A Glance Inside Pakistan’s Poultry Processing Industry
Lahore, Pakistan – Meyn & BioVet Pvt Ltd. signing the contract for the provision of processing system spare parts.
Author: Ahmad W. Naseer, CEO, Biovet Pvt Ltd, Lahore, Pakistan
With the production of 1.25bn broilers a year, Poultry in Pakistan enjoys second position as the largest industry in the country after textile manufacturing. At present, the industry is worth PKR 700 billion, (US$5.9 billion) and 73% of its capacity is located in the Punjab region. The industry provides jobs to 1.6 million people across the country, and the yearly growth potential of the industry was 8 - 10% in the year 2015-2016 alone. The GDP contribution was 1.4% for the year 2015-2016, with value, added cost up to 7.6% (151.2 Billion PKR as compared to 140.5 Billion Pakistani Rupee's (PKR) in the year 2014-2015).
Moreover, Pakistan is the world’s 10th largest producer of broilers. Despite these broiler figures, 95 percent of poultry in Pakistan is sold live, or through a traditional wet market, which has virtually no added cost (Source: Pakistan Poultry Association: PPA). Chicken meat consumption is estimated to be 6.5 kg per person, per year, which is far below figures from OECD countries, which was 29.12 kilograms per capita in 2016. (Source: OECD).
In Pakistan, grandparent bird stocks are produced outside the country. Thus, a 5% import duty plus 11% regulatory duty is applied. The government had also increased regulatory tariffs up to 30% on the import of feed (corn). The Pakistan Poultry Association (PPA) submitted its 2016-17 budget proposals to the Federal Board of Revenue (FBR), seeking exemption from Regulatory Duty on the import of grandparent chickens to curb overall production cost.
In the May budget presented by Pakistan’s Government for the year 2017-2018, it was proposed that a 5% Regulatory Duty on the import of grandparent and parent stock of chicken may be removed, and customs duties may be reduced from 11% to 3%. The budget also proposed that customs duties may be reduced on the import of hatching eggs from 11% to 3%. A sales tax rate of 17% to 7% on certain imported machinery and equipment for poultry is also to be applied.
If fully functional, Pakistan's poultry industry could generate a projected export revenue of US$12 to US$15bn, which is 40-50% higher than current growth share over the next 2-3 years. It could also lead to the creation of 3,000 to 4,000 direct jobs, provided the government supports in developing the processing industry by ensuring zero-rating of exports, and by giving incentives.
The commercial poultry industry emerged during 1960 to 1965 in Pakistan. Before that, the industry was limited to the domestic market and had little scope for growth. From 1970 to 1980, broiler and layer farms were established to improve chicken quality. Stability was achieved by the year 2000 when new investors re-shaped the poultry farming industry by adopting new technologies of environmental control: shifting from traditional open houses to semi or fully closed automated houses.
Being an Islamic country, HACCP, ISO 9001:2008, and Halal certifications are required for all commercial poultry processing in Pakistan. The chicken must be hand slaughtered by a Muslim butcher, and the feed should not contain any porcine. Other countries allow the import of chicken once the inspection of production, feed mills, farms, and processing plant is ensured.
Pakistan is the only country where a simple certificate or Halal certification is sufficient to label and categorize the product as Halal. The global halal food trade has expanded to US$3 trillion: however, Pakistan still has no significant market share. Therefore, if feed and processing systems are improved, Pakistan could potentially export chicken to Middle Eastern, and Asian markets – which presents a remarkable economic opportunity for Pakistan. That being said, the industry must adapt first if it is to reach a point where it can compete with global markets.
Pakistan's poultry processing industry is categorized into two market segments, which is 1. modern, and 2. traditional (wet market). The cost of processing chicken for modern processors is approximately PKR 40-50 per kilogram, as compared to PKR 2 per bird in wet markets. The significant differences in production costs are due to the higher taxes applied to processors using industrial-scale processing equipment. The killing of the birds is completed manually in both segments of the market since stunning is forbidden in Islam. Except for the manual slaughtering of the bird, all other steps in modern processing: from shackling, scalding, picking, evisceration, washing, chilling, cut up and deboning are followed as per international standards.
Offal transportation is categorized and handled in two ways: heart, liver, gizzard, and neck are considered as edible offal and are transported to cold stores for on-handling. The neck and hock are packed separately, and so are the liver and gizzards. Non-edible offal such as blood, feathers, heads, and feet are then transported to rendering plants for disposal.
The offal handling is automatic and precise in modern processing, whereas traditional slaughtering causes poor product quality and presents health risks. Therefore, modern processing must be adapted to increase Pakistan’s chances of exporting poultry meat to Middle Eastern and Asian markets.
*This article was originally published in Meyn WORLD Magazine, click here to read the publication online.