HATTON NATIONAL BANK LTD

COLOMBO

AGRICULTURE OPERATIONAL MANUAL

(VOLUME II)

TECHNO-ECONOMIC ASPECTS

March 2013 Hatton National Bank Ltd – Colombo

Index

Chapter Title Page No.

T 1 Crop Loans 3

Plantation and Horticulture T 2 23 Development loans

T 3 Coconut Cultivation 33

T 4 Farm mechanization loans 69

T 5 Financing allied activities 97

T 6 Poultry Development Loans 108

T 7 Loans For Minor Irrigation 155

T 8 Fishery development loans 168

Page|2 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Chapter – T 1

CROP LOANS

1.0 Introduction: The term 'crop loan' is commonly used for loans given to farmers for Seasonal Agricultural Operations (SAO). It covers all expenses right from preparatory activities necessary for raising various crops till their harvesting. These activities include, ploughing, preparing land for sowing, weeding, transplantation, purchasing and supply of inputs like fertilizer, pesticides and seeds and labour for all the operations in the field for raising and harvesting crops. Thus the credit required to meet all the expenditure for raising crops till the crops are harvested is considered as “production credit” and is commonly known as “crop loan”. Since cultivation of crops is seasonally recurring in nature, it is referred to as “Seasonal Agricultural Operations”. The period of such a loan is generally one crop season. In most of the regions of the country there are basically two crop seasons: ♦ Yala – Starting from May to August e.g., paddy, onion, vegetables (beans, carrots, cabbages beet-root leeks etc.) ♦ Maha – from October to late January e.g., Paddy Maize, Greengram, Kurakkan,Thus, crop loan is required for four to six months in most of the regions of the country, but the loan period often gets extended for early requirement of cash for storing seeds and other inputs and in the post harvest period for sale of the produce. In general, the time provided is at least two months over the period that the crop takes from sowing to harvesting. For some crops like banana, pineapple, sugarcane, which take longer time, crop loan is provided for over a year up to 18 months. Thus the maximum period under crop loan for such crops is generally upto18-20months.

2.0 Techno economic aspects of crops: There are a number of techno- economic aspects of crops which are relevant in the context of providing bank loans to intending borrowers. The following are the important aspects discussed in the crop wise list given in the table at the end of this chapter.

2.1 Crop season: The planting and harvesting seasons vary with crops and locations. The planting season from the point of view of financing banks is important for planning the peak lending in tune with demand for loans. It is the planting season and the period

Page|3 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

immediately thereafter the bulk of the disbursements to input suppliers take place. Branches therefore have to plan well ahead of the planting season to maximize the credit off take. Noting the harvesting season is a part of loan follow- up and recovery processes. The harvesting season, followed by on farm processing and time required for marketing would decide the fixation of repayment schedules.

2.2 Crop duration: The crop duration, generally classified as short (0-6 months), medium (6-12 months) and long duration (>12 months) is an important aspect in agricultural advances. While crop duration is relevant in case of seasonal / annual crops, the number of crops per year is important in case of perennial crops. The crop duration and number of crops per year is important for cash flow calculations and should be considered carefully depending upon the crop being financed on a case to case basis.

2.3 Planting material: The planting material could be seeds or seedlings as in case of many seasonal and annual crops. In case of perennial crops the planting material may be seedlings, rooted cuttings, grafts, budded plants or tissue cultured plants. If the planting used is seeds, the ‘seed rate’, meaning the seed required per acre/ hectare becomes the basis for costing. In case of seedlings and other plant material based on the spacing the plant density is worked out to arrive at costing. The sourcing of plant material is important both from qualitative and costing angle.

2.4 Gestation period: In case of perennial crops the pre–bearing period or the time taken for commencement of yielding is referred to as gestation period. In estimating the development cost of horticulture and plantation crops the gestation period is to be considered carefully as applicable to the specific crops being financed. The development cost of plantation and horticulture crops expressed on a per acre/ per hectare basis generally takes into account the first year planting cost plus the cost of maintenance during the gestation period.

3.0 Seasonality in crop loans: Credit delayed is credit denied. The crop loans should be made available in time to meet the crop production requirements at various stages. Proper planning should be done to collect and process the loan applications. A definite calendar of operations should be prepared in respect of crop loans. Branches should identify the major crops grown in their operating areas, ascertain the major cultivation seasons and the sowing/transplanting periods and chalk out a calendar of operations well in advance of each season. Based on the cropping pattern and calendar of operations, branches should plan in such a way that loan applications are entertained well ahead of the season, so that the loans can be disbursed, on getting sanction from the sanctioning authority, coinciding with the sowing/transplanting period.

3.1 Crop could be classified broadly under three categories:

Page|4 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Annual Crops: Cereals : Paddy, Maize, Jowar, Wheat etc. Pulses : Black Gram, Green Gram, Red Gram etc. Oil Seed Crops : Ground Nut, Sunflower etc. Fiber Crops : Cotton, Jute etc. Perennial Crops : Tea, Coffee, Rubber, fruit Crops etc.

Based on season: Maha (Oct to Jan) : Paddy, Maize, Greengram, Kurakkan etc. Yala (May to Aug) : Paddy, onion, vegetables (Beans, carrots, cabbages, beet-root leeks etc.) 4.0 Scrutiny of applications: Crop loan applications if properly filled in will provide the vital information needed for credit evaluation and sanction. The data and facts mentioned in the application are to be thoroughly scrutinized and verified during the Field/Farm Visit. The scrutiny should ensure the following critical points are verified: n Suitability of the Ø proposed cropping pattern in regard to soil conditions, Ø irrigation facilities Ø quality inputs supply availability Ø post harvest sales arrangements Ø Farmer’s own involvement in farm activities and his experience and ability etc. n Loan evaluation should specify Ø the loan amount recommended crop-wise, Ø Considering the quantum of loan proposed to be sanctioned, if it is considered necessary break-up for loan disbursements in “cash” and ‘ kind” component is to be prescribed, for monitoring end use of funds and Ø indicative loan drawls, n Periods of drawls for various crops and for various operations to plan disbursements n Period of harvest and marketing to be noted for proper follow up and recovery n Due dates to be diarized for follow up n Security for the loan to be ascertained

5.0 Appraisal of Crop Loans: The crop loan applications can be accepted under New Comprehensive Rural Credit Scheme (NCRCS) or the bank’s own scheme. The flow chart of crop loan appraisal system given in the Annexure-2 shows how the applications under NCRCS scheme or the bank’s own scheme are taken-up for financing. The eligible crops under NCRCS are specified by Central Bank of Sri Lanka (CBSL), whereas the crop loan

Page|5 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

under banks owns scheme could cover all the crops including those listed under NCRCS. The appraisal of crop loans in terms of cost of cultivation, loan amount differ between NCRCS and bank’s own scheme. Similarly, there are differences in terms of ceiling on cropped area, rate of interest, security, disbursement and repayment stipulations. These norms / guidelines are given in detail under Annexure – 1 at the end of this chapter.

5.1 Scale of finance: The quantum of finance for which a farmer is eligible is to be decided with reference to the crop and the extent of land where the crop is proposed to be raised. It should be ensured that the purpose(s) for the loan is to cover cultivation expenses like (i) inputs purchases like seeds, organic manures, fertilizers and pesticides, (ii) labour cost, (iii) farm equipment hire charges, if incurred and (iv) transportation cost for transporting inputs to the farm and the harvested produce for sale to the market place.

The cost of cultivation may vary from farmer to farmer depending upon the area of cultivation, soil fertility, the type and variety of crop raised, and certain other factors. But it is not possible for a bank to accommodate this variation among different farmers. Therefore, it is convenient to fix crop wise per acre/hectare 'scale of finance' (SOF), which would satisfactorily meet the requirement of majority of cultivators in the area. With a view to minimizing the chances of under financing as well as over financing, the Central Bank of Sri Lanka (CBSL), in consultation with Department of Agriculture lays down the “scale of finance” reckoning the prevalent cost of inputs and labour. The scale of finance announced by CBSL for the cropping season for different crops is in Annexure -3.

CBSL undertakes a periodic review of SOF and announces the revision in the scale of finance applicable for different crops. This will be communicated to branches through a circular. Branches will have to adhere to the revised scale of finance if and when so announced through the circular. The farmer's requirement of cultivation expenses may be classified into two categories: outlays which can be met primarily in “cash” like that for hiring of labour (component “A”) and those which can be disbursed in kind as in the case of purchase of improved variety of seeds, chemical fertilizers and pesticides (component “B”). This facilitates monitoring the “end use of loan funds, the Branch can, where it considers necessary, sub-divide the loan sanctioned under (i) “kind component” where the loan is directly disbursed to the input suppliers for purchase of seeds, fertilizers and pesticides and (ii) “cash component” where the loan is disbursed in cash to the borrower for meeting expenses like cost of labour for various operations like ploughing, planting/sowing, weeding, harvesting etc. There may arise instances where there may be necessity to deviate from the laid down scale of finance under the Bank’s own scheme. In such cases, the applicant can be asked to submit an estimation of the cultivation expenses and the expected

Page|6 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

surplus. AO should thoroughly scrutinize the estimation sheet and confirm if the working reflect the considering the good credit standing of the applicant.

5.2 Limits: Normally limits are worked out on the basis of Scale of Finance (SOF). It should be borne in mind that these SOF parameters take margins into account. Therefore no separate margins need to be stipulated where the limits are worked out as per SOF. In exceptional cases for progressive farmers the bank may consider some relaxation in SOF. Based on the inputs received from the farmer, AO can determine the cost of cultivation expenses using the work sheet in Annexure.

5.3 Security/Collateral: An essential feature of the crop loan system is that cultivator's eligibility for crop loan and the quantum are determined not with reference to any tangible security he offers but on the basis of the farm size, the crop he grows and the surplus he is likely to generate on sale of produce. The repayment of the loan is expected out of the sale proceeds of the crops. In sum, it is the cash surplus that generated from the activity financed shall always be the source of repayment and as such is the primary security. Collateral securities are sometimes taken by bankers as an alternate repayment source for the loan. Collateral acts more as a deterrent on the borrower from willfully defaulting on his loan commitment to the Bank. Further, if the bank had encumbered his land or other properties, the borrower will be constrained to enlarge his indebtedness, and also it will be the indicator for other financing agencies.

5.4 Repayment: The due date for repayment of crop loans should be so fixed that it is not too distant from the harvest and at the same time, a reasonable time is given to the cultivator to process and to market the produce. No crop loans should be allowed a repayment period of more than 12 months except in the case of banana, sugarcane and pineapple where the period of loans may be allowed to run upto 18 to 20 months depending on the variety. In the case of crop loans to be operated in over draft, it is enough if the month alone during which the loan is to be repaid is mentioned under repayment column without mentioning the actual due date. As a thumb rule 2 months grace period may be allowed, for repaying the crop loan, from the month of harvesting of the crop for marketing and realizing the sale proceeds. Adverse seasonal factors or natural calamities may result in failure of crops in certain areas. In such cases, short term loans can be converted into medium term loans repayable in two or three easy installments from future crops. Fresh short term finance for raising crops may also be provided to such borrowers. For ensuring banks to absorb the risk of non repayment of loans by the farmers when the crops are damaged due to wide' spread natural calamities and not to disqualify the farmers from fresh borrowings, there is a process known as conversion which enables farmers to borrow fresh crop loan for the next crop season pending

Page|7 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

repayment of earlier loans. In this regard branches can be guided by the bank’s guidelines issued from time to time. 5.5 Check list for appraisal: The check list covering technical feasibility and other aspects of crop loan appraisal is given under Annexure -4. The agricultural Officer / Manager appraising crop loan proposals can use this check list to ensure that all the aspects of crop loan appraisal are complied with before sanction is accorded. 6.0 Mode of Disbursement: The disbursement of crop loan may be in one lump sum or in stages. In most small loans, generally being crop loans, Banks tend to disburse the amount directly to borrower for ease of loan administration. The end use is verified later during farm visits. Generally, a farmer can get a better price for inputs by paying cash and if bank insists on paying direct to supplier, the farmer may feel that he is being made to pay a higher price. However, as earlier stated, if the crop loan is bifurcated into a ‘cash component’ and “kind component”, cash component of the loan amount would be disbursed directly to borrower to meet expenses relating to production such as wages etc; ‘kind component’ would be released direct to the suppliers of inputs for purchase of inputs such as seeds, fertilizers, pesticides etc. under due authorization from the borrower to debit his loan account and pay the suppliers for inputs supplied /services rendered.

• Borrower should be given freedom to use the limit as per his credit requirement. It is possible that a borrower may approach the bank to disburse the loan (or part of it) on disbursement basis because he had already incurred those expenses during planting season. It is also possible that in some cases the borrower may not be in a position to produce receipts or other supporting papers for his purchases / expenses. Such a request can be favorably considered provided the AO / Branch Manager is satisfied about the inputs having been purchased/assets having been created. AO should certify the same before disbursement in such cases.

• Similarly where cash disbursal has been made (credit to borrower’s SB account), the AO will follow up with the borrower to obtain receipts / invoices where possible.

