PROPOSALS FOR DEVELOPMENT OF NON-PROFITABLE LIVESTOCK FARMS OF THE NLDB

PREFACE
Sri Lanka, rich in it’s soil fertility levels and varied of Agro climatic conditions has enormous potential for sustainable growth in the Livestock & Farming. Country’s heritage of the yesteryear revolved around Agriculture and Agriculture based industries. The parameters of irrigation systems in technical terms prevailed then, superseded the technological boundaries of today. The NLDB is blessed with considerable wealth of public assets. If these assets are able to be re-engineered and put to good use, that would immensely contribute towards the national policy of Mahinda Chinthana in driving away the food crisis envisaged. The key is to make the right decisions & choices of our public investments, to find ways to Harness and Channel Market Forces. People Need To Be Conscious Of What They Throw Away And Where They Throw It away. Aggressively driving towards a culture of doing away with the consuming of powdered milk & inject the nutritional values of Fresh Milk to the minds of people and making it available, thus resulting in the encouragement of a cottage industry, booming for self sustainability. Diversify the Farm Plan prioritizing to Livestock and coupled to Agriculture utilizing it’s resources converting to Food Processing and Bio Fuel. A revitalized Agri Business Sector could be a key factor for life style improvements.

PROPOSED PROJECT
The proposed project will be under public private partnership (PPP) with NLDB with certain mechanisms for participation by a Private Company described as alternative options later in this memorandum. Whatever the participatory mechanism proposed under few options, shall ensure continuity for well over thirty years since the return on investments of this nature is essentially long term. Following farms will be considered under this project
1. Polonnaruwa Cluster ( Welikanda, Polonnnaruwa,Kandakaduwa) 2. Puttalam /Anuradhapura Cluster ( Kottukachchiya, Oyamaduwa and

Parasangaswewa)
3. Kandy Cluster ( Haragama, Mahaberiyatanne) 4. Weerawila Farm

.

Reasons for clustering the farms are for better administration, management control and to sharing of human and capital resources in a more effective manner.

1.

Polonnnaruwa Cluster
Presently Polonnaruwa and Welikanda farms are operative and not making any profits for the last few years as the financials revealed. We will not implement any action plan for the Kandakaduwa farm as at present since it is occupied by the Sri-Lanka Army, if this could be cleared it could be developed as one of the best dairy under Polonnnaruwa cluster The broader action plan to develop this cluster is as follows. 1. Growing of pasture in an area of 500 ha in the cluster. This should be facilitated with ready supply of water because water constraints have become a serious issue in the location and there is a necessity for digging up agricultural/deep wells and adoption of sprinkler or drip irrigation system to supplement water. 2. Commencing a dairy unit starting with a pedigreed stock of 500 neat cattle and 250 buffalos. 3. Introducing a hatchery for producing chicks and it could supply chicks at a reasonable price for individual farmers as well as medium scale farms in the eastern province. This will be helpful to improve the income and livelihood of the poor farmers living in the eastern province and this goes in line with the objectives of the Nagenhira Navodaya Development Plans 4. Introducing an electric fence around the boundary to ensure safety of the animals and the properties. 5. Cultivate maize for animal feed 6. Growing of the perennial crops such as coconut, cashew as they are ideal for the conditions prevailing in the area. Additionally, Ipil Ipil (Leuceana leucocephala) and Gliricidia could be planted as hedges or at recommended spacing to get large amount of bio mass which could be used for formulation of feed for livestock. Further Soya Bean and Ginger also could be grown in this cluster and after oil extraction; the residue can be used as an animal feed. 7. Growing of intercrops e. g. grapes and banana in between perennial crops.. 8. Growing of teak in the periphery of the land to obtain long term benefits i.e. timber. 9. Introduction of Greenhouse to cultivate bell pepper, and other cash crops for export market 10. Rearing of inland fish in pond and lakes of the farms to generate additional income and to ensure protein food security in the region 11. Introduce .full automatic milking machines to maximize the yield, necessary storing facilities to minimize the wastage and assure hygienic conditions 12. The target will be to increase the milk production up to 6000 lts per day and to implement state of the art packing and other products plant 13. As a socially responsible entity it is proposed to enhance worker living conditions in order to maximize worker productivity and thereby enhance profitability In order to implement the above development plan for this cluster is need of significant investment of around of at least Rs 100 million within period of eight years and to ensure turning around the cluster within second year of operation.

