Saturday, August 11, 2012

The shake-up begins in Emu Farming in TN - Part I

The largest contract Emu Farming Company in Tamil Nadu, failed to fulfil its commitments, and flashed in Media for a whopping Rs.250 Crores Scam. Scams in Emu Industry is albeit not new. The extent of the scam and the amount involved is really big this time.

Susi Emu Farm is being accused of duping the Emu Farmers to the tune of Rs.250 Crores, and complaints lodged with Police and District Administration. Unverifiable sources are confirming that 12 persons are already arrested and being interrogated, including the People behind Susi Emu Farms. It seems the assets and bank accounts are frozen, and Passports are impounded for all those involved, until the investigations are completed.

To sum of what kind of scam is inolved in this business, let me briefly explain it to you. 

Susi Emu farms started initially with the intention of selling the emu chicks as the core business.  There was a time that Emu Farm owners find it difficult to market their chicks at a reasonable or profitable basis, because of competition. It was like a dog-eat-dog, and undercutting the prices of the chicks were norms of the trade in 2008/2009. Some of the people involved in Emu Farming, with ingenious plans devised by Auditors, came up with a marketing scheme to quickly and profitably sell all the chicks produced, perhaps in demand.

The ingenious plan works like this: A (Emu) Farmer deposits Rs.15,000/- per pair of 3-month old emu chicks, with a minimum lot of 10 pairs to the Emu Farming Company (EFC), which is Rs.1,50,000/- for 10 pairs. In turn, the EFC constructs the shed with fencing & utensils in Farmer's backyard, and provides 10 pairs of 3-month old emu chicks. The feed is given by the company at no cost. Periodical visit by the EFC to check the health of the birds also done, and Medication is provided if needed to the Birds at no cost to the farmer. Farmer just lends some space, and look after the bird by feeding them. Feeds are indeed provided by the EFC. Farmer gets Rs,600/- per pair as holding charges per month, which works about Rs.6,000/- per 10 pairs every month. The contract is for 5-year period, and the deposit of Rs.1,50,000/- will be refunded at the end of 5 years without interest, and the Birds shall be returned to the EFC. Every year EFC takes back the one-year old birds from the farmer, and replaces it with another batch of 3-month old chicks. The adult birds are taken to the EFC's farm, where they will collect the eggs and produce more emu chicks for sales.

The economics for the EFC is very simple: A chick is produced at Rs.1,600/-, Cost of feed for one year would be around Rs,6,000. The miscellaneous expenses would be Rs.400/-. Hence, the total cost accrued for EFC is Rs.8,000/- per bird, which is Rs.80,000/- per 10-pair lot. EFC collects Rs.1,50,000/- in advance. EFC can pay back Rs.72,000/- per farmer per year, which means, they are returning the deposit amount on a month-by-monty basis with no interest. There is a fibonacci theorem that can tell exactly when this would burst, which would be few years from now.

Farmers are attracted to the scheme, as there is no one providing Rs.72,000/- return on the investment of Rs.1,50,000/-, which is 48% per annum. Farmers have to just feed the Birds and fill the tubs with water.  This is really mouthwatering for the farmers.

Factually, the rate of return is huge, except someone gambles, no other business is easy to get this much of returns. EFC's were thriving on the deposit amount, as they were able to give monthly pay-outs regularly to everyone, which begets more farmers queueing up with hard-cash in hand. The number started growing rapidly. Susi Emu Farm has to procure tens of thousands of emu chicks every year from Andhra and Maharashtra to cater to the needs of Tamil Nadu.

The nature of the scheme has such a deep pocket, the burst wouldn't have come so soon. An Agricultural fortnightly magazine has organized a Farmers Congregation to discuss about "Contract Farming - Good or Bad". The main topic was Emu Farming in that congregation. There were debates, Questions & Answers with Agri-Veterinary officials, etc. There was a strong message as a outcome of the congregation that current method of Contract Farming is evil, and farmers who have invested in it should be cautious, and new investiments are strongly discouraged.

As an outcome of the above congregation, happened to be organized in the same town as the HQ of Susi Emu Farms located, Farmers started flogging to the office of Susi Emu Farms asking for the refund of the Money. Offices were closed and people behind have disappeared.

It has been estimated that there are 12,500 such farmers were affected by this, which works out to be of Rs.250 Crores (Rs.2 Lakh average per farmer).

But there is a good side of the story, which in turn is going to help this industry to grow. I will continue it in the next part.

1 comment:

Karthik K said...

Unfortunately I couldn't able stop my uncle to invest in one of the bogus company.

In all my search I didn't find any market to sell the grown birds so I couldn't dare to suggested him to start his own farming.

Thank you so much bro. for all the information you provided perhaps still I am not able to find any market for the grown birds (after almost one year).

I have called some slaughtering units in AP & TN, Like Jeevan Emufarms, dindigul & there are not ready to take.

Just thinking, even existing slaughters don't want to take the birds, how this industry will survive ??

I still wonder how to sell my uncle's 50 grown birds..

If you have any information to sell these birds, pls share...& It will be hope for the farmers who are ready to sell & who want to start farming on his own.

Thanks for the all your postings & Keep blogging