7.0 Post Disbursement Aspects: Manager/ Field Officer should visit the borrower’s farm at least twice during the currency of the loan. The first visit should be made sometime after disbursement to verify whether the crops have been raised according to the pattern given in the loan application. Besides verifying the utilization, the visit will also help to establish personal contact with the farmer who becomes aware that the Bank takes interest in

Page|8 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

his activities and progress. The opportunity could also be utilized to provide guidance and advice on cropping pattern, pest control, input application etc. The second visit should be around the period of harvest. This would help to assess the crop condition, probable income and period of income and to prepare the ground for recovery in time from out of harvest proceeds. Wherever possible more frequent contact with the borrowers should be maintained. The borrowers should be informed of the due date well in advance and recovery should be arranged to be effected by keeping close touch with them during harvesting and marketing seasons. 8.0 Other Aspects relevant to crop loans: 8.1 Estimating crop loan at the Macro level based on PLP: There is a methodology to develop Potential Linked Plans at Regional Office level. Accordingly, macro level data like) land holding distribution based on the size of the land holdings, b) area under cultivation crop-wise area for the last 5 years, c) distribution of gross cropped area among farmers (d) crop yield (e) price realized etc. Based on such and other macro level data credit off take potential the extent of loan requirement can be broadly estimated. Some general information like new crops introduced, thrust areas decided by the Government, tie up arrangements for marketing and present cropping pattern are also to be collected. Depending on the past trend, acreage under those crops which are not expected to be covered through bank finance should be excluded. The resultant crop-wise acreage, which is expected to be covered through bank finance, should be multiplied with ‘scale of finance’ (per hectare finance fixed for a particular crop) to give the total financial requirement. The potential for crop loan thus worked out is to be allocated by RO to various branches. The PLP exercise is considered a helpful guide for macro level credit planning at RO or district level and the projections are utilized by bank branches for planning their credit activities. 8.2 Schematic lending – cluster approach: Wherever possible, branches may formulate schemes covering a large group of farmers in a compact area for cultivation of crops. Such schematic lending, besides helping the branches in reducing the cost of supervision and follow-up may also facilitate sanction of higher discretionary powers (wherever necessary) than those being vested with the branches by controlling Offices under such specific schemes sanctioned by them. In areas where marketing or processing units are operating, special schemes for cultivation of crops like sugarcane, cotton, coffee, banana etc. under tie-up arrangement with such agencies can be formulated and financed. 8.3 Comprehensive crop development: Comprehensive programs for productivity improvement of specific selected crops can be launched in a compact area. The crop selected should preferably be a commercial crop. In extensive food crop growing areas food crops can be also taken up. The branches should select compact areas and concentrate on productivity improvement. A comprehensive scheme should be drawn up, if necessary in

Page|9 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

consultation with experts in the line, with details of coverage of area, seasonality in lending, quantum of loan per acre, seasonality in recovery and provision of inputs etc. Under the scheme the bank can take responsibility to provide the farmers all assistance, both monetary and non-monetary for successful raising of this crop. Simultaneously branches should take all efforts to popularize the scheme in the area and improve the coverage. The main focus should be on more coverage, adequate and timely credit, provision of inputs services and technical guidance ensuring optimum yield per acre and profitable marketing. ♦ Identify a suitable compact area with adequate potential and infrastructure and with a wide credit gap. ♦ Select a suitable crop for intensive development. ♦ Convene a meeting of the farmers to explain the bank’s endeavour, facilities available from the bank, profitability of crop and package of practices to be followed. ♦ Draw up a comprehensive scheme indicating the area to be covered, scale of finance to be adopted, provision of inputs and stages of disbursements, seasonality in lending and recovery targeted optimum yield per acre, arrangements for storing, processing and profitable marketing and forward to Regional Office/ e for sanction of overall limit. ♦ Enlist assistance of the experts to draw a profitable crop rotation and selecting suitable crops/ varieties. ♦ Enlist maximum number of farmers to be covered and complete formalities relating to collection of applications etc. well ahead of the season and prepare a calendar of operations to ensure provision of timely credit, inputs and services. ♦ Take steps to popularize and provide the package of practices by circulating adequate literature on these crops as well as conducting result and method demonstrations by coordinating with the extension agencies of the Government and Universities. ♦ Arrange for processing, storage and marketing of produce. ♦ Examine the export potential and arrange for export marketing wherever possible. ♦ Make arrangements for periodic group discussions of farmers, branch officials and crop specialists. 8.4 Overdraft facility for multiple crops: Farmers may be raising different crops in different seasons during the same year. In such cases, the total annual crop loan requirements of the farmers for raising various crops can be sanctioned by way of aggregate “overdraft limit” instead of providing multiple crop loans of fixed tenor .This will also obviate the need for submitting crop loan application for each crop to be raised by the applicant during the year and the need for obtaining fresh documents every time. The proposal for such overdraft limit should clearly indicate the nature of crops proposed to be raised, extent of cultivation of each crop, season for sowing and other operations and harvest of crops. Branches

Page|10 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

should ensure that the drawl and remittance in the overdraft limit synchronize with the period of cultivation and harvest of crops respectively. The overdraft limit is valid for one year and when continuance of the limit is required, proposal for renewal should be obtained well ahead of the date when the limit will lapse. The annual credit requirement can be obtained in the following tabular form for quick assessment of the seasonal requirements, the drawing power and for fixing the repayment schedule

Season Eligible Time Time S. No Crop Extent loan schedule for schedule for Planting Harvesting amount disbursement recovery

The total credit requirement, assessed as above for all the crops, should constitute the eligible quantum of the applicant and the loan documents should be obtained for this aggregate amount. Branches should adhere to the disbursement and recovery schedule depending on the seasonality of each crop as per the calendar of cropping operations worked out. Branch should also ensure that the borrower adheres to the proposed cropping pattern. 8.5 Crop loans for seed production: Quality seed is one of the essential inputs for good crop production. This can be either to the units directly engaged in production of seed or indirect production through contracting out for production. Indirect production includes production of hybrid/high yielding seeds by the farmers under tie-up with reputed producers of seeds. These entities will arrange for supply of foundation/ registered seed in case of high yielding varieties or parent material in case of hybrid seed, to the farmers and procure the produce from the farmers. These agencies should have adequate facilities to carry out processing of the seed produced. Thus providing crop loans to seed production activities can enhance crop loan portfolio of the bank substantially. 8.6 Contract farming: Contract Farming is an attempt to bring together the growers and the end users by avoiding the middlemen and thus getting an assured market and better price for the farmers. At the same time the users get an assured source of suppliers of agri commodities in required quantities and of quality. Contract farming is defined “as agricultural production carried out according to an agreement between a buyer and farmers, which establishes conditions for the production and marketing of a farm product or products. Typically, the farmer agrees to provide agreed quantities of a specific agricultural product. These should meet the quality standards of the purchaser and be supplied at the time determined by the purchaser. In turn, the buyer commits to purchase the product and, in some

Page|11 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

cases, to support production through, for example, the supply of farm inputs, land preparation and the provision of technical advice. The contract requires the farmer to plant the agreed crop on his land, and to deliver to the contractor a quantum of produce (calculated based on projected yield and agreed acreage). The prices are also pre-agreed. On its part the corporate generally supplies the farmers with seeds, other inputs and technical advice where necessary. While the basic structure of contract farming is same, the terms and nature of the contract may differ according to variations in the nature of crops, agencies, farmers, and technologies available, etc. The forward sale agreement system already in practice could be used by branches to enhance their participation under contract farming.

Crop list – Techno economic aspects

Page|12 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Crop list - techno economic aspects

Plant Season (months) Crop duration(months) Type of loan density Repayment Planting seed rate/ Gestation Economic yield (t / Spacing period Short Medium Long material Rooted period life ha Crop Development Planting Harvesting (years) (0-6) (6-12) (>12) cuttings / loan loan ha harvests per year per harvests 1.0 Cereals 1.1 Paddy } Irrigated M P seed 30 kg 8 P } Rainfed Y P seed 150 kg 5 P 1.2 Maize Y &M P seed 60x30 cm 20 kg 5 P 1.3 Sorghum Y &M P seed 60x30 cm 8-10 kg 3 P 1.4 Finger millet M P seed 30x15 cm 3 kg 3 P 1.5 Kurakkan 2.0 Pulses 2.1 Blackgram M P seed 40 x10 cm 30 kg 0.8 P 2.2 Chickpea 2.3 Cowpea Y &M P seed 30x15 cm 35-40 kg 1.5 P 2.4 Greengram 2.5 Lentils- 2.6 Pigeonpea 2.7 Red dhal 2.8 Soyabeans Y &M P seed 40x5 cm 50 kg 3 P 3.0 Oilseeds 3.1 Gingelly 3.2 Groundnut Y & M P seed 45x15 cm 1.5 - 3 P 3.3 Mustard 3.4 Sesame 3.5 Sunflower Y & M P seed 60x25 cm 13-16 kg 1-2.5 P 4.0 Commercial crops 4.1 Big onion Y & M P seed 100-156 plants/ m6-8.5² kg 15-25 P 4.2 Chilli Y & M P seed 45x30 cm (RF), 60x4574,000 cm plants/ha (I) (RF), 37000 plants/ha1-3.0 (I) P 4.3 Potato Y & M P 15-25 P 4.4 Red onion 4.5 Sugar cane 4.6 Tobbaco Page 1

Page|13 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Crop list – Techno economic aspects Page 2

Crop list - techno economic aspects

Season (months) Crop duration(months) Plant Type of loan Repayment Planting Gestation Economic yield (t / Short Medium Long Spacing seeddensity rate / Crop Development period Planting Harvesting material period life ha (0-6) (6-12) (>12) ha loan loan (years) harvests harvests yearper

5.0 Horticulture crops 5.1 Vegetables x Upcountry 5.1.1 Beans x Bush bean Y & M x seeds 50x10 cm 75 kg 6 - 10 x x Pole bean Y & M x seeds 60x45 cm 50 kg 9 - 12 x 5.1.2 Beetroot Y & M x seeds 30x10 cm 10-11 mt/yr x 5.1.3 Butter bean 5.1.4 cabbage Y & M x seeds 50x40 cm 200-250 g 11.2 x 5.1.5 Carrot Y & M x seeds 25x3 cm 4 kg 15-40 x 5.1.6 Green bean 5.1.7 Knolkhol 5.1.8 Leeks Y & M x seeds 15x10 cm 3000-4000 g 30-40 x 5.1.9 Longbean 5.1.10 Radish Y & M x seeds 25x30 cm 5 kg 20-50 x 5.1.11 Tomato x seeds 80x50 cm 300-400 g 5.1.12 winged bean Y & M x 10 x x Lowcountry 5.1.13 Ashplantain 5.1.14 Ashpumpkin 5.1.15 Bitter gourd Y & M x seeds 1.5 x 1.0 m 15 x 5.1.16 Brinjal Y & M x seeds 90x60 cm 250 g 20-25 x 5.1.17 Capsicum Y & M x 6-15 x 5.1.18 Ladies finger (okra)Y & M x seeds 90x60 cm 4.5 kg 10-15 x 5.1.19 Luffa 5.1.20 Pumpkin Y & M x seeds 3x3 m(local var.),1 kg2.5x2.5 m (Ruhunu) 15-25 t x 5.1.21 Snake gourd 5.1.22 leafy vegetables

Page|14 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Crop list – Techno economic aspects Page 3

Crop list - techno economic aspects

Season (months) Crop duration(months) Plant Type of loan Repayment Planting Gestation Economic yield (t / Short Medium Long Spacing seeddensity rate / Crop Development period Planting Harvesting material period life ha (0-6) (6-12) (>12) ha loan loan (years) harvests harvests yearper

5.2 Fruit crops 5.2.1 Amberalla 5.2.2 Avocado 5.2.3 Banana 5.2.4 Beli 5.2.5 Carambola 5.2.6 Citron cuttings/ 5.2.7 Dragon fruit  2x2 m 10 tonne seedlings 5.2.8 Durian  5.2.9 Grape fruit 20- 5.2.10 Grapes  25Mt 5.2.11 Guava 5.2.12 Jack fruit  5.2.13 Lime  5.2.14 Lomonime  5.2.15 Mandarin 5.2.16 Mango Y & M  budded/grafted10x10 materialcm 5.2.17 Mangosteen  5.2.18 Melons 5.2.19 Papaya  2.5x2.5 m 5.2.20 Pineapple 10000 plants 5.2.21 Passion fruit seedlings/cuttings/grafts/seed 5.2.22 Pomogranate 5.2.23 Rambutan  10x10m 100 plants 100-150 kg 5.2.24 Strawberry 5.3 Roots, tuber and rhizome 5.3.1 Cassava 5.3.2 Dioscorea Y M tubers 1x1m (greater yam), 1x0.5 m (lesser yam) 5.3.3 Innala 5.3.4 Kiri Ala  corms 1x1m 4000 mother corms/acre 16-18 5.3.5 Manioc 5.3.6 Sweet potato Y&M  vine cuttings90x20cm 55,000-60,000 cuttings 18-22

Page|15 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Crop list – Techno economic aspects Page 4

Plant Season (months) Crop duration(months) Type of loan Repayment Planting density Gestation Economic yield (t / Spacing period Short Medium Long material seed rate / period life ha Crop Development Planting Harvesting (years) (0-6) (6-12) (>12) ha loan loan harvests per per harvests year

6.0 Plantation crops end of 6.1 Coconut rainy season 6.2 Rubber 6.3 Tea 7.0 Spices 7.1 Betel 7.2 Cardamom seeds, bark twice rooted 1.2 x 0.6 m 13890 2 to 2 ½ 70 - 80 470 kg of 7.3 Cinnamon colour into in a cuttings 1.2 x 0.9 m 9260 years years quills/ha. brown year and air 1.2 x 1.2 m 6950 layering Seeds( 15 to 20 rainy months 7.4 Cloves 6.0 m x 7.25 m season old seedlings ) seed( 4 months) 7.5 Cocoa or 3 m x 3 m 1100 4th year vegetativ e 7.6 Ginger 1 10 months 2-3 seeds or 7.7 Lemongrass mont by 60 cm x 60 cm 3 months hs suckers Nutmeg and rainy 7.8 seeds 6 m x 6 m Mace season rooted Maha and twice 7.9 Pepper pepper 2.5 x 2.5 m 1700 Yala rains a year cuttings 7.10 Turmeric

weather is not too shoot 7.11 vanilla 8 feet x 5 feet rainy or cuttings too dry.

Page|16 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

PADDY CULTIVATION The key aspects that should be borne in mind in paddy cultivation are briefly discussed below. Selection of quality seeds: Selecting good quality seeds to harvest a healthy crop is very important. That's why cultivators go for pure seeds for their chosen rice variety, which are full and identical in size, free of weed seeds, and seed-borne diseases, insects and other matter. By using quality seeds;

§ It will minimize seeding attempts

§ Produce a good quality crop

§ Reduction in replanting

§ Uniformity in plant size

§ Resistance to pests and other diseases which would affect Paddy cultivation Important Rice Varieties incude traditional varieties like .Samba, Sri Lankan Red Rice, Keeri Samba, Supiri Samba, Supiri Nadu, Nadu Rice, Badhabath etc. and hybrid varieties viz. BG-300, BG 94-1, Bg-403 and BG-407 etc. Preparation of Land: Land preparation refers to the procedure of arranging the cultivation area, in the best possible condition for Rice cultivation, ensuring the land is level and hydrated matching to the needs and requirements of the rice seeds planted. Preparation is done via machineries or by water buffaloes. Crop Establishment: Crop Establishment refers to managing a series of steps that includes, seeding, seed germination, seedling emergence and its development up until its stage of maturity, with other factors such as soil, climatic, biotic, machinery and management procedures. Crop Establishment can be done in two methods; Transplanting: This method is much favoured across Asian countries, which also requires more labour and back-breaking effort. It is the process where selected seeds are planted on a seed bed, where the seeds are allowed to grow until they are mature enough to go to the field. After that, pre-germinated seedlings are manually transferred from the seed bed to the wet field. Direct Seeding:

Page|17 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

It is the process where dry seeds or pre-germinated seeds and seedlings are spread throughout the cultivation area by hand or planted by machinery. Irrigation and Management: Cultivated paddy has a higher sensitivity towards water shortages. They are in need of a steady supply of water, and it tends to immediately react by developing symptoms of water stress when the supply is disturbed and drop below the required. Therefore to ensure golden crop the cultivators should always maintain a sound water management systems ensuring sufficient amounts of water reaches every rice plant from its birth to the final stage of its life. Nutrient Management: Like every living being, plants also need varying nutritional factors at various stages of life. By maintaining the situation of a flooded rice field; farmers and cultivators have the ability to preserve soil organic matter as well as receive free nitrogen from natural sources. If the Nutrient Management halts by maintaining the above level, you will produce a crop of about 3 tons per hectare, without artificially applied nitrogen fertilizer. If a higher yield is the target, more nutrients should be provided. Crop Health Management: Crop Health management is essential. As the crop flourishes, it charm pests and diseases of various kinds to thrive in the crops' healthy grow. Before using pesticides and other artificial methods, it is best to prevent any negative conditions from continuing, which might attracts rodents, harmful insects, viruses, diseases, and weeds. Another method that could be adopted is to create an anti-eco-system for the pests and diseases, which would naturally decrease the negative impacts from unwelcoming guests and situations to the minimal. Harvesting: Harvesting refers to the best period to collect mature rice crop from the rice field. Rice crops usually mature within and around the period of 115-120 days after crop establishment. It can be done both manually and mechanically. Though manual harvesting is common across Asia, it is highly a labour intensive process which requires 40 to 80 man-hours per hectare. Post-Harvesting: Post-Harvest procedures are undergone depending on their immediate usage after harvesting. Preliminary stages that quickly follow harvesting stage are drying, storing, milling, and final processing. Out of the abovementioned

