SWOT analysis of Pema Feed Mill: The 1st PPP model under MAGIP-IFAD
Pema Feed Mill which is been developed as a Public Private Partnership (PPP) model between MAGIP and the Promoter Mr. Pema Dorji became operational in August 2015. While MAGIP provided financial support amounting to Nu. 2.6 million, that covered the costs of a full set of Medium Scale Feed Mill with the capacity of 32 MT per day with horizontal feeding system and for laying mill house foundation up to the plinth level, the promoter has contributed one Acre land, mill house, feed store, approach road to mill house, transportation and three regular employees, with the total worth of Nu. 6.530 million.
The mill was established with the following objectives.
Long-term: The Feed Mill shall create good market opportunities for the farmers to produce more cereal and oil crops and dispose their surplus besides manufacturing quality feeds, and concentrates for the livestock. The company would also procure and sell some important feed ingredients to the farmers who require them, a clear win-win deal.
Short Term: The Feed Mill shall fulfill the following requirements:
- Cater the feed requirements of the livestock farmers in the east at a reasonable price
- Create employment opportunities.
The feed mill is located at Namla under Kanglung Geog which is about 20 km away from Trashigang town towards Samdrup Jongkhar.
The increasing numbers of livestock farms (Piggery, poultry, and dairy) in the Eastern Dzongkhags have increased the demand for the concentrated feeds. The commercial Karma feed is often inadequate and expensive owing to long distance transportation which has to come all the way from Phuntsholing. On the other hand, the local farmers produce surplus cereal grains and oil seeds which they find it difficult to market and face huge post-harvest loses. In fact, these excess grains which are left unprocessed and underutilized can easily go as raw materials into the feed mill, if there exist such plant in the region.
The memorandum of understanding between the proprietor and the government is that the factory supply feed at reasonable price or at par with Karma Feed benefiting both the parties- proprietor and livestock farmers. Despite of agreement, price of Pema Feed increased slightly and even goes beyond prices offered by Karma Feed. Therefore, there aroused an issue of upsurge in feed price. “The price increase is attributed to increase in price of raw materials and essential ingredients needing to import from Siliguri in India”, according to the Manger of Pema Feed Mill.
The objectives of conducting SWOT analysis of Pema Feed Mill are to:
- study present situation of the mill
- Study internal and external factors of the mill
- Evaluate underlying causes of increase in feed price
- Come up with set of recommendations for improvement of the mill
2 Situational Analysis
2.1 The capacity of the mill
The mill has the capacity to produce 32 metric tons of feed per day (4 tons per hours). But the mill operates to produce only about 3 tons/day on an average. The production is based on the demand from the livestock farmers. The production record in December 2016 reveals that the mill has produced on an average of 0.4 MT/hour which is far below the production capacity of 4 MT/hour. Therefore, only 10% of the mill capacity is being utilized.
2.2 Demand of feeds
The mill receives demand form the farmers of six eastern Dzongkhags. Demand for layer feed is the highest followed by dairy lactation feed. The mill also receives demand for chick starter and growers but the demand is negligible. The demand for fattener feed and bull ration is insignificant and thus the mill produces as and when the demand is being placed otherwise no stock is being maintained.
2.3 Ingredients/raw materials
Major raw materials such as maize, soybean and mustard are being sourced from the local farmers in the region while other vital ingredients (Lime stone, fish meal, synthetic methionine and lysine, Di-calcium phosphate, molasses, etc.) are being sourced from Siliguri in India. However, during the off seasons or in the case of not being able to meet the raw materials from the local community, the feed mill import all the raw materials from Siliguri in India.
On an average, the mill purchases 72 MT and 13 MT of maize and soya beans respectively in a month. The mill also procure mustard depending on the availability. Most of the raw materials comes from Mongar Dzongkhag (Dremetse geog), Trashigang Dzongkhag (Thrimshing, Kangpara, Udzorong, Lumang) and Lhuentse Dzongkhag. The purchase record in the month of December 2016 revealed that the mill has procured almost 100 MT of maize form the local communities
2.4 Distribution system
The proprietor of the mill owns grocery shop in Trashigang town from where the feed gets distributed to the buyers. There is no feed agent identified in rest of the Dzongkhags. Some of the livestock farms located in proximity to the factory also collect feeds directly from the factory by arranging their own transportation. In rare case the factory delivers feed on the farms.
The feed mill remains open for six days in a week from 8:00 am in the morning till 5:00 pm in the evening, except on Sundays and National Holidays. The mill is being operated by three employees.
2.5 Quality control
To monitor the feed quality, the Feed Mill receives the concerned officials from BAFRA every month who then does the sample testing to ensure that feed ingredients are of good quality. Moreover, the officials from Nutrition and Animal Health Sectors of Regional Livestock Development Centre (RLDC), Kanglung also makes a frequent visits to the feed mill to update on the feed quality.
Despite of technical back-up and quality checks by the line agencies, the feed mill receives complaints from the buyers citing decline in egg and milk production. As Pema Feed Mill produces mashed form of feed it is likely that intake loses in poultry are comparably higher than pelleted feed produced by Karma Feed Mill. “Low quality feed is mainly attributed to poor quality raw materials they receive from the farmers. “Quite often, the factory receives maize infested with fungus.” Said the Manager.