2)

Puttalam , Anuradhapura Cluster

Presently Kottukachchiya, Oyamaduwa and Parsangaswewa farms are under operation but not making profits for the last few years. However we found that these farms have great potential for improvement and within a short period they can be converted in to profitable units The broader action plan for this cluster is proposed as follows. 1. Development of diary with crossbreed animals of 1000 neat cattle 2. Development of pasture lands 3. To introduce poultry (50,000 birds) as layers and hatchery with a capacity of 20,000 eggs 4. Cultivate maize and soya been as poultry feed ingredients and introduce a feed mill with a capacity of 10 tons per day 5. Introducing an electric fence around the boundary 6. Growing of the perennial crops such as coconut, cashew as they are ideal for the conditions prevailing in the area. Additionally, Ipil Ipil (Leuceana leucocephala) and Gliricidia could be planted as hedges or at recommended spacing to get large amount of bio mass which could be used for formulation of feed for livestock 7. Introduce Goats 250 nos Jamnapari Goats 8. Growing of teak in the periphery of the land for obtaining long term benefits i.e. timber 9. Introducing the Greenhouse to cultivate cash crops for export market 10. Rearing of inland fish in pond and lakes of the farms to generate additional income and to ensure protein food security in the region 11. Introduce .full automatic milking machines to maximize the yield, necessary storing facilities to minimize the wastage and assure hygienic conditions 12. Our target to increase the milk production up to 5000 lts per day and to implement state of the art packing and other products plant 13. As a socially responsible entity it is proposed to enhance worker living conditions to maximize worker productivity and thereby enhance profitability The implementation of the above development plan for this cluster will cost around Rs 75 million within period of eight years will ensure to make the profits after one year of successful operation

3) Kandy Cluster
Presently Haragama, Mahaberiyatanne farms are under operation but not making profits for the last few years. However we found that these farms have great potential for improvement and within a short period they can be converted in to profitable units. The broader action plan proposed for this cluster is listed down below. 1. Growing of pasture in an area of 100 ha in the cluster. Water could be taken from the Mahaweli River. 2. Improve the dairy unit starting with a European breeds stock of 200 neat cattle and buffalos herd. 3. Setting up a oil mill to extract coconut oil and the residue poonac will be used as cattle feed.. 4. Growing of Mahogany and Tuna in the periphery of the land for obtaining long term benefits i.e. timber. 5. Introducing the Greenhouse to cultivate bell pepper, and other cash crops for export market 6. Introduce full automatic milking machines to maximize the yield, necessary storing facilities to minimize the wastage and assure hygienic conditions 7. The target is to increase the milk production up to 2500 lts per day 8. As a socially responsible entity it is proposed to enhance worker living conditions to maximize worker productivity and thereby enhance profitability The implementation of the above development plan for this cluster the private partner will invest Rs 50 million within a period of eight years and ensure operational profits after one year of successful operation

4)

Weerawila Farm

Presently farm is under operation but not making profits for the last few years. However we found that this farm too has great potential for improvement and within a short period they can be converted in to profitable units. The following proposals are made in respect of this farm.

1. Construct ponds to collect and retain rain water in the farm to assure irrigation to pasture field area of 100 ha in the farm. This should be facilitated with ready supply of water because water deficit has become a serious issue in the location and there is a necessity for digging up agricultural/deep wells and adoption of sprinkler or drip irrigation system to supplement water. Presently there is a wind mill with constructed with an overhead tank that could supply water through gravity 2. Commencement of a dairy unit starting with a MURRAH buffalo stock of 200 . 3. Introducing a hatchery for producing chicks and it could supply chicks at a reasonable price for individual farmers as well as medium scale farms in the southern province. 4. Cultivate Coconut and Cashew and dragon fruit 5. Growing of intercrops e. g. Banana and Papaya in between perennial crops.. 6. Growing of teak in the periphery of the land for obtaining long term benefits i.e. timber. 7. Introduce .full automatic milking machines to maximize the yield, necessary storing facilities to minimize the wastage and assure hygienic conditions 8. The target will be to increase the milk production up to 1500 lts per day. 9. As a socially responsible entity it is proposed to enhance worker living conditions to maximize worker productivity and there by enhance profitability The implementation of the above development plan for this farm will need an investment of Rs 30 million within a period of eight years and it will ensure the profitability with the second year of operation.