Page|18 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

stages, drying is the most important factor as the storage capability is determined according to retained moisture levels. Delays In drying, partly drying or ineffective drying will reduce the quality and will lead to a greater loss of harvested crop. System of Rice Intensification (SRI) Package of Practices: Selection of Land: Medium Upland, Medium Lowland & Lowland areas are very much suitable for SRI cultivation. In case of Medium Upland & Medium Lowland, the presence of irrigation facility would be helpful for the cultivation. Land preparation: 4-5 ploughing is required for preparing the land & in the last ploughing, we need to ensure it is upto a depth of 6 inches Selection of Seed: For Medium Lowland & Lowland, any improved variety of 150 days duration and for Medium Upland, any improved variety of 120 days duration can be selected Seed Requirements: 1 Kg seed is required for 33 decimal plot or 3 Kg for 1 acre of land Seed Treatment: Take a bucket of clean water; put the entire seed in the bucket full of water for 12 hours. Then take it out and dry it in shade and add Bavistin Powder (Carbendazim) @ 3 gm/kg of seed & keep the seed in a wet gunny bag for germination Nursery Preparation: For 1 acre of ‘Transplanting’, we need to prepare 6 small beds (size 20 ft X4 ft). Prepare drain for drainage of excess water during heavy rain on four sides of the bed. Apply 25 kg of FYM in each of the bed. Then spread the treated and partly germinated seeds in the nursery bed very thinly. We have to develop the nursery bed in a corner of our main field for easy transplantation. Main Field Preparation: During the last ploughing, we need to apply 35 Kg DAP & 20 Kg MOP on 1 acre of main field and mixing it with the soil properly. In the main field also, we need to prepare drains (4 sides of the main field as well as in the middle of the plot at a distance of every 20 ft). Transplantation: Take seedlings of 8-14 days old for transplantation (depending upon occurrence of a good rain). Pull the seedlings from the nursery bed very carefully (do not disturb the roots) by using a Spade or Kadai or Plate

Page|19 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

As the nursery plot is in the corner of the main field therefore, we need not carry the seedlings very far. The spacing we need to follow is 10 inch X 10 inch and transplant single seedling maintaining the proper Spacing (take a rope of 40-50 ft length & mark it after every 10 inch by a nail/wood/plastic etc.). After completing one row, the rope can be shifted for transplantation of another row. Inter-culture & Top dressing: 1. First top dressing is usually done 15-20 days after transplanting (Weeding is done & application of Urea @ 12 Kg/acre is recommended) 2. Second top dressing is usually done 30-35 days after transplanting (Weeding is done & application of 10 Kg MOP and 18 Kg Urea is recommended for 1 acre of land) 3. Third top dressing is usually done 45-50 days after transplanting (Weeding is is done & application of 10 Kg MOP and 12 Kg Urea is recommended for 1 acre of land) Detail of Investment for one acre of SRI cultivation: (approx)

S.No. Input Requirement Quantity Amount in LKR 1 Seed 3Kg 45 2 Bavistin Powder 10 Gm 10 3 Fertilizers a • DAP 35 Kg 420 b • MOP 40 Kg 280 c • Urea 42 Kg 252 Total Cost/acre For one Acre Appx.LKR 1,000

Input cost indicated need to be verified Important points to be taken care of during the practice: 1. There is no need of holding water of 2-2.5 inch on the main field but maintaining a water of 0.5 inch is sufficient 2. There must be provision of alternate drying and soaking of the plot, which will help positively in the production 3. For crop protection –visiting the plot regularly should be ensured 4. Put some sticks inside the plot to help birds to come and sit, which will help us in protecting the crop

Expected Yield: 6-8 Tons/Ha can be achieved by following the PoP

Page|20 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Vegetable Cultivation • Upcountry vegetable farming system – Upcountry vegetable farming system is the major vegetable production farming system in Sri Lanka. The vegetables that are resistant to cool climate are cultivated in areas like Nuwara Eliya due to their cool climate. Most of the planting material and seeds are imported. Continuous cultivation is done on high sloppy lands in small plots, with soil conservation methods. This farming system can supply the entire upcountry vegetable requirements. • Agro-well related vegetable farming system: It is essential to store water for dry season in Dry zone and Intermediate zone. One of the major problems in using agro well water is the accumulation of chemicals in ground water, due to application of agro chemicals. • Protected culture: In this system high value and quality crops are cultivated in polytunnels. This system is used to reduce the damage as much as possible due to external environment, provide optimum condition to get maximum yield with high quality crops. Also modern cultivation methods are used in this system. Selection of suitable crop: • Climatic requirements: The main factors are rainfall pattern, temperature, wind and relative humidity. It has to be ensured that the climatic conditions are suitable for the crop chosen. E.g., due to low temperature, some crops are restricted to Nuwara Eliya district. • Soil properties: Soil texture, structure and toxic substances affect to plant growth. Nutrients’ absorption of the plants grown depends on alkalinity/ soil acidity. For instance, for paddy cultivation, soils with high water holding capacity is needed and if the soil is of high salinity, suitable variety should be selected. For crops like potato, loose soil is suitable, while deep soil is suitable for perennial crops. • Growing season: Some crops are sensitive to amount and period of sun light. The intensity of sun light is high in Yala season than in Maha season. Therefore some crops give higher yield in Yala season. But some rice varieties are not light sensitive. Also the period of time that receives sunlight in Maha season is shorter than the Yala season. But higher yield can be obtained by cultivating in proper season for light sensitive varieties. • Labor availability and cost: Labor cost is one of the major costs in farming activities. Deployment of modern farming equipments will

Page|21 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

economise to a certain extent on this cost. It is important to reckon labor requirement while selecting the crops. For instance, continuous shoot removal is needed for some tomato varieties. • Inputs availability: Inputs availability like quality seeds, fertilizer and water should be reckoned. High expenditure is needed when importing some seeds. Some times higher expenditure associated with transporting raw material like fertilizer. Select drought resistant crops and varieties when selecting crops for water scared areas. • Market demand: Vegetables are most perishable and as such need to be sold within the shortest time. The final objective is achieved by selling after harvesting in crop cultivation. The profit or loss depends on demand in the market. And market demand is also different. Hence proximity to the demanding market needs to be considered first. And there is a huge difference between customer demand and export demand. Therefore select and cultivate crops based on the target market. Also it is important to select crops based on storage facilities, processing facilities and transport facilities. Because, refrigerator facilities are needed to store harvest for long period of time some crops. Also transport facilities should be selected according to the distance to market. Otherwise necessary actions should be taken to store by post harvest methods. Therefore cultivation and variety should be selected after considering all the necessary factors.

Chapter – T 2

Plantation and Horticulture Development loans

Page|22 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

The term Plantation crops refers to those crops which are cultivated on an extensive scale in a large contiguous area, owned and managed by an Individual or a company. The crops include tea, coffee, rubber, cocoa, coconut, arecanut, oil palm, cashew, cinchona etc. These plantation crops are high value commercial crops of greater economic importance and play a vital role in economy.

• They contribute to national economy by way of export earnings.

• Plantation industry provides direct as well as indirect employment lo millions of people.

• Plantation industry supports many by-product industries and also many rural industries.

• These crops help to conserve the soil and ecosystem. Plantation crops are often classified as beverages (tea, coffee, cocoa), nuts (coconut, arecanut and cashew) spices (cinnamon, cardamom, pepper, nutmeg and clove) and other crops like rubber. Plantation crops in most of the cases are also unique in requiring invariably further processing before consumption. Horticulture as a terminology is all encompassing to include a wide variety of crops, (i) growing of fruits (Pomology) (ii) cultivation of vegetables including potato and tuber crops (Olericulture) (iii) commercial flower production (Floriculture) (iv) Medicinal and aromatic crops (v) Mushroom production. In promoting crop diversification horticulture crops are important and have several distinct advantages:

• Produce higher biomass than field crops per unit area resulting in efficient utilization of natural resources • Are highly remunerative for replacing subsistence farming and thus alleviate poverty level in rainfed, dryland, hilly, arid and coastal agro ecosystems • Have potential for development of wastelands through planned strategies • Need comparatively less water than food crops • Provide higher employment opportunity • Are important for nutritive security • Are environmental friendly • Are high value crops with high potential of value addition • Have high potential for foreign exchange earnings and

Page|23 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

• Make higher contribution to GDP 1.0 Plantation crops A subsistence form of agriculture prevailed in Sri Lanka before the 16th century. But with the arrival of the Portuguese in the early part of this century, plantation agriculture began to develop. Tea and rubber were introduced to the country in 1870s and cultivation of these crops together with coconut expanded rapidly in the subsequent years. Large extent of forest lands were cleared and brought under these crops resulting in distinct plantation crops sector. The plantation crops sector started in the 16th century continues to be an important contributor to the economy of the country and uses a large percentage of the agricultural land. Tea, rubber, coconut and the minor export crops such as cinnamon, cardamom, cocoa etc are considered as plantation crops. Plantation crops like Tea, Rubber and Coconut are cultivated in varying extents of land and contribute nearly 3% of the GDP as at FY 20091 employs around 750,000 people. The total annual foreign exchange earned by this sector is in the region of Rs. 160 billion i.e., nearly 20% of the total export earnings and 84% of the total agricultural exports. 1.1 Plantation crop status – 2011:

Particulars Units Tea Rubber Coconut Production Kg mn 328.6 (a) 157.9 2808 Total extent Ha ‘000 222 127 395 Extent bearing Ha ‘000 185 - - Area under tapping - - 102 - Cost of production Rs / kg 350.00 (b) 120.50 - Cost of production Rs / nut - - 10.00 Average price Colombo auction Rs / kg 360.68 508.8 - Export (f.o.b) Rs / kg 510.41 535.4 - Production price Rs /nut - - 27.56 Export (f.o.b) Rs / nut - - 39.15 (d) Replanting Ha 1202 2847 1518 New planting Ha 28 1534 1501 Value added as % of GDP 1.3 (c) 1.2 1.4 Source : CBSL Annual Report 2011 (a) Including green tea (b) includes green leaf suppliers profit margin (c) in growing and processing only (d) Three major coconut kernel products

1Source: Agriculture in Sri Lanka

Page|24 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

only Due to various Land Reform Acts enacted by successive governments since independence especially after 1956, the large estates have been fragmented. There are small holders of tea, rubber and coconut who cultivate extents of lands as small as 0.5 ha 2.0 Horticulture crops: Fruit and Vegetable Sector has much potential to contribute to increase the level of national income, export revenue, generate new employment opportunities, increase farm income and enhance the nutrition and health of the people. The potential for cultivating fruit and vegetable crops for the domestic and export markets is high. Sri Lanka’s per capita consumption of fruits and vegetables remains far below the required average daily intake – as against the recommended daily intake of 200g of vegetables, average per head consumption in Sri Lanka is only about 94g per day With economic growth and increasing income levels of the people there will be increasing demand for fruits and vegetables in the local market and the supply has to be increased as indicated above to match the increasing demand. The opening up of the North and the East, which are mainly agriculture producing areas increases the potential to grow fruits and vegetables in Sri Lanka. The strategic location (altitude and longitude – nearness to equator) makes the country ideal for growing varied kinds of fruit crops. The Sri Lankan fruits and vegetables are in high demand abroad. However, a major challenge faced by exporters is not lack of demand, but finding exportable quality fruits and vegetables in sufficient quantities for export. The sector is dominated by small scale informal farmers and a major source of income and employment in the regions. The government has recognized the need to get the formal private Sector involved in this sector, especially in the areas of processing, developing seed and plant material and provision of modern technology, machinery, equipment and other related services. According to statistics available with the Department of Agriculture, out of the total agricultural land under cultivation in Sri Lanka about 20% is used to grow fruits and vegetables. Table 1: Area, production and productivity of fruit crops - 2009

Crops Extent (ha) Production (mt) Productivity (t/ha) Avocado 2286 12076 5.28 Banana 48044 383784 7.99 Cashew 21836 6305 0.29

Page|25 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Guava 1287 4556 3.54 Lime 10302 4490 0.44 Mandarin 552 1748 3.17 Mango 26120 67941 2.60 Orange 5354 4145 0.77 Papaw 6120 24258 3.96 Passion 466 409 0.88 fruit Pineapple 4782 51611 10.79 Pomegranat 843 5499 6.52 e Rambutan 4687 29490 6.29 Watermelon 159 8349 52.51 Total 132838 604661 Source: Dept. of Agricultural Statistics, 2010 Table 2: Area, production and productivity of vegetable crops - 2009

Crop Extent (ha) Production (mt) Average yield (t/ha) Ø Beans 7910 40153 5.08 Ø Beetroot 2693 26664 9.90 Ø Cabbage 4016 62774 15.63 A. Ø Carrot 2896 35830 12.37 Up Ø Knolkhol 1435 12289 8.56 country Ø Leeks 1680 26793 15.95 Ø Radish 3342 33889 10.14 Ø Tomato 7137 73917 10.36 Total (A) 31109 312309 Ø Ash plantain 8449 77633 9.19 Ø Ash pumpkin 976 9582 9.82 Ø Bitter gourd 4170 39692 9.52 Ø Brinjal 10762 106381 9.88 B. Ø Capsicum 3287 14406 4.38 Low Ø Cucumber 3092 31757 10.27 country Ø Okra 7230 56549 7.82 Ø Red pumpkin 9197 107319 11.67 Ø Snake gourd 3167 33421 10.55 Total (B) 50330 476740 Grand total (A+B) 81439 789049

Source: Dept. of Agricultural Statistics, 2010 3.0 Other Critical Points to be considered for Loan Appraisal

Page|26 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

3.1 In areas where the subject plantation / horticulture crop is not a traditional one, it is necessary to study the various requirements of the crop and confirm that all the requisites like climate, soil, water for irrigation etc. are congenial for the selected crop. In this regard, the branch may get the opinion of the commodity Board concerned/Department of Horticulture on the suitability of the area and ascertain the extent of technical guidance that can be made available to the farmers by them. Without such technical guidance a crop in a non-traditional area can be difficult to be taken up by farmers 3.2 Factors like average rainfall, temperature (minimum and maximum), humidity, etc., should be examined. Areas subject to frequent hail storms, thunder storms etc., and occurrence of frost or frequent fluctuations in minimum and maximum temperatures particularly during the flowering season should be avoided. 3.3 Suitability of soil for the proposed crop should also be considered. For example, while fruits can be grown in a wide range of soils, porous, well drained and at least 15 cm. deep soils are to be preferred. The soil should be of uniform texture with a water table at least below 3 m. Soils with hard pan, Kankar etc. and those which are either very heavy or very light should be avoided. The pH requirement which varies among the crops should also be carefully examined by soil and water analysis. 3.4 Based on the topography, the requisite soil and water conservation measures including drainage facilities have to be determined and provided for in the project cost. 3.5 Suitable fencing is a must to protect the orchard and plantations from menace of cattle and wild animals and poaching by the intruders. However, huge investment on this, disproportionate to the project outlay should be avoided. While barbed wire fencing may be preferred in case of estate plantation, it is advisable to advocate for live fencing in respect of smaller holdings 3.6 Source and adequacy of irrigation to provide lift irrigation as well as supplementary irrigation, particularly during the hot periods should be carefully examined. The suitability of the water should also be ensured by proper water analysis if necessary. 3.7 Wherever feasible water saving devices like sprinklers, drip irrigation, etc. should be considered subject to financial viability.