Some of the reasons behind producing poor quality feed by the factory are; non availability of subject matter expert in feed formulation, inferior quality raw materials, non-availability of core concentrate (premix), and interest of the proprietor. The proprietor has shifted his interest in producing feed in the east to producing feed in the south as he has bought feed mill at Gelephu. As per the proprietor, the demand and scope of feed business is manifold in the south compared to east.
2.6 Current feed price
The feed price comparison between ‘Pema Feed’ and ‘Karma Feed’ is as given in the table below.
|Type of Feed||Pema Feeds (Revised Rate) in Nu||Karma Feeds (Rate at Trashigang) in Nu|
2.7 Working environment
The Feed Mill has large exterior and open space. The surroundings are tidy and at a sufficient distance from the road point. The mill is equipped with CCTV camera that not only serves security purpose but also monitor laborers. The employees are provided with eye protection glass, mouth cover and a pair of gum boot a year. However, the employees has no uniform or dress code and other safety wears.
2.8 Sustainability Aspects:
Economic Aspects: Economically, the Feed Mill is viable. It is a successful/profitable venture to the promoter, where-in, as a PPP initiative, half of the initial investment is borne by MAGIP. The profit margin is not known but certainly there is profit because the production trend is on rise.
Environment Aspects: Environmentally, the Feed Mill is sound. It is not producing any un-degradable and hazardous waste, neither there is air pollution. The nearby water is not contaminated because the feed mill doesn’t use any water for its operation. The only waste generated in the torn-out sacks, some paper boxes and the molasses tins which are usually recycled and sold to the scrap dealers. Due to its ideal location, communities nearby has also not felt any sort of sound or noise pollution. The surroundings are maintained with free of garbage.
Social Aspects: Socially, Pema Feed Mill is acceptable. Besides making feed easily accessible, the farmers are benefitted in terms of income generation from sale of raw materials, particularly maize, to the feed mill. In the current trend, many buyers are opting for Karma Feed because of its superior quality but Pema feed mill is a reliable feed source because Karma Feed has to get transported all the way from Phuntsholing.
3 SWOT Analysis
SWOT analysis tool is being used to analyze Pema Feed Mill by looking at the current situation.
- High production potential of the plant (4 MT/hour).
- Huge market (all over the six Eastern Dzongkhags) and centrally located.
- Located close to Regional Livestock Development Center and any technical assistance can be availed from them.
- Feed out let in Trashigang town.
- No need of pre-ordering for Poultry layer and dairy feeds.
- As a first PPP initiative, it has the advantage of receiving high brand name.
- No subject matter expert on feed formulation.
- Low demand because of inferior feed quality
- Non practice of door step feed delivery
- Poor market penetration- absence of feed agent in other Dzongkhags
- Labor shortage- only three employees but only two of them does the operation.
- Proprietor hardly visits the mill as he is already preoccupied managing feed mill at Gelephu
- No large scale feed factory in the region
- Government support for livestock commercialization
- Increasing per capita consumption of livestock products as a result of increased purchasing power
- Bird flu outbreak in neighboring India
- Initiation of “School Egg Program and School Milk Program” could increase the demand of egg and milk respectively
- Locally available raw materials (ingredients)- prospects of large scale cultivation of maize and soya bean by the farmers
- Competition from other feed mill (ex. Karma Feed)
- Lack of quality raw materials
- Disease outbreak in poultry might affects feed demand
Following are some of the recommendations proposed
- Recruit technical staff who has skills and knowledge on advanced feed formulation.
- Recruit additional workers and run the mill at its given capacity (4 MT/hour)
- Use of quality raw materials to improve feed quality. Feeding of feed to poultry produced by Pema Feed Mill has resulted into feed borne diseases and cannibalism in some farms. There is a greater risk if the feed contains afla toxin which is hazardous to animal health and hampers production
- Improvement of marketing channels- Identifying of feed agent in every Dzongkhags (Five eastern Dzongkhags) for market penetration
- Advocacy and promotion of the product through mass media
- Maintaining of feed price lower than the Karma Feed Mill. As the Feed Mill was supported by MAGIP in PPP model, the memorandum of understanding (MoU) is to supply feed at reasonable price or at par with Karma Feed. However, prices offered by Pema Feed Mill is slightly higher than Karma Feed.
- Constant testing of feed sample for nutrient composition to improve formulation and quality
Overall, the Pema Feed Mill which has started as a PPP initiative between the Promoter and MAGIP was found to be economically viable, socially acceptable and environmentally feasible. It has not only benefited the promoter but also the surrounding communities mainly by making the concentrated feed locally available and opening the market for the domestic produces (maize, soya and mustard), thereby reducing the post-harvest losses.
However, Pema Feed Mill has to consistently maintain the feed quality by deploying at least one technical employee in feed formulation. Given a better feed quality, Pema feed mill has the potential to meet the feed demand from six Eastern Dzongkhags and beyond.
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Acknowledgement: DLO, DAO, LPO, DVH of Trashigang Dzongkhag, the Manager of the Pema feedmill and the respondents to our questionnaires. ’.