg of LB als
Std Production 44.0
Cost Per Kg of LB 0
Basic GC Per Kg of LB 2.95
First 1Rs
Incentive saving 30%
Next 1Rs
saving 40%

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Policy on payment of Growing Charges to AP 1 Farmers

Above 2Rs
saving 50%
If farmer Achieve the results (Performance as below)
FCR 1.85 1.83 1.81 1.79 1.77 1.75 1.73 1.71
Mortality % 5.00 4.85 4.70 4.55 4.40 4.25 4.10 3.95
Per Kg of
Medicine Cost LB 0.65 0.62 0.59 0.56 0.53 0.50 0.47 0.44
Average Body
Weight Kg / bird 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00

Outcome Farmers Actual Prodn Cost

Per kg of
Chick Cost LB 7.35 7.34 7.33 7.32 7.31 7.30 7.29 7.28
Per kg of 35.1 34.7 34.3 34.0 33.6 33.2 32.8 32.4
Feed Cost LB 5 7 9 1 3 5 7 9
Per kg of
Medicine Cost LB 0.65 0.62 0.59 0.56 0.53 0.50 0.47 0.44
Administration Per kg of
Cost LB 0.79 0.79 0.79 0.78 0.78 0.78 0.78 0.78
Actual Per kg 43.9 43.5 43.0 42.6 42.2 41.8 41.4 40.9
Production cost of LB 4 2 9 7 5 3 1 9
Production Cost Per kg of
Saving LB 0.06 0.48 0.91 1.33 1.75 2.17 2.59 3.01

Farmers Growing Charge Income

Basic Growing
Charge 2.95 2.95 2.95 2.95 2.95 2.95 2.95 2.95
Incentive 30% 0.02 0.15 0.27 0.30 0.30 0.30 0.30 0.30
40% 0.00 0.00 0.00 0.13 0.30 0.40 0.40 0.40
50% 0.00 0.00 0.00 0.00 0.00 0.09 0.30 0.51
Total Growing Per Kg of
Charge LB 2.97 3.10 3.22 3.38 3.55 3.74 3.95 4.16
Per Bird 5.94 6.19 6.44 6.76 7.10 7.47 7.89 8.31
For 5000 birds Rs per
282 294 307 322 339 357 378 399
placed batch 03 51 03 71 34 66 43 27

Market Rate Incentive:

The incentive is payable based on the selling price applicable to that farm on
based on batch average sales realization. The incentive are payable in
addition to basic growing charges and basic production incentive.

Eligible Category: Only A, B and C category farmers are eligible for market
rate incentive

Minimum Selling Price (MP): The minimum selling price to qualify for
market rate incentive is Rs. 50 per kg i.e. any selling price in excess of Rs 50
per kg only qualifies to avail market rate incentive.

How to calculate the incentive/Penalties?

The incentive shall be payable at the rate 10 % based on the selling price in
excess of the minimum selling price i.e., Rs 50 per kg subject to maximum of
Rs 1 per kg
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 Policy on payment of Growing Charges to AP 1 Farmers

Sl Selling Price per Kg Incentive

No
1 Less than Rs 50 per Nil
kg
2 From Rs 50.01 to Rs 10% for Selling price in excess of
60 per kg minimum Price. Suppose if the rate is
Rs 57 per kg then incentive will be Re
0.70 per kg ( 10% of (Rs 50- Rs 57/-)
3 Maximum Ceiling of Maximum Ceiling of Mkt Rate
Mkt Rate Incentive incentive will be Rs.1/kg

Illustration:

DC Date Age Kgs Sale Total

Lifted Price
( Rs /
kg )
5-Dec-09 39 600 49 29400
6-Dec-09 40 1200 53 63600
7-Dec-09 41 1500 57 85500
8-Dec-09 42 2000 62 12400
0
Average Selling Price for 5300 57.08 30250
the batch 0
Average Market Incentive
based on batch realization
per kg 0.71

Recoveries to be considered
The recoveries to be considered are categorized as follows:
1. Early Chick Mortality
2. Abnormal Mortality
3. Shortage Recovery
4. Other Recovery

1. Early Chick Mortality :

if the first week mortality rate exceeds by 1.50% and the overall mortality rate
exceeds by 5.00%, Rs.14.00 per birds for excess over 1.50% shall be recovered from

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 Policy on payment of Growing Charges to AP 1 Farmers

the farmers as first week mortality recovery.

2. Abnormal Mortality
Recovery in respect of abnormal mortality shall be made at the following
rates, based on the recommendation by the respective Line Supervisors and
Branch In charges.

Sl No Age of the birds Amount per Bird

1 Age 8 to 14 days Rs.27 / Bird
2 Age 15 to 21 days Rs.37 / Bird
3 Above 21 days Rs.63 / Bird

3. Shortage Recovery
Recovery – Mortality
Criteria Rate of Recovery
Early Chick Mortality Rs.14.00 per birds shall be recovered for
1st week mortality exceeds excess over 1.50% mortality in the first week
1.5% and overall mortality and 5% mortality during the batch.
exceeds 5%
Abnormal Mortality Age 8-14 - Rs.27 per bird
as recommended by line Age 15-21 - Rs.37 per bird
supervisor and branch in charge Age above 21 - Rs.63 per bird
Shortage Recovery Higher of Average Realization or Production
In case of any shortage in final Cost for the batch
count

Any shortage in birds noticed and/or reported on final count, the recovery for
the shortage birds reported will be calculated at higher of average realization
or production cost of that batch.

4. Other Recovery
Manager is having discretion to recover from farmers in case of any
discomfort with and or excess production cost spent by farmers. This

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Policy on payment of Growing Charges to AP 1 Farmers

recovery will be subject to the maximum amount of growing charges due to

the farmers.

G Grading of Farmers:

The grading of farmers is based on the farmers production cost for that
batch. The production cost will be calculated based on above illustration.

Farmer’s production cost per KG Grade of the farmer

If Less than Rs.42.00 per kg “A”
Above Rs.42.01 and up to Rs. 43.00 /kg “B”
Above Rs.43.01 and up to Rs. 44.00 /kg “C”
Above Rs.44.01 and up to Rs. 45.00 /kg “D”
Above Rs.45.01 and up to Rs. 46.00 /kg “E”
Above Rs.46.00 /kg “F”

-Signed-
G B.Sundararajan
Joint Managing Director

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