Page|27 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

3.8 The project should take into account the requirement of crop specific infrastructural / investments such as erection of trellis for grapes, propping for bananas, staking for tomato etc. In case of plantations like coffee, tea and rubber arrangement/availability of processing facilities must be ensured. In respect of large plantations, necessary provision for construction /remodeling/ renovation/ extension of processing houses with required machinery and equipment must be made in the project 3.9 Availability of quality planting materials of high-yielding, pest/disease resistant clones should be ensured. In respect of large plantations, establishment of own nurseries can be included as a part of the project. Certain crops require special practices for preparing the planting materials like grafting in mango, layering in guava, budding in roses etc. Adoption of tissue culture planting material can also be considered wherever required. 3.10 There are various forms of layout to be considered along with spacing while taking up the plantations or orchards. The forms of layout include square system, triangular/hexagonal system, rectangular system and hedge system (single/double/triple). While the square system is suitable in flat areas which facilitate cross-wise cultivation, the triangular/hexagonal system is found better for undulating areas where cultivation is not to be done for fear of soil erosion. The latter system also accommodates 15 per cent more number of plants. Rectangular planting with lesser spacing between the plants in the row and wider spacing between the rows is also followed on the hilly slopes. Hedge system which is essentially a high density method of planting is popular in crops like pine apple, tea etc. 3.11 Whether the farmers are receptive to modern practices as recommended by the Department of Agriculture/Horticulture/ Universities/Research institutions in the area need careful consideration especially when a crop is grown for the first time in the area. 3.12 Wherever desirable, inter-cropping must be done as it gives reasonable returns to the grower even during the gestation period of main crop, besides keeping the plenty of inter-space available between the plants weed-free during the initial years under cultivation. The inter-crops should be raised only where the lands are flat or the slopes are gentle. Where the slopes are very steep, inter cropping should be avoided. The selection of inter crop should be such that it should not interfere with the cultivation of main crop. Once the main crop comes to yielding

Page|28 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

stage, the raising of inter-crops should be stopped lest their cultivation adversely affects the yield of the main crop. 3.13 Cultivation of inter-crops (If the chosen intercrop has a long life, as for example, pine apple in coconut garden or pepper vine on the shade trees grown in coffee plantation, the cost of rising the inter-crop can be taken as capital cost. If the inter-crop is seasonal, provision for raising the inter-crop in the first year can be made.) 3.14 Where planting of trees is taken up on field bunds (e.g. coconut), the loan requirement may be decided based on the input cost worked out on individual plant/tree basis. 3.15 Shade raising of shade trees (temporary/permanent) to protect the plants from the scorching effect of sun as required in some plantations like coffee, tea etc., should be looked into. However it may be noted that this is losing popularity because better results are being obtained without shade or with very light shade where other practices, such as trimming, weeding, and fertilization are followed 3.16 Infrastructure: Infrastructural facilities like construction of labour/supervisor quarters, processing houses, laying of farm roads etc. may also be included to the extent they are necessary, taking into account that such investments do not affect project viability. 3.17 The planting material of the required quantity and quality is procured by beneficiary from reliable sources such as nurseries of Universities or State Government or any other nurseries approved by the concerned department of the State Government etc 3.18 Make a realistic estimate of yield and price in respect of horticultural and plantation crops in view of the fact that the price is actually a forecast of the price in the distant future which may be even 6 to 8 years in the case of crops with long gestation period and that most of the horticultural crops like mango, grapes etc. are perishable which is one of the critical factors for unpredictable price fluctuations both in the domestic as well as export market. In this regard, the yield fluctuations due to alternate bearing tendency of some crops like mango and vagaries of nature affecting other crops should also be taken into account in estimation of income. The price and yield as reported by the Commodity Boards and Research Directorates, and also the local opinion are the guiding factors in determining the yield, price and income calculations.

Page|29 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Page|30 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

5.19 It is important to follow standard practices regarding: • The pits dug will be of standard size and with recommended spacing and number of plants. • The pits will be filled with top soil, cattle manure and phosphate before planting is done. • Proper and adequate soil conservation and drainage arrangements shall be ensured. • Adequate and suitable fencing arrangements will have to be provided as per local practices for protecting the estate/orchard from cattle and trespassers. • Only high yielding recommended varieties shall be planted in place of traditional varieties and use of tissue culture plants advocated for uniform yield shall be encouraged. • The young saplings will be stacked immediately after planting and shade cover provided wherever necessary and properly irrigated. • Pot watering of plants shall be done during dry months of first 2 or 3 seasons in respect of plants to be raised under rain fed condition. Water saving devices like sprinklers, drip may be suggested for installation for ensuring better water use efficiency. • The recommended fertilizer application and plant protection schedules shall be followed. • Mixed cropping is advisable wherever possible as in the case of coffee, areca nut and coconut. • Wherever feasible, the beneficiaries shall raise proper intercrops during first 4 or 5 years so as to improve returns. • Installation of processing equipment, civil and engineering works shall be carried out according to approved plans, designs and estimates. 6. Package of practices of Selected Crops Appendices A-1 to A-6, B-1 and B2 and C detail the recommended input requirements and package of practices, right from choice of planting material, planting method, application of manures and fertilizers, plant protection measures and cultural practices for select plantation and horticulture crops listed below. These recommended practices and input requirements may vary suited to the climatic and soil conditions obtaining in the country. It would therefore be desirable for the branches to access the package of practices developed by the Department of Agriculture, Government of Sri Lanka (to check with Dev. Division availability and

Page|31 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

source). This will be an important input in crop costing of plantation and horticulture crops.

Package of Practices for Select Crops Appendix Ref No Crop A-1 Vegetable Crop - Tomato A-2 Fruit Crop - Mango A-3 Plantation crop - Coconut A-4 Plantation crop – Tea Plantation A-5 Plantation crop - Rubber A-6 Spice Crop - Cinnamon B-1 Protected cultivation of rose B-2 Production Technology for Tropical Orchids C Mushroom Cultivation

Crop costing and income assessment sheet (Annexure-1) can be used as a general template to convert the information available in to cost quantification and income calculations. 7. Application and Appraisal forms The specific application meant for plantation and horticulture loans has to be obtained from the applicant. The agriculture officer can help the applicant in filling-up some of the aspects in the application form that relates to project cost estimation, yield assessment and income expenditure calculations. For appraising the loans for plantation and horticulture development, the AO can use the specific format meant for the purpose. The crop costing and income assessment sheet (Annexure - 1) provides a structured analysis of the assumptions, cost particulars, cost of cultivation/maintenance and the assessment of yield/income on a year to year basis over the project period. The check list for appraisal of plantation and horticulture development loans given in Annexure - 2 would be useful to ensure that all the critical issues are taken care of in the process. 8. Financing Floriculture Units From the AgStat data (2007) it is found that there is substantial agriculture holdings under flower crops in Kandy, Gampaha, Kurunegala where the holdings are more than 1000. There are number of other districts where the holdings under flower crops range from 200 to 600. The flower crops grown are roses, carnations, orchids and anthuriums. In Nuwara Eliya district in addition to these crops gerbera, alstromeria and medona lily are also grown. Floriculture as an activity is both a high-tech farming and export oriented, having promotional importance from the policy point of view. Production technology for cultivation of rose and tropical orchids, as stated earlier, is

Page|32 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

detailed in Appendix- B1 & B2 and this could serve as a model for the branches to promote finance to floriculture activities feasible in their area. 9. Mushroom Cultivation The details on mushroom cultivation covering paddy straw mushroom, oyster mushroom and button mushroom given in Appendix-C is a useful reference for the branches to promote lending to this promising activity.

Chapter – T 3

Page|33 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

COCONUT CULTIVATUION

Planting coconut seed nut directly on the field is not recommended and seedlings reached up to 7-10 months, laid in a nursery are only recommended for the field establishment. In this process it enables to grow seedlings vigorously and uniformly. Method of Nursery Management: 01. Selection of the Nursery Site. : Proposed land should be flat and low gradient. Soil should be well drain sandy or sandy loam soil. Adequate amount of sunlight, scattered shade and water source in close proximity are fundamental factors in selecting the land. Uniform level of shade can be provided by establishing a Gliricidia fence. 02. Nursery Beds. Width of the nursery should be decided based on the feasibility of management practices including routine activities. Length of the nursery can be determined by the length and shape of the lands. It is feasible to have 5 seedling layers per one bed. The seed bed should be averagely 15–25 cm above the ground level while distance among two seed nuts layers should be positioned at 25 cm distance. Seed nuts should be laid in trench in which the depth is 10-15 cm. The distance between two adjacent seed nuts should be 15 cm. Seed nuts place horizontally and simply cover with soil so that upper surface of the seed nut is merely visible. Seed nuts that are laid in any trench should be placed in to one direction and opposite direction to the adjoining rows. 03. Moisture conservation in Soil bed: Normally Coconut fronds or 3-5 cm dimension coir layers can be utilized as mulch for the seed bed. If in case coir dusts are used as a mulching material should rotate the material. In areas where above components are not freely available, can shift to saw dust, paddy husks and weed thrash as a mulching material. 04. Irrigation: Regular application of water is compulsory under dry weather conditions. Watering is necessary if there is no rain continuously for about 6 days, watering should be done at least once in four days. (0.25 mm of rain is received it be considered as a rainy day) 05. Weed control: Weeding helps in moisture conservation of the seed bed and reduce the impact on seedbeds. Therefore it is essential to practice weeding once a month or twice corresponding with the prevailing weather conditions.

Page|34 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

06. (a) Termites attack. : Considerable impact is done by termites in seed nurseries. Further, termites highly damage to seed nuts by attacking the kernel parts. Therefore great attention is required in this regard. Recommended pesticides / Dosage: (i)Soak in cloropyrifos - Seed nuts should be soaked 3 minutes in 20 % cloropyrifos, 3-5 ml mix in one liter of water. (ii) Spread to the soil - 15-25ml of 20% cloropyrifos mix in 5 litter of water is adequate for one square meter of land, to be spread. (b) Plesispa attack: Plesispa attacks on young coconut leaves by sucking cell sap. Therefore chlorophylls deteriorate and retard the growing of seedling and possibly under severe attack, seedling may be fatal. 07. Removal of non-geminated seedling: It allows to laid seed nuts for about 5 month time until it is germinated in the seed bed. Seed nuts which are failed to germinate will be removed after 5 months time. It is believed that 80% of seed nuts germinate after 5 months from lying. 08. Removal of low quality seedling: Laid seed nuts start to germinate 2½ months from laying and allow them to grow until 5 months time. Once rejected seed nuts are removed from the field, germinated seedlings are removed after 7 months times from the laying when disease affected and low quality seedlings are removed from the nursery. Seedlings which are completed 7 months are recommended for field establishment. 09. Production of poly bags seedlings Nursery preparations of seed nuts: Seed nuts should be laid vertically in a pre nursery until they produce a sprout and transferred to poly bag. 9.1Mixture of poly bag seedling: The mixture should compose of surface soil, cow dung and coir dust. Areas where coir dust is not freely available saw dust can be used instead of it. When using saw dust aware on fungal diseases which seedling are prone to be. Ratio of the mixture - Top soil 3 Part + Cow dung 2 Part + Coir Dust 1 Part. 9.2 Material used for poly bag: Black polythene with 12’’ 6’’ is used to prepare this polybags. 10. Selecting of mother palms & seed nuts: In order to full fill the annual seedling requirement existing model gardens are not adequate. Therefore high quality seed nuts are selected from identified seed gardens. Approved types of hybrid seedling by nurseries of the board 1. Tallx tall

Page|35 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

2. Dwarf x tall 3. Morock tall 4. Plus palms Selecting mother palms give an opportunity to produce high quality seedlings with optimum genetic potential. Selecting of mother palms is done by professionals based on scientific criteria accepted by Scientist. This procedure is as follows. 1. First identity high yielding lands 2. Out of them find out high yield blocks 3. By applying relevant agronomic practices for that block select high yielding plants. Morphological features of a good palm

• Stout, sturdy & straight (erect) stem and closely set leaf scars. • Short leaves in the crown should be in a spherical orientation should compose with 25-30 fully opened fronds with bunches in different ages. • Petiole of seed bunches should not be lengthy and should strong enough to hold bunch of seed nuts by fronds and medium sized sufficient number of nuts should be in a bunch. Lands which contain above mentioned palms should poses below mentioned criteria. i) Land extent more than 5 acres ii) Production of 3500 nuts per acre per year and 55 mature palms per acre should be remaining in the land. iii) Bearing palms with the age of 15-45 palms. Selecting mother palms done methodically after a studying of all factors above mention. Selected 100 palms randomly covering the selected land/block and harvest the seed nut from palms. Count the average number of seed nut per palms. And select palms which shows the yield more than the average

• Exclude palms which shows unusual morphological features • Collect 03 seed nuts randomly from those palms and record the weight of a seed nuts (husk is removed) and should be more than 2100g. • Palms which are selected in that should be marked properly as plus palms. • Selecting of the nursery.

Page|36 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

• After selecting high quality palms. Pick seed nut separately from selected palms (Never allow to mix the selected seed nut with seed nut which harvest from un selected palms.) • Next pest attacked seed nuts should be removed and cover to protect from sunlight until send them to the nursery. • Corresponding with the prevailing weather conditions. • Main objective of the Coconut Cultivation Board is to provide necessary guidance and support to • Coconut growers spread around the country. The Coconut Cultivation Board is the main arm for development and assistance in development of production and productivity of land under coconut. This includes materials & inputs, financial assistance and extension service and all forms of regulations and directions. Further, certified seedlings are also produced to meet growers’ demand by the CCB. • With those objectives, the Coconut Cultivation Board was established on 30th March 1972 under the provisions given in Coconut Development Act No. 46 of 1971. • Currently, Coconut Cultivation Board possess network of 17 Regional Offices throughout the island. Apart from that, there are 36 Seedling Nurseries, around 50 Fertilizer Stores and 12 Model Gardens are functioning as supporting wings. Nurseries are capable to produce 1,694,400 poly bag seedlings and 2,429,000 bear root seedlings, per year to carry out above mentioned development assistance in an advanced manner • There are two training centers at Lunuwila and Medamulana. They are in the form of an extension centre equipped with qualified staff to conduct training courses. Coconut Cultivation Board. 9/428, Denzil Kobbekaduwa Mawatha, Battaramulla, Sri Lanka. General Tele : +94 (11) 2861331/32 Fax : +94 (11) 5549507/5635623 E-mail : [email protected]

• Coconut is a long – term crop and if properly cared it expected to be productive for over 60 years. Therefore, taking appropriate decision at the time of establishing a new plantation is very crucial. Adhering to an optimally suited planting density with distances fitting to mono or multiple cropping, selection of planting material adapted to the soil and climate, appropriate planting and care after planting are essential factors requiring the attention of the grower at the time of establishment. Most coconut growers, especially small holders are

Page|37 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

often not thoughtful about these crucial factors that determine the establishment of a uniform and a highly productive plantation.

• Planting seedlings: When filling the planting holes arrange two layers of husk Or coir dust at the bottom of the planting hole. Fill the hole with topsoil mixed with 1 kg dolomite, organic manure (5 kg wood ash or 10kg dry cow dung or 5 kg goat dung) and 1 kg young palm mixture. ( Composition is given below ) Wetland Intermediate Zones

Wet and intermediate zone Dry Zone Fertilizer Amount (g) Fertilizer Amount (g) Urea 250 Urea 250 Eppawela Rock 750 Eppawela Rock 500 Phosphate Phosphate Muriate of 250 Muriate of potash 250 potash

Young Palm Mixture: The planting hole should be filled with the above mixtures up to 20 cm below the ground level. But in case of lands with poorly drained soils, the planting hole should be filled up to the ground level with the above mixture. If the soil is frequently under water logged conditions during the rainy season planting holes should be raised a little above the ground level. When seedlings are transplanted ensure that seed nut of the seeding is not buried deeper in the above soil mixture. Buried collar region of the seeding leads to rotting during heavy rainy days.

• When poly-bagged seedlings are used for field planting, first cut and remove the bottom of the poly bag with a knife. Then place the bottomless poly-bagged seeding in the center of the above prepared hole after removing the soil to accommodate the poly bag in the soil mixture. Finally lift and remove the poly bag carefully without disturbing the soil in the poly bag and roots of the seeding. In areas where black beetle damage is high poly bag may be lift half way and tied it up to the base of seeding to cover the collar region of seeding (picture 9) and made a few holes on the poly bag to facilitate the aeration. This poly bag should be removed after 3-4 months from planting.

• However in poorly drained soils the tying of poly bag around the base may increase the of collar rot during rainy season. In such situation

Page|38 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

remove the poly bag completely from the collar region to facilitate the direct exposure to sunlight.

• It is advisable to carryout preventive treatment against possible termite attack. This is done by immersing the nut of the seeding for a few minutes with one of the following insecticide solution. (In the case of poly bagged seeding drench around with 1 liter of below solutions for one seeding after field planting)

• Time of Planting: Seeding should be planted with the onset of rains but towards the end of rainy season in excessively water logging areas. Planting with the rains enables the seeding for root development before the dry season. Planting should be planned in Yala season for the wet zone and Maha season for the dry zone. It is advisable to dig the holes and fill them during the inter-monsoonal periods. Rows of the coconut should be in east-west direction when square or rectangular planting is adapted. Irrigating the seedling during dry season and soil moisture conservation practices will help proper growth of seeding.

• Infilling: At the end of the 1st Year after planting, all weak seeding should be removed and vacancies should be filled in order to get a uniform plantation. It is recommended that infilling should be complete before the end of 5 years from the date of planting. 1. Basin irrigation (50-70%) 2. Picher irrigation (60-70%) 3. Hose irrigation (75-85%) 4. Drip irrigation >95% 5. Girdle irrigation (75-80%) 6. Sprinkler irrigation (60-70%) Basin irrigation A basin of shallow depth (about 10 cm) is prepared around the base of the palm, and the basins of adjacent palms are interconnected with furrows. Water is allowed to flow freely from the furrows to the basin. This method is not suitable for undulating lands. Even in flat lands, considerable land preparation is required initially to allow free flow of water. The water requirement for this method is high as considerable amount of water is lost due to soil absorption, leaching, and evaporation. This method is particularly not suitable for sandy soils due to heavy losses of

Page|39 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

water by percolation. Furthermore, it is difficult to apply a fixed volume of water to a palm by this method. Picher irrigation This method is useful to protect seedlings in the dry and dry intermediate zones where mortality rate is high. Following are the steps in the pitcher irrigation • Take two unglazed clay pots having capacity of 15-20 liters and make a hole at the bottom of each pot and insert a 2feets long rope. • Paint one side of the pot so that water will not seep through. • Bury the clay pot up to the neck at 0.7 m distance to the plant with painted surface away from the plant placing the rope in the direction of the plant. • Fill the pot with water, keep the mouth of the pot closed and top up regularly. Generally, during the dry weather, it may necessary to fill it in twice a week. Although the water is used efficiently in this method, the rate of water flow to the plant is very slow. Therefore, the method is not very suitable for adult palms. Hose irrigation: An underground PVC pipes network to supply water to outlets is more suitable for coconut plantation. One inch diameter and 100 ft long rubber hoses are used to irrigate 16 palms within the one outlet. This would facilitate other practices in the estate such as weeding, picking and transport of nuts. Also it facilitates to irrigate intercrops and maintenance is very easy and profitable. The pipe system consist main line sub main line and risers. At the end of each riser, 1”ball valves are installed to deliver water to palms. Drip irrigation: Drip irrigation system is feasible in coconut lands. Drip irrigation involves the wetting of a smaller soil volume in the root zone to provide the water requirement of plant. Advantages of this system are as follows. • It requires relatively less water as the system can be designed for efficient use of water. • The water usage can be regulated. • Fertilizer could be added to the irrigation water, thereby saving cost of fertilizer application. • Intercrops also could be irrigated with simple modification to the system.

Page|40 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

• The system can be operated with minimum labor. The high capital investment and maintenance problems are the disadvantages of this system. Girdle irrigation Pipe network and other accessories are similar to the drip irrigation. But perorated poly ethylene tube ring is used around the base of the palm in order to drippers. Less maintenance problems compare with the drip irrigation. Installation cost is similar to drip irrigation. Spray jet irrigation Pipe system and other accessories are similar to the drip irrigation. Small sprayers are used to irrigate the root zone of coconut in order to drippers. Advantages of this method are as follows • Less clogging problems • Keeping a good microclimate around the coconut palm • Less maintenance problems compare with the drip irrigation. • Installation cost is similar to drip irrigation. Sprinkler irrigation Sprinkler irrigation requires a high capital investment and abundant supply of water. As the water is sprinkled all over the surface, individual trees cannot be irrigated and wastage of water is high. However this system is suitable for commercial nurseries where seedlings are closely spaced and places where annuals and pasture are grown as intercrops. Irrigation Rate depends on soil parameters (water holding capacity/texture/depth /infiltration-lateral and vertical) and the effective root system of the plant. Irrigation frequency depends on the evapo-transpiration of the plant/soil system/canopy/root system/atmospheric evaporative demand/relative humidity/temperature/wind/etc Suitability of an irrigation system depends on 1 Plantation type (large/small, age, mono/intercrop….) 2 Water resources (surface, deep aquifer, quantity, quality…) 3 Soil landscape (topography, soil texture and depth….) 4 Economics and resources (capital, maintenance, labor, efficiency….) EFFECT OF WATER DEFICIENCY FOR GROWTH AND PRODUCTION

Page|41 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Decrease in the production of female flowers, reduce nut setting, increase button nut shedding, increase immature nut fall, reduce nut size, reduce nut production ,reduce copra out-turn, dropping /wilting of leaves, and death of coconut seedlings/palms are the result of water deficit during prolong rain free periods. Coconut yields of 4500-8000 nuts/ac/yr or more have been achieved in several well managed coconut states even under rain fed conditions. In most states are at least few (10%) palms yielding more than 80 nuts/palm/yr even during the drought. Studies show that about 2/3 of the potential coconut production is generally lost due to either poor nut setting or immature nut fall as a result of water deficit conditions. A coconut palm yielding 80-120 nuts/palm/yr in good rainy years may reduce its yield to 40 nuts/palm/yr or less after a drought period. But with appropriate supplementary irrigation, the coconut yield could be maintained at a stable high yield of 100-140 nuts/palm/yr or more, continuously, irrespective of the drought. Research conducted at the coconut research institute and elsewhere has shown that the supplementary irrigation of coconut increases nut yield by 30-60% and copra yield by 54% or more. Hence supplementary irrigation could increase the coconut yield. Installation of an irrigation system is expensive and requires some scientific knowledge. It is essential to have a continuous supply of irrigation water even during the drought (adequate underground, aquifer, and river). Further, the irrigation should be implemented as a complete package including relevant fertilizer/agronomic/management practices. Fertilizer Application Coconut palm being a perennial with a life span of 60 years or more requires a regular supply of nutrients plant nutrients to sustain its growth and yield in its production period it is revealed that 45% of the variation in yield influence by nutrients. In coconut growing soils, considerable amount of nitrogen (N) phosphorus (P), Potassium (K) and magnesium (Mg) are depleted from the soil, as a result of continuous removal of Nut and other parts of the palm. In Sri Lankan soils the average palm yielding 50 nut7500nut/ hectare/year) nuts/palm/year is of the order of 765g of N (Urea equivalent of 1663g) 140g of P2O5 (Eppawala Rock phosphate equivalent of 475g) 883g of K2O (muriate of potash equitant of 1475g) and 219g Mg (Dolomite equivalent of 1100g. In that contest the relative magnitude of nutrients removed by the palms is in the priority order K>N>Mg>P. The above estimate annual depletion of nutrients is a very valuable guide for determining fertilizer requirement of the palm. 1

Page|42 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Fertilizer for high breed (CRI65,CRISL98) & tapping coconut 2 Method of fertilizer application for adult palms 3 Fertilizer Mixtures for adult coconut palms 4 Method of fertilizer application for young palms 5 Method of fertilizer application at the time of planting 6 Sufficiency Ranges of Nutrients 7 The nutrient requirement in coconut 8 Fertilizer application Coconut is a perennial crop which uses only 25% of the soil. It’s root system is spread horizontally 2m radius from the base of the palm and vertically the greatest concentration of roots is in the top meter of the soil.Therefore, there is great potential for growing other crops which is called intercrops under coconut plantations. It is obvious that, as a mono-crop coconut is a poor use of land. Growing other crops under coconut (Intercropping or Multi Cropping) and raising livestock not only intensifies land use but also bring in additional income. There are several agronomic, ecological and socio-economic considerations associated with intercropping under coconut. The coconut palms require a continuous supply of water. Therefore, it is recommended to practice intercrops areas where there is no moisture stress. Under the irrigation facilities intercrops can be practices in all zones. If there is no irrigation facility during the dry period, it is best that intercropping is limited to wet and wet intermediate zones. Factors to be considered when selecting a intercrop. 1. Agro climatic zone, wet zone, intermediate zone or dry zone 2. Age of the coconut plantation generally intercrops can be grown during the first five years of plantation and then from 25 years. During the period of 5-25 years, sunlight is inadequate for most crops. 3. Marketability of the area 4. Planting material availability Labour use efficiency and labour availability General guidelines for intercropping under:

Page|43 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

1. There should be adequate sunlight available for intercrops. 2. Ensure that there will be no competition between coconut and other crops for moisture. 3. Ensure that both crops (Coconut and intercrop) should be receive adequate fertilizer. 4. Soil should not have been degraded different crops require different soil types. Always correct crop should be chosen. In most cases failure of intercropping is due to the wrong choice of the intercrop. Agronomic and socio-economic advantages of intercropping 1. Increase the land use efficiency 2. Improve soil fertility by building up organic matter. 3. Reduce soil erosion and temperature 4. Provide additional income 5. Reduce the risk and uncertainty in agriculture 6. Increase employment opportunities. 7. Provide micro environment for early bearing of coconut. What can be grown in coconut plantations. A vast range of intercrops can be grown under coconut by considering following factors. 1. Soil type 2. Rainfall 3. Soil depth 4. Sunlight availability Depending on the soil depth : Deep rooted crops – Cocoa, Coffee, Cinnamon, Nutmeg, Citrus Shallow rooted crops – Cardamon, Pepper Pasture, Grasses, Betel Depending on the age of the coconut plantation

Annual Semi Perennial Perennial 0-5 Ginger, Turmeric, Cereals Pineapple years and Pulses (Yams & Passion fruit Tubers) (Sweet Potato, Banana Colocasia, Innala) Chilies, Papaya Vegetables 25-45 Yams & Tubers Cocoa, Coffee, Pepper, years Ginger Clove Nutmeg, Cardamom, Turmeric Pasture, Fodder 45-60 Yams & Tubers (Cassava, Pineapple, Cinnamon, Citrus, Pasture, years colocasia) (Innala, Sweet Banana, Cashew, Betel. potato) Cereals and Pulses, Passion fruit, Chilles,Vegetables Papaya Intercrop Models:

Page|44 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

1. Nutmeg / Coconut Intercrop Model 2. Rabutan / Coconut Intercrop Model 3. Arricanut / Coconut Intercrop Model 4. Papaya / Coconut Intercrop Model 5. Passion fruit / Coconut Intercrop Model 6. Banana / Coconut Intercrop Model (Double Raw System) 7. Cocoa / Coconut Cocoa / Coconut Intercrop Model (Double Raw System) 8. Pineapple / Coconut Intercrop Model (Double Raw System) 9. Pineapple / Coconut Intercrop Model (Triple Raw System) How to plant intercrops 1. Orient intercrop rows in the east-west direction 2. Select the correct spacing (leave at least 2m from coconut) 3. Correct and recommended planting holes 4. Plant with the onset of South-West monsoon 5. Apply fertilizer for intercrop Animal Husbandry in Coconut lands There is a great potential for rearing animals in coconut lands to maximize the land use efficiency by providing organic manure and to get an additional income. Especially in coconut triangle this potential is very high and micro environment under coconut plantations is highly ideal for animal growth and performance. Potential for rearing animals under coconut plantations: 1. Coconut palm is utilized only 25% of the land area and rest is available for animal rearing. 2. The mean annual temperature in Coconut plantations is 2-3 lesser than outside temperature. This temperature is ideal for animal growth. 3. Grass and fodder can be easily grown in coconut lands in the wet and intermediate zonesBenefits of animal husbandry in coconut lands: 1. Maximum land utilization 2. Organic manure for coconut palm 3. Additional income 4. Facilitate the integrated farming systems which related to crop and animal integration.

Page|45 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Animal husbandry could be practiced easily in coconut lands located in wet and intermediate zones where grass can be grown easily. Types of animals could be reared under coconut plantations.

• Cattle • Goat • Sheep • Poultry • Turkey • Duck • Fish • Pig Cattle management under coconut is mainly important for milk production and manure production. A. Diseases The coconut palm is affected by a number of diseases, some of which are lethal while others gradually reduce the vigour of the palm causing severe loss in yield. A brief account of the important coconut diseases is given. 1. Bud rot 2. Leaf rot 3. Stem Bleeding 4. Root (wilt) disease 5. Tanjavur wilt 6. Mahali 7. Crown chocking 8. Leaf blight or Grey Leaf Spot 9. Tatipaka Disease B. Pests The major insect pests of the coconut palm are the rhinoceros beetle, the red palm weevil, the black headed caterpillar, the cockchafer beetle and the coreid bug. Adopt suitable remedial measures as and when required. The following table gives the major symptoms and control measures. 1. Mealy bugs and Scale insects 2. Termites 3. White grub

Page|46 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

4. Eriophid Mite of Coconut 5. Slug Caterpillar Kapruka Purawara Development Program In view of development of the coconut industry Kapruka Purawara is a joint intervention of entire sector. This program conducts in an identified Divisional Secretariats in an island wide. Correspondent to the number of Divisional Secretariats covers under the Kapruka Purawara programs for the duration of 2011 – 2016 are mention below.