GENERAL OBSERVATIONS AND RECOMMENDATIONS

We observed that almost all the farms are running under capacity mainly due to the fact that their true potential is not captured by providing required input to the farm. It is essential that investments be made to make them run in their full capacity for making them financially viable and sustainable. In addition to financial investments, the most important factor is the provision of qualified supporting staff to all farms and assists them with proper managerial and marketing strengths to run the individual farm in each cluster effectively and profitably.

We are confident that by introducing financial investments and technology into these farms, we could convert all these farms into profitable units within a reasonable period.

It has to be mention specifically here that the private sector partner propose to establish training centers in each cluster or farm as the case may be to train the own farm staff as well as the educated youth from the vicinity in order to enhance productivity and to establish a pool of prospective qualified and skillful bank of employable human resource.

As indicated in the discussions held with the secretary to the ministry of livestock development and the senior officials of the ministry and the NLDB this memorandum will only offer conceptual and broader frame work and action plans envisaged by the private sector partner and if the proposals are accepted in principle the partner will elaborate to a greater extent the action plans with its own resources and with the employment of foreign and local consultants. The final more detailed informative report shall consist of complete set of projected financial statements to facilitate the evaluation.

OPTIONAL BUSINESS MODELS OF PARTICIPATION IN THE PPP
Option one
1. The private sector partner will act strictly as a “Managing Agent” to the nine farms to be carved out. Managing Agent will bring the managerial expertise. 2. The funding requirements of the operations as well as the capital development will be the responsibility of the NLDB. However the managing agent will assist the NLDB in raising finances. 3. The status co of employees of the NLDB attached to the respective farms will remain unchanged. The employees that are to be brought in by the managing agent in mostly at the higher managerial levels including the “Chief Executive Officer” will be seconded to the intended operation and their costs will be charge against the collective revenue of the proposed clusters. 4. The Managing Agent will be entitled to a profit share of a minimum 50% after charging all expenses.

Option two
1. Same as option one 2. The funding requirements will be made if necessary by the private sector partner for both operational and capital development. This will be brought in the form preferably of “secured debentures” to be issued by the NLDB which will carry a coupon rate of AWDR plus 5%, redeemable within a period of five years from the issue. The debentures to be issued shall have floating charges over the immovable properties of the clusters concerned if the value of those properties is adequate to cover the value of the debentures. 3. 4. Same as option one The Managing Agent will be entitled to a profit share not less than 75% after charging all expenses.

Option three
1. All immovable and movable assets of the nine farms earmarked will be leased out to a totally new entity still totally owned by the NLDB for 35 years. Thus the ownership of the properties is always with the NLDB but it is leased to the new entity. Even the farm level liabilities both current and long term will be taken over by the new entity. Initially the entire issued shares of this entity are owned by the NLDB (the 100%). But as a when the private sector partner brings in investment for operations and capital development the NLDB will dispose it shares to the private sector partner to a maximum extent of 49%. 2. If the fund requirements exceeds the value of 49% of the share capital the excess funds needed may be brought in as Redeemable Debentures as explained under option two. 3. The present NLDB employees will have the option of either remain with NLDB or to join with the new entity. 4. A management fee of 3% of revenue is applicable for the private sector partner under this option. The relevant management personnel of the private sector partner will be seconded to the new entity. 5. Both the NLDB and the private sector partner will be entitled to dividends declared in proportion to their respective holdings.

CONCLUSION
As indicated earlier this document shall only be considered as the conceptual frame work of the proposal and offer broader outlines of the action plans envisaged. This is expected to be studied extensively by the Ministry of Livestock Development and NLDB senior management. The final proposal by the private sector partner will be made on the basis of the acceptance of the business model and the broader action plans. The final proposal shall be extensive covering all aspects of operations including the financial projections.