Year Number of DS Divisions 2011 22

2012 28

2013 30

2014 30

2015 35 2016 35

Total 180

• Kapruka Purawara program has been designing in accordance with the “Mahinda Chinthana Idiri Dekma”. Therefore the objectives to be completed under the Kapruka Purawara program are as follows : • Enhancement of the productivity of coconut lands in identified Divisional Secretariats • Promotion of planting coconut in potential lands in the selected divisions. • Increase coconut yield by 80 nuts per palm per annum in those DS Divisions. • Identification and promotion of coconut based novel industries. • Identification of new possibilities of employment opportunities. • Dissemination of new research and development knowledge among the growers of the DS divisions. • In recognized divisions under the program will be develop as a regulation body. • Expansion of market opportunities for coconut and coconut based products.

Page|47 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

• Give opportunities for the volunteer in provisioning for the coconut and coconut based industries.

B A N A N A After achieving self-sufficiency in food grain production, supply of nutritious and balanced diet should be the highest priority. For good health fruit consumption per day per capita is recommended as120 grams. Banana is one of the most nutritious, energetic and delicious fruits of the world. It is equally suitable both for large scale cultivation as well as for home scale cultivation. The banana is considered to be one of the most primitive, cultivated tropical fruits. It is not only the staple food of millions of people, but also the most important commercial fruit of the tropical areas of the world now. The cultivated banana is botanically named as Musa paradisiaca belonging to the family Musaceae. It is believed to have originated in the hot tropical regions of south East Asia. It is extensively grown in many countries like Mexico, Egypt, Israel, South Africa, Indonesia, Philippines, Brazil, and Sri Lanka. Next to Brazil, India is the second largest banana producing country in the world. Banana is a rich source of energy in the form of sugars and starch, available almost throughout the year and is the cheapest fruit. Almost all the parts of a banana plant are useful and today, it is the leading tropical fruit in the world market with a highly organized and developed industry. Uses and Composition: Banana is the cheapest and most nourishing of all fruits. It has got a number of uses. Almost all the parts of banana are useful in some or other ways. Various industrial and medicinal uses of banana are summarized here. A. Industrial importance: 1. Banana is used in the processing industry to prepare products such as banana pulp, canned slices, jam, flakes, juice, banana figs, chips, fruit bar, powder, etc. 2. In some parts banana is cultivated exclusively for leaves to make dinner plates and wrapping material. 3. Banana sheaths and leaves are used for making crude ropes. 4. Starch is manufactured from the pseudo stem. 5. Used in the food industry, eg. for preparing baby food from Kunnan and Nendran varieties. 6. 6.Unripe banana fruits as well as the inner core of the pseudo stem are used for cooking as vegetable. 7. Used in the manufacture of beer and (pure and denatured) alcohol.

Page|48 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

8. Yeast of good quality can be made out of banana flour which can replace malt in breweries. 9. The juice from the pseudo stem can be used in dyeing industry. 10. Fiber production and paper making from fiber are commercial possibilities. 11. Banana is used as feed for cattle and pigs in some countries. 12. It is one of the largest single trade items in International fruit trade. B. Medicinal values:

• Banana flour made into gruel and diluted with milk is good for patients suffering from gastritis. • Banana ash is rich in alkaline salts and, therefore, checks acidity in stomach, heart bum and colic pains. • Ripe fruits taken with tamarind and salt are said to control dysentery. • Fruits of 'Poovan' are believed to be good even for diabetics. • Ulcers are cured by smearing a paste of aromatic and sweet -fruits of Devakadali variety of banana. • Ayurvedic medicines are prepared from ripe banana fruits. Composition of banana fruit

Sl. No Components Amount 1 Moisture 70% 2 Carbohydrate 27.0% 3 Crude fibre 0.5% 4 Protein 1.2% 5 Fat 0.3% 6 Ash 0.9% 7 Phosphorus 290.0 ppm 8 Calcium 80.0 ppm 9 Iron 6.0 ppm 10 B-Carotene 0.5 ppm 11 Riboflavin 0.5 ppm 12 Niacin 7.0 ppm 13 Ascorbic acid 120.0 ppm

Nutritive Values:

Energy 116.0 Protein 1.2g Fat 0.3g Carbohydrates 27.2g

Page|49 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Calcium 17.0g Phosphorus 36.0mg Iron 0.9mg Carotene 78.0ug Thiamine 50.0ug Riboflavin 80.0 Vat. C 7.0 (per 100g edible portion )

Page|50 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Medicinal Values / Uses: Ripe Fruit : Good source of energy; readily digestible fruit useful for feeding children suffering from diarrhea Useful for treatment z of gastro intestinal disorders, constipation, arthritis, anemia and allergies. Unripe fruit: Useful for urinary tract disorders, obesity, and disorders of menstruation Major Growing Areas: All island except very high cultivations Nature of cultivation: Large, medium,&small scale orchards and home gardens. Recommended Varieties 1. Embul 2. Kolikuttu 3. Anamalu 4. Seen kesel 5. Rathambala 6. Embon Value Added Products - Salads, chips, flour Economics of Cultivation: Cultivation of banana is a highly paying agricultural venture. Generally, a farmer can generate Rs 35 to 40 thousand from one hectare of banana plantation. However, the net profit is highly varying from region to region depending on the soil and climatic conditions, varietal suitability, protection of plantation from attack of insect pests and diseases, availability of production inputs, etc. The economics of banana cultivation can be worked out by using following format. Following are the various cost components to be considered while considering a project for financing banana cultivation: A. Fixed cost: 1. Cost of the land Rs 2. Cost of farm building, storage, structure, etc. Rs 3. Cost of fencing Rs 4. Cost of windbreaks Rs 5. Cost of clearing, leveling and bunding of the land Rs 6. Cost of lay-out Rs 7. Cost of digging and filling pits Rs 8. Cost of machines, instruments and other accessories Rs 9. Cost of roads and paths Rs 10. Cost of permanent irrigation system Rs

Page|51 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

11. Cost of raising plant material Rs B. Recurring cost:

1. Cost of manures and fertilizers Rs 2. Cost of insecticides, fungicides and weedicides Rs 3. Cost of farm power a. Diesel, petrol and electricity Rs b. Livestock and their feed Rs 4. Cost of transportation Rs 5. Cost of farm labour (paid and unpaid) a. Land preparation Rs b. Irrigation Rs c. Weeding Rs d. Application of fertilizers and manures Rs e. Application of plant protection chemicals Rs f. Different intercultural operation Rs g. Harvesting Rs h. Grading Rs i. Ripening Rs j. Storing and marketing Rs k. Any other labour involvement Rs 6. Interest on fixed cost@ % Rs 7. Rent or revenue on the land Rs 8. Depreciation a. Farm structure Rs b. Farm machinery Rs 9. Repairs and maintenance Rs Total recurring cost Rs C. Income: 1. Yield of the fruits Rs 2. Any other material such as leaves, stem etc. Rs Gross income Rs (Net profit = Gross income -Total recurring cost)

Page|52 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Mango Introduction: Mango, popularly known as the king of fruit, belongs to Anacardeaceae family of trees. Taste, flavor and fragrance of mango is very characteristic to the same. Mango was originated in India. Though it is not endemic to Sri Lanka, it is seen growing in many parts of the country. It is very rare to find a home garden without a mango tree in our country except in certain upcountry areas. Present extent under mango in Sri Lanka is about 27,500 Ac. Predominately, it is grown in Kurunegala, Anuradhapura, Hambanthota, Puttalam, Moneragala, Jaffna districts and in Mahaweli Systems H & C. As a fresh fruit, mango has a high demand in local markets. Likewise, a considerable amount of foreign exchange could be earned by exporting both fresh and processed mango products. At present Sri Lanka export about 80,000 Mt. Therefore, plans are under way to increase the extent under mango to about 17, 481 Ac by year 2020. Nutritional Aspects Nutrient level per 100g of mango flesh

Water 81.0 g Energy 74 k cal Protein 0.6 g Lipids 0.4 g Carbohydrates 16.9 g Calcium 14 mg Phosphorus 16 mg Iron 1.3 mg Carotene 2743 micro g Thiamin 80 micro g Riboflavin 90 micro g Niacin 0.9 mg Vitamin C 16 mg

Consumption of a medium size mango could provide the daily requirement of Vitamins A and C. The level of various nutrients may vary depending on the cultivar, ripeness of the fruit and area of cultivation. Mango is consumed as ripe and unripe fresh fruit as well as various processed products. Pickles and chutneys are made from unripe mango. Different types of drinks, jams, jellies are prepared using ripe fruit. Likewise,

Page|53 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

dried and dehydrated mango pieces and mango powder is also seen in the market. Medicinal properties: Both unripe and ripe mango has medicinal properties. A drink made out of unripe mango is used as a remedy to prevent various body ailments caused by a raise in ambient air temperature. Unripe mangoes are also used in treating stomach problems and to stimulate bile formation and in treatment of blood related diseases. Ripe mango has many medicinal properties. Consumption of ripe mango is useful to overcome night blindness and to protect health of skin. There is a common belief that consumption of ripe mango with cow’s milk helps gain weight. Mango seeds, leaves and bark are used in the treatment of diarrhea and disorders in reproductive system of women. Recommended Varieties: There are a wide range of mango cultivars presently grown in Sri Lanka. Out of these, a number of best cultivars have been identified for cultivation under various agro-ecological regions of the country. Use of such adaptable varieties is necessary to get a higher yield from a mango tree. Fruit of different varieties have its own characteristic flavor and taste. Cultivars recommended for various agro-climatic regions of the country

Karuthakolomban Willard Vellaicolomban, Dry Zone Ambalavi, Chembatan, Malwana(Underground) Karuthakolomban Vellaicolomban Intermediate Zone Willard Bettiamba Malwana(Underground) Vellaicolomban Gira amba Wet Zone Peterprasand Dampara

Preparation of budded plants:

Page|54 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Rootstocks must be raised first to produce budded mango plants. It is much better to use seeds extracted from ripe fruit of cultivars Kohu amba, Wal amba, Walu amba and Gira amba etc. At first, remove the husk of the seed. Make a small cut at the distal end of the seed and pull the husk away to get the seed inside without any damage to it. When the cut is made at the distal end of the seed with husk, even if it cuts the seed inside, it does not damage the embryo. Extracted seeds may have mango weevils inside. When such seeds are planted, whole seed may be destroyed. Therefore, dip the seeds in an insecticide solution such as 'Dimethoate' before planting for a few minutes. Use of fungicides such as 'Captan' at this time is helpful to protect the seeds from fungal infections at the nursery. Seeds treated with insecticide and fungicide solution must be planted in a sandy seed bed. For the seed bed, use a 15-20 cm thick layer of sand. Sand beds must be laid out in a place with slight shade. However, never under trees such as mango or avocado. Then it is easy to protect the seedlings from certain fungal diseases. In the sand bed plant seeds in a row spaced 15-20 cm apart. Curved side of the seed must be downward at planting. Spacing of 2-3 cm is allowed between two seeds in a row. After seeding, keep the sand bed moist at all times. Seeds germinate and seedlings emerge 10-14 days after planting. About three weeks after emergence, seedlings are suitable for transplanting in polyethylene pots or any other secondary nursery. If a media such as coir dust is used for germination of seeds, care must be taken to maintain the appropriate moisture level. At high moisture levels, seedling may be infected with fungal diseases. Plants hardened in the seed bed may be transferred to polyethylene pots filled with a suitable media. Else plants may be transplanted well prepared secondary nursery. Planting in polyethylene pots: Use pots made out of 200 gauge polyethylene to a dimension of 20 cm (8”) diameter and 30 cm (1 ft) height. Potting mixture is prepared by mixing equal parts of topsoil, sand and well composted cow dung or leaf litter together. Use of one part of coir dust to four parts of above mixture is helpful to improve the water holding capacity of the potting media. Fill the polyethylene containers with the above mixture. Fill media only to leave 2-3 cm from the top of the container. This is necessary to prevent overflow of water when pots are irrigated.

Page|55 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Planting in a secondary nursery: If seedlings are not directly transplanted in a pot, it must be transferred to a secondary nursery. To make a secondary nursery, prepare beds about 20 cm in height filled with a mixture of top soil and well composted cow dung. Have a drain between two beds to improve drainage. Double row system of planting must be adopted in the secondary nursery. In a single bed, two double rows are planted (four rows of seedlings). A spacing of 45 cm is allowed between two double rows 30 cm is recommended within the double row with triangular system of planting. Plants in secondary nursery of polyethylene pots become ready for grafting 7- 8 months after transplanting. The stem of the stock plant must attain pencil thickness before grafting. Selection of scion: Take scions only from mother trees having good fruit quality characteristics. For this purpose use trees giving fruit with quality specific to the cultivar and that bears well annually. Scion wood must be collected from branches bearing fruit. Avoid use of water shoots.

As for budding, a bud just below the apical bud of the scion wood is used. Grafting is done with a piece of shoot with apical bud. Methods of budding: Both patch budding and grafting can be adopted for mango. Patch budding is more suitable for the wet zone while grafting is suitable for the dry zone.

For grafting, shoots with mature leaves around apical bud is the most suitable. Before grafting, the shoots must be conditioned. One week before grafting, remove all the leaves in the selected scion wood. Then cut the defoliated scion stick to about 10-15 cm length. The basal end is axed to form a wedge. In the rootstock, cut back the plant at a place where stem thickness is equal to that of the scion wood. Then carefully split the stock stem stump down and insert the scion and tightly wrap the union with a polyethylene tape. To prevent drying off of the scion wood, cover it with a polyethylene bag. Or else keep the grafted plants inside a propagator. These kinds of measures will ensure a high success rate of grafting. For budding, use a piece of bark with a single bud collected from a fruit bearing shoot of a selected mother tree.

Page|56 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Remove a rectangular shaped piece of bark at 20-25 cm height of the stock plant. Then insert the scion with the bud into the stock plant and tightly wrap with a polyethylene tape. For success of budding it is essential that the size and shape of the scion wood and that of the cut made on the stock plant match closely. When stock plants taken from seedbed is transplanted into polyethylene pots directly and grafted, a plant ready for field planting can be produced in 7-8 months. However, when stock plants are transferred to a secondary nursery and grafted, it takes about 16 months to produce a plant ready for field planting. Thus the cost of production of such plants increases invariably.

Climatic requirements: Mango tree is well adapted to tropical and subtropical environmental conditions. It can be cultivated until up to 1300 m above mean sea level. However, commercial cultivations are limited to areas below 600 m above mean sea level. Optimum temperature for mango cultivation is 27-30C. Mango is successfully cultivated in areas where annual rainfall range from 500-2500 mm. For a successful crop, most important thing is the distribution of rainfall rather than the amount. A dry period of 3-4 months is an essential prerequisite for successful flowering of mango. Rains at flowering may affect yield due to pollen wash off. Soil: Mango can be cultivated in a wide range of soil conditions. A well drained soil with 2 M depth is the best. Soil pH must be 5.5-6.5. Soils with high clay content or with frequent water logging are not suitable for successful cultivation of mango. Field preparation: Mango is cultivated both as a home garden crop and a commercial scale crop. Before establishment of a commercial cultivation, clear the land and plow and harrow. At the same time, take steps to adopt appropriate soil conservation measures. Spacing

Within row (m) Between row (m)

For Willard 7 10 For Other Cultivars 10 10

Page|57 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

For the particular cultivar of interest, stake out land accordingly. In a land with a loose soil, a planting hole measuring 60 cm x 60 cm x 60 cm is sufficient. For heavy soils use of 90 cm x 90 cm x 90 cm planting holes recommended. Fill the planting hole with well composted organic materials and top soil two weeks before planting. Heap the soil to about 6 inches above the ground level over the planting hole. Planting materials: Budded planting materials are recommended for planting. Use of these planting materials ensure the preservation of fruit quality characteristics of the cultivar, early bearing and ease of crop husbandry in the mango cultivation.

It is advisable to use planting materials certified by the Department of Agriculture. Those planting materials are sold with a label indicating the cultivar name and a number of identification on it. Whenever seedlings are used as planting materials, it takes along time to bear. Also it is difficult to guarantee the fruit quality characteristics of the cultivar.

Time of planting: Planting can be commenced with the onset of Maha rains in the dry zone. In intermediate and wet zones, planting is possible with onset of Maha or Yala rains.

For a home garden, planting is possible at any time of the year except during periods of heavy rains. If a prolonged dry condition exists, plants must be irrigated as and when necessary. Use only very vigorous plants for field planting. Minimize the stress during field planting by hardening plants exposing to direct sunlight and with less water application. This hardening helps to improve the success rate of field establishment. At the time of planting remove the cover. Cut around the edge of the bottom of the pot and remove the intermingled roots by pruning tap root. • Place the plant in such a way that the base of the plant in the pot is aligned with the ground level. Then remove the polyethylene bag with two longitudinal cuts from bottom up.

Page|58 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

• After removing the polyethylene cover, fill the planting hole with soil and slightly tighten the soil. These steps help reduce root damage due to breaking and splitting of potting media block. • Allow the plant to grow directly up. Use a stick closer to the plant and tighten it into the stick carefully. - To minimize water loss under dry weather conditions, remove half of each mature leaf. • Use mulch around the plant using easily available mulching material such as dry grass or salvenia. Mulching helps to reduce soil temperature in the root zone. Weed control also become easy. It also reduces drying of soil and wind erosion of soil. • After planting watering is an essential requirement. Construct a basin around plants to control runoff of applied water. • Provide shade appropriately to protect plants from heavy sunlight.

Crop Management: Training of trees: Training gives a tree good appearance, management of the tree becomes easy, high yields with quality fruit is possible and pest and disease incidence minimized. Training of trees must be started right from the early stages of growth. Pay special attention to train trees from the time of planting.

Allow a plant to grow as a single stem up to about 1/2 M. Let the first branch form at 1/2 M height. Then at about 15-20 cm spacing allow growing 3-4 branches around the tree. Let these branches to grow in opposite directions to give a good appearance to the tree. This is also important to minimize break of branches at latter stages of growth. Natural shading of branches also minimized when branches are equally well distributed around the tree.

Shoots that do not receive sufficient sunlight do not produce enough food reserves for the tree. Thus, fruit set in such branches are not satisfactory. Such branches must be removed. Also diseased, dead and intermingling branches must be removed. In removing branches the cut must be very close to the main stem or limb when pruned. Prune trees under dry weather conditions. Apply a paint mixed with a fungicide to the cut surface. Weed Control: It is not essential to weed the whole land area in a mango cultivation. Most important thing is to keep the area around the base of the tree weed free. Thus keep only the area under canopy cover weed free by use of a mamoty. However until the end of first year after planting, it is important to have an area extending up to about 60 cm away from the tree without weeds. During this period use dry grass as a dead mulch. Use a slasher to

Page|59 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

move down the weeds among trees. In doing so the grass in this area can be maintained as live mulch. Then erosion due to wind and rain can be countered.

Irrigation: Especially in areas when prolonged dry periods exist, it is imperative to irrigate the plants in the first three years after planting. Frequency and amount of irrigation depend on rainfall and soil properties. For mango the most critical periods of moisture requirements from flowering to fruit maturity and leaf bud burst to leaf maturity. From leaf maturity up to flower bud burst irrigation must be withheld. Irrigation during this period adversely affect flowering. Fertilizer application: Wet Zone: Un-bearing trees: Annual dose of fertilizer per plant (g)

- Urea Rock Phosphate MOP At planting 115 230 105 A year later 115 230 105

Thereafter, until the bearing stage, use the above mixture with annual increments of 60g urea, 115g rock phosphate and 55g of muriate of potash. Bearing trees: Annual fertilizer dose per plant (g)

- Urea Rock Phosphate MOP At fruiting 215 325 380

Thereafter, until the bearing stage, use the above mixture with annual increments of 110g urea, 165g rock phosphate and 190g of muriate of potash. After several years the maximum recommended dose per tree is 870g urea, 1295g rock phosphate and 1515g of MOP. Dry and Intermediate Zones: Un-bearing trees: Annual dose per plant (g)

- Urea TSP MOP At planting 160 195 90 A year later 160 195 90

Page|60 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Thereafter, until the bearing stage, use the above mixture with annual increments of 80g urea, 100g rock phosphate and 45g of muriate of potash. Bearing trees: Annual dose per plant (g)

- Urea TSP MOP At fruiting 235 160 515

Thereafter, until the bearing stage, use the above mixture with annual increments of 120g urea, 80g TSP and 260g of muriate of potash. After several years the maximum recommended dose per tree is 945g urea, 630g rock phosphate and 2055g of MOP.

Table 1. Nutrient Requirements (g/tree) of Bearing Mango Trees. A. For Dry and Intermediate Zones Age of Tree=> 4 5 6 7 8 9 10 Nutrient N 108 162 216 270 324 378 432

P2O5 72 108 144 180 216 252 288

K2O 306 459 612 765 918 1071 1224

B. For Wet Zone

Age of Tree=> 4 5 6 7 8 9 10 Nutrient

N 100 150 200 250 300 350 400

P2O5 90 135 180 225 270 315 360

K2O 225 337 450 562 675 787 890

Other cultural practices

Wind breaks Before establishment of a large cultivation, plant trees like glericeedia or ipil- ipil along the border of the land. This is particularly important in areas where heavy winds prevail.

Page|61 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Termite damage During dry periods, termites may damage underground parts of the tree. To overcome this problem apply a band of engine oil on the base of the stem up to about 45 cm height.

Fire protection In the dry zone heavy winds blow July through August. Most cultivated lands are damaged by fire at this time of the year. To protect the mango plants by spreading fire, have a 5-10 M wide fire belt around the orchard plowed and harrowed to remove dry grass. Also during the dry months of the year keep an area of about 3 M around the base of trees weed free. This might protect trees even if a fire spread over the orchard.

Removal of stock shoots and flower buds After planting grafted trees, never allow to grow buds from any other area except from the grafted bud or shoot. If allowed, the growth of the grafted shoot will become weak and may die back later. All flower buds that emerge at early stages of growth must also be removed. This is particularly important for trees showing poor growth. In such trees, continually remove flower buds up to the end of third year. This precocious flowering is mostly seen in cultivar Willard. Thinning out of fruit A tree can sustain a certain number of fruit depending on its size. If more fruit are set than this, those fruit may drop naturally. In certain instances, however, even after natural fruit drop, a large number of fruit may remain on the tree and due to this only a few fruit will set in the following year. For a commercial cultivation, this is not a good thing to happen.

For varieties like Karuthakolomban and Vellaicolomban, leave only one fruit a panicle while cultivar Willard can have 4-5 fruit per panicle and remove all other excess fruit. This is important to minimize yield variation over the years. Also it is helpful to obtain a higher proportion of well grown high quality fruit every year.

Insect pest control Fruit fly (Bactocera dorsalis) Adult is brown in color. Dark yellow spot seen on the thorax. It is 8 mm long and wing span is about 15 mm.

Page|62 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Female fruit fly lay eggs inside the peel of fruit after piercing it. Developing larvae use the fruit flesh as food. As a result fruit flesh melts and become unsuitable for consumption. Fungi causing fruit rot may also enter the fruit from the pierced whole adults made to lay eggs. Infested fruit develop brownish rotting spots on fruit surface. Such fruit drop quickly.

Control: • Remove all dropped fruit and destroy. • Before dispatch fruit to the market, dip fruit in 40C water for 20 min. • Use methyl eugenol traps to trap and destroy fruit flies. Use traps fro flowering through harvesting stage.

Five traps are sufficient per acre. Remove all trapped insects fortnightly. Also replace the chemical occasionally. Spray a suitable pesticide from time of flowering. Fenthion is recommended at 30 ml in 10 ltrs of water. Stop spraying at two weeks before harvesting. Mango leaf hopper Amritordes brevistylis, Ideoscorpus clipealis and Ideoscorpus neveaspardis

This plant hopper is about 4 mm in size and is a very active insect. It lives all year round under the leaves and in stem crevices and the population explodes during the dry season. At this time if a person goes under a infested mango tree, a characteristic sound can be heard due to the activation of hoppers.

Page|63 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Adults lay eggs on flower buds and on developing young leaves. Instars suck plant sap and due to this flowers and leaves dry off. This affect the fruit set and fruit yield severely. Hoppers excrete a sticky sugar rich solution and when that falls on leaves and other parts of the tree, a black mold grows on such surfaces. Affected leaves and flower panicles turn black in color. Nor fruit set on such panicles too. When the mold grows on fruit, their marketability drops. Under heavy infestation total crop failure is a possibility. Management: Train trees properly and prune excessive foliage and branches. Then penetration of light inside of the canopy checks the growth of hopper population. At the time of flushing and flowering use one of the following chemical sprays. Dimethoate 30 ml in 10 ltrs water Imidacloprid 10 ml in 10 ltrs water Mango seed weevil (Sternocatus mangiferae) An insect of about 1 cm long and reddish brown to ash in color: It is a nocturnal insect and it can fly. Adults lay eggs on immature fruit under the peel. Larvae cross the fruit flesh and enter into the seed of the developing immature fruit and use the developing seed as the source of food. Weevil comes out of the husk after seeds left out of fruit after consumption and live inactively on stem crevices and other dark places of the tree. Path crossed by the larvae through the fruit flesh is not discernible at ripening stage. This however affects the germination of the seed and thus it is a pest of primary importance to nurserymen. Control: Remove and destroy all dropped fruit at various stages of growth. At flowering spray Dimethoate at 30 ml/10 ltr water in such a way that all leaves and developing fruit get wet. Leaf cutting weevil Adult insect is ash brown-black in color. It is about 5 mm long and 2 mm wide. Weevil cuts the leaf on tree leaving about 1/4 of it on the tree. The fallen leaf pieces can be seen under the tree. Adult insect eats the other remaining leaves on the tree. This creates wholes on leaf blade. Due to this damage, growth of plants may be affected.

Page|64 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Control: • Remove and destroy all fallen pieces of leaves. • Spray Dimethoate at 30 ml in 10l water at the time when damage is first observed.

Disease control Anthracnose Colotritricum gloesporiodes is the causative agent of this disease.

This disease is prevalent in every mango growing area of Sri Lanka. Leaves, flower panicles and all stages of developing fruit may be affected by this disease. During hot humid weather conditions, the severity of the disease is higher. Different varieties may have ability to resist this disease. Symptoms On developing leaves the emergence of small dark brown or black spots is the first stage of infection. With the passage of time, these spots will grow and unite each other to form irregular shaped brownish black spots. Newly emerged leaves are more susceptible to Antracnose. If severely infected, die back of shoots possible. This is frequently observed on mango nurseries. When flowers contract Antracnose, panicle will turn black in color and dry off. Due to this all flowers in the panicle may be lost. Small developing fruit turn black in color, dried off and fall. Mature fruit shows small dark brownish spots at the beginning. As the fruit mature these spots grow in size and turn into black irregular shaped patches. Infected fruit shows rotting at the surface. Such fruit are unmarketable. Fungal spores on infected fruit and flowers wash off during rains and get deposited on developing fruit which cause formation of small disease spots. After harvesting, as the fruit ripens its natural resistance to the disease fades away. Therefore, fungus present on unripe fruit as a latent infection begins to develop rapidly as the fruit ripens. However, after harvesting it is very rare to observe spread of disease to a fruit by another infected fruit. Management of Antracnose • Prune excess foliage to allow penetration of sun light inside of the canopy.

Page|65 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

• Use on of the fungicides listed below just before and after flowering. For effective spray penetration onto leaves and flowers, use a nozzle connected to a rubber tube fixed to a wooden pole.

Fungicide Mixture Benlate 6g /10 l water Daconil 20g/10 l water Maneb 20g/10 l water

Dip fruit at least within 24 hr. after harvesting in hot water at 50C for 5 minutes. For this purpose mix 100g Benomil per 100 l of water. However, care must be taken to control water temperature properly to avoid any damage to fruits.

Stem End Rot A disease of importance in harvested fruit. A number of fungi including Ladiodiplodia theobromea, Coletritricum gloeosporiodes and Fotogercis mangiferea cause the stem end rot disease in mango. Disease symptoms develop around the stem end of the fruit as it begins to ripen after harvesting.

Fungal spores are prevalent on dead leaves and twigs in orchards. As the spores spread on to flowers and fruit before harvesting, the fungi may form latent infection on fruit. Symptoms Symptoms become clear as the fruit ripens. At the stem end of the fruit, brownish patches begin to develop. Due to this both the peel and the inside flesh begins to rot. Infected fruit also gives a bad smell. Management In cultivations where this disease is severe, adopt a spray program from the time of flowering. Use Benlate at the rate of 6g in 10 l water. Sprays must be repeated in 14 day intervals. In addition, Never let leaves and twigs to fall and rot near the trees. Avoid harvesting fruit that is not sufficiently mature. Use hot Benlate dips as recommended for Antracnose control above. Store harvested fruit at a low temperature. Harvesting & Post-harvest Technology Harvesting Grafted plants commence bearing 3-4 years after planting. Fruit need to be

Page|66 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

harvested only after it mature sufficiently, but before ripening. In most cultivars, when fruit is mature enough, the color of peel change from dark green to light greenish yellow in color. However, to ascertain the level of maturity a number of fruit should be picked randomly, cut and inspected. If fruit show a yellow color around the seed, they are mature and ready for harvest. If the flesh color is white, it is not yet ready for harvest. Hands pick fruits if possible. Else, use a wooden pole with a hook or knife attached with a cloth bag or net below. This prevents bruising and fruit injury. Never let fruit fall on the ground. There is a simple device for harvesting as given above. As shown in the figure, it is fabricated with 1 mm galvanized iron and below the tooth-shaped ring is a pouch made out of fish net or cloth. Pedancle of the fruit is inserted in between the teeth and make sure the fruit is inside the pouch and pull the pole. Detached fruit will then fall into the pouch. To minimize sap exudation, harvest fruit between 9 AM - 3 PM. Avoid humid rainy weather conditions at harvesting. Yield

Age of tree Fruit Number per tree 5-8 450 9-10 800 11-25 1250

Handling harvested fruit Never leave harvested fruit under direct sun. Take those to the pack house safely. Thereafter, sort fruit to remove damaged, cut and bruised, immature and over-ripe fruit. Wash sorted fruit in a water bath with Benomyl or Thiobendazol. This is important to remove sap on the fruit and to give it a good appearance. Due to the action of fungicide, development of diseases like Antracnose is checked. However, for effective control of post harvest diseases, 1-3 min. dip in 52C water is more suitable. This can be done with or without fungicide. If a fungicide is not mixed with hot water, spray a solution of 1% fungicide on washed fruit. Packing Before packing fruit may be sorted again. At this time if there are any unmarketable fruit, those are discarded.

Page|67 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

For export purposes, selected fruit is packed according to size. For European markets, high demand is for fruit weighing 200-250g. However, sort and pack fruit according to the requirements of the buyer. Pack fruit in cardboard boxes as a single layer of fruit to about 4-5 Kg in weight per box. Each fruit should be wrapped to polyethylene or shredded paper and pack in the box. Storage At ambient air temperature, mangoes harvested at correct stage of maturity can be stored for about 8-12 days. Under cold conditions at 12C , storage life can be further extended up to 25 days without loosing fruit quality. Transport For local markets, damages caused at shipping is not duly taken care of. Therefore, losses are very high. Hence, it is important to pack fruit in appropriate containers and transport safely. For export, air freight is the most common method of transport. The reason for this is that fruit can not be stored for a long time. Economics & Marketing Labor requirements Labor requirement for the first year to establish 1 Acre of systematic mango cultivation.

Item Man days Land preparation/Soil conservation 14 Staking and holing 04 Application of manure and basal fertilizer 04 Planting 02 Shading 01 Fertilizer application/weed control 01 Irrigation 12 Orchard maintenance 04 Total 42

Chapter – T 4

Farm mechanization loans

1.0 Introduction

Page|68 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Mechanization of selected farm operations is a key factor in the successful implementation of an intensive farming system based on intensive use of yield increasing technology and multiple cropping. Timely operations and seasons are the critical factors to maximize output from farming activity. Due to the seasonal nature of agricultural operations, the farmers often face difficulty in the timely and successful performance of agricultural operations, especially during the peak labour-load periods; at the time of sowing, harvesting and threshing. To smoothen these peaks, labour saving devices can be introduced by mechanizing some selected agricultural operations. This would make it possible to introduce multiple cropping. Thus, switch-over to mechanical power will not only help perform the various operations in time but will also help the farmer adopt more profitable crop rotations. Management of farm power and machinery is often overlooked. Machines are rapidly replacing the human and animal power. This spectacular progress in farm mechanization has remarkably increased the farm output and the labour productivity. In changing over from manual to machine-power, a suitable set of machinery and implements for use under local conditions and relative cost- benefit relationship on various alternative types of equipment and power have to be worked out. Mechanization increases the farmer’s total farm investments and he therefore has to decide how much capital he should invest in machinery and which machines he should buy or when does it pay to hire a machine rather than buy one. The desirability of mechanization can be judged from the viewpoint of the individual farmers concerned or from that of the economy of the country in question while a government will be more concerned with the large-scale impact of mechanization on unemployment or balance of payments, the farmer will be concerned with how it affects his farm production and profits, etc. Often these two approaches are opposing ones - national interests may not always coincide with those of the individual farmers. Ultimately, a government can greatly influence the degree to which mechanization takes place through its policy measures.

Page|69 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

For the farmer, mechanization of a particular phase of his activities becomes interesting when: • Labour costs become significantly high; • Labour is in short supply, especially in periods of peak seasonal activity; • Working animals become too expensive or are not available when needed; • It will lead to an increase in cultivable area, either by an increase in the total area or by increased cropping intensity; • The climatic and soil conditions are such that only limited periods for cultivation are possible; • Losses in harvesting, processing and storage can be limited to reasonable levels • The quality of the work can be improved resulting in better output. These factors give some indication of how difficult it can be to decide if mechanization is worthwhile or not. A meaningful solution can only be found after the circumstances of each case have been considered. 2.0 Steps in farm mechanization The operations which are usually first considered for mechanization are those for' which the use of manpower has become too expensive or takes too much time and where the use of machinery seems to be advantageous. The various farm operations mechanized and the related issues are: ♦ Soil preparation is usually one of the first operations to be mechanized. Once this operation is mechanized it becomes more attractive to mechanize others, because with the increasing number of operational hours the cost/hour of the farm machinery becomes lesser.

♦ The next most suitable operation for mechanization is that of weed- control. For this cultivator or, where the crops are grown on ridges, ridger-bodies can be used.

♦ Harvesting, a labour-intensive activity, is usually the next operation to be mechanized. The machines used are generally rather specialized and this tends to make them expensive. In addition, they have a very limited period of use when the total farming operation is considered. This is especially so for combine harvesters (for rice, wheat. sorghum, soybeans, sunflower seeds, maize and cotton).

♦ Operation of these harvesters, which usually have a large capacity, is only economical if large areas are harvested, i.e. for contractors, cooperatives or large estates. Much cheaper and so much more

Page|70 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

remunerative are a number of 'mounted' harvesting machines such as groundnut lifters, forage harvesters, mowers and pick-up balers etc.

♦ One operation associated with harvesting which under certain conditions can be successfully mechanized is that of the threshing of the grain. The capacity of these machines does not have to be so large because this operation is not so fixed to one particular period. Moreover, with the use of the appropriate parts, the machine can often be made suitable for the threshing of other crops as well.

♦ Spraying against weeds and pests can also be mechanized, using motorized knapsack sprayers and tractor-mounted sprayer equipments. ♦ Farm tractors can also be used to provide transport. For distances up to 50-60 km a tractor with trailer is generally cheaper than a truck. Tractors can also be used to maintain field roads and for powering water pumps if so required.

♦ Based on the working width of the machines and the working speed of the tractors, and by applying a factor of 0·825 for turning and overlapping, the theoretical performance can be calculated. In practice, however, the output is much lower because one has to reckon with the efficiency of the operations. This efficiency of operation of the farm machinery is affected by: • climate; • soil; • field size; • sanitary stops; • clogging up of machinery; • interruptions because of rain; • fuelling and daily maintenance. • making adjustments to the implements; • cleaning of machinery; • operator; • distance to the work place; • over all management;

♦ Some general power requirements for soil preparation and crop maintenance are given in the table below : Table: Soil preparation and crop maintenance - power requirements

Page|71 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Width Speed Required Equipment Depth (cm) (cm) (km/h) tractor hp • 3-disc plough 90 20-25 6 60 - for each extra disc 30 20-25 6 15 • Mould-board plough (2 furrows) 60 20-25 6 45 - for each extra furrow 30 20-25 6 15 • Subsoiler per tine- 45 4 40 - per tine 60 4 55 - per tine 75 4 70 • Tandem disc harrow 150 10 8 60 - for every extra 30 cm 30 10 8 10 • Tine harrow 400 7 6 45 - for every extra 30 cm 30 7 6 5 • Rotavator 120 cm 120 10 5 50 - for each extra 30 cm 30 10 5 15 • Power harrow (2 bar) 300 15-17 4 50 - for every extra 30 cm 30 15-17 4 8 • Rigid tine cultivator 240 7-10 4 40 - for every extra 30 cm 30 7-10 4 5 • Planter (per unit) <5 6 12 • Planter with fertilizer attachment <5 6 15 • (perSeed unit) drill 240 <5 6 40 - for every 30 cm extra 30 <5 6 5 • Seed/fertilizer drill 240 <5 6 45 - for every 30 cm extra 30 <5 6 7 • Rotary mower (in 90 cm high 150 5 55 Sourcegrass) : Agril.compendium for rural development in the tropics and subtropics ♦ In developing countries the overall efficiency is usually 40-60%. For quick estimation the following data may be used. The low number of hours/ha refer to high efficiencies and the high numbers to low efficiencies

Page|72 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Hours /ha Soil preparation - rice fields Manual labour: dry fields 200-250 Manual labour : wet fields 150-200 With a pair of bullocks: ploughing and puddling (wet fields) 80-120 With a two-wheel tractor (5-10 hp): ploughing and puddling 20-30 (wet fields) With a four-wheel tractor (45-60 hp): disc harrowing and 4-8 puddling (wet fields) Soil preparation - dry fields (upland crops) Mechanized ploughing (60-70 hp tractor) Light soil 1.0-1.5 Medium-heavy soil 2.0-3.0 Heavy soil 3.5-4.5 Mechanized harrowing (45-60 hp tractor) 1-2 Miscellaneous operations Ridging 1-2 Sowing 1-2 Inter-row cultivation 1-2 Combine harvesting 1-2 Combine harvesting (rice) 2-4 Source : Agril.compendium for rural development in the tropics and subtropics The number of machines required depends not only on the production per hour but on their availability for work during the working season as well. This availability of machines is influenced by: • The quality of the machines • The availability of spare parts • The repair facilities • The quality of the operator • The length of the working season • The age of the machine.

The availability of new machines, working under favourable circumstances, can be as high as 90%. In general, however, the availability in developing countries is not higher than 60-70%. It may even be less than 50% if, for instance, the supply of spare parts or the repair facilities are not well organized.

Page|73 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

3.0 Cost calculations The machine costs can be divided into two categories: fixed costs and variable costs. The fixed costs include depreciation, interest, insurance, taxes and shelter. The variable, or operating, costs include operation and maintenance costs, fuel, lubricants, spare parts etc. 3.1 The fixed cost per hour can be calculated as follows: Purchase price- residual value • Cost per hour depreciation= Total running hours in the depreciation period

(Purchase price + residual value) X interest rate • Cost per hour for interest = 2 X 100 X total running hours in the interest period

Yearly outlay for these costs • Cost per hour for shelter, insurance, taxes = Total running hours per year 3.2 The variable costs are based on: • Repair and maintenance: in developing countries these costs will be 100-150 %of the purchase costs, depending on the particular circumstances

• Fuel, lubrication requirements, filters, etc.: for each delivered hp a tractor will consume 250 cc of diesel fuel per hour. The cost for filter replacement and lubrication usually amounts to 15 % of that for fuel.

• Wages and overheads: because it cannot be assumed that the drivers will be (can be) assigned to other work outside the cropping season, costs per hour are usually calculated by dividing the yearly wages and overheads by the total running hours for the year, even though these may be well less than those equivalent to a full year’s operation.

Page|74 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Table: Tractors and machinery, their reference prices, and estimated working life and repair costs

Tractor or machine Average working life Total repair costs as (working hours) % of new costs Tractor. 40-50 hp 7,000 130-150 Tractor. 60-70 hp 8,000 120-140 Tractor. 90-100 hp 10,000 100-120 3-disc plough 4,000 160 Mould-board plough (3 4,000 120 furrows) Tandem disc harrow. 180 cm 4,000 250 Rotavator, 1 20 cm 3,000 150 Tine harrow (400 cm) 4,000 80 Power harrow (2 bar. 300 cm) 3,000 100 Rigid-tine cultivator, 270 cm 5,000 80 Planter per unit 6,000 100 Planter with fertilizer 6,000 100 attachment (per unit) Seed/fertilizer drill, 240 cm 6,000 100

Source : Agril.compendium for rural development in the tropics and subtropics 4.0 Mechanisation in paddy cultivation The need of machinery for rice cultivation arises when seeking solutions for the problems like drudgery, high production cost, low quality, low cropping intensity and above all the labour scarcity. From time to time the need has been changing and today the major concern is lower the cost of production, increase the quality and solve the problem of scarcity of labour. In a survey conducted jointly by Farm Machinery Research Centre (FMRC) and the University of Peradeniya, it was found that 84 of the farmers gave top priority in the process of mechanization for cultivation of rice. The task of introducing machines to farmers had not been easy due to various reasons. Since the importance of machinery has now been realized, immediate but well planned, mechanization programmes must be launched in order to achieve sustainability in rice production. In this context, the labour intensive and time-consuming operations should be clearly identified and at the same time increasing the quality of products also should not be neglected.

Page|75 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

4.1 Status of mechanization in paddy A total of 899,000 ha of paddy fields, is island wide, need some form of power for operations such as land preparation, plant establishment, weeding, irrigation, crop protection, harvesting, threshing, paddy cleaning and storage. The following are the available units of machinery for paddy cultivation in Sri Lanka. Machinery No of units Two-wheel tractors (6 - 12 hp) 55,000 Four-wheel tractors 15,000 Ploughs 18,000 Mould Board (for two-wheeler) 75,000 Mould Board (for animal) 54,000 Rotary ploughs (for two-wheeler) 10,000 Nine tine tillers 4,500 Weeders 105,000 Sprayers Paddy reapers 2,500 Paddy threshers 30,390 Winnowing fans 20,000 Transplanters 825 (Source: FMRC 1999) The level of mechanization in paddy is highest in spraying operations (100%) followed by land preparation (87%). In winnowing the mechanization is @ 82%. The following table gives the details of the levels for various operations: Level of Operation Remark mechanization Chemical spraying 100% Land preparation 87% Final leveling is done by manual or animal power Winnowing 82% Winnowing fans coupled to two or four wheel tractors Paddy cultivation 75% Final cleaning is done when preparing seeds d for milling Threshing 45% Excluding tractor treading Reaping 08% Two-wheel tractor coupled vertical reaper Transplanting 02% Includes row seeding Weeding 02% This is possible only for the crops established in rows

Page|76 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

(Source: RNAM & FMRC) 4.1.1 Land preparation Land preparation is generally done using two wheel tractors, four wheel tractors, animal and manual power. It is said that nearly 50% of the available land is unable to be cultivated during the yala for scarcity of water resulted due to late land preparation. This delay is mainly due to the lack of farm power for land preparation. The average power requirement per hectare per day in different steps in land preparation is given below:

Primary tillage 15 hp/ha/day Secondary tillage 10hp/ha/day Puddling & leveling 10hp/ha/day In accordance with the present availability of tractors and animal population, the total power available in the country is 1113840 hp (440,000 hp from two wheel tractors, 525,000 hp from four wheel tractors and 148840 hp from animal and manual). This is equivalent to 1.23 hp/ha and percentage wise nearly 87% of the land is prepared by tractors and 13 is by animal and manual power. With the present available power, time taken for the three sub operations in land preparation could be calculated as: Duration for primary tillage (15/1.23) 12.20 days Duration for secondary tillage 8.13 days (10/1.23) Puddling and leveling (10/1.23) 8.13days Total 28.46 days

In addition to this, the work involved in clearing bunds and establishment of crop take at least 8 days to 30 days depending on the method followed for seeding and transplanting. If the duration taken for land preparation were to be shortened by two weeks the additional amount of power needed in the farm would be 556,920 hp. The statistical data shows that there is nearly 3000 two wheel and four-wheel tractors are annually added to the tractor pool in this country and it is worthwhile to consider the best suitable tractor type with respect to capacity, fuel consumption and price.

4.1.2 Crop establishment

Page|77 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

More than 90 of the paddy fields are broadcast sown and a competitive yield is obtained using the recommended quantity of fertilizer and herbicide. This is the fastest, simplest and cheapest method when compared to row seeding and transplanting. Although there is no significant yield difference in all three methods, experience indicate that row seeding and transplanting makes the subsequent operations conducive for mechanizing labour and time- consuming operations such as harvesting. Crop lodging is the major concern and emphasis is solicited for developing lodging resistant varieties. In addition to developing invulnerable paddy varieties for lodging, transplanting could be encouraged as it was proved to be less susceptible for lodging. 4.1.3 Plant protection Weed, pest and disease control is done using chemical sprayers. This technique is 100 % mechanized in the case of rice cultivation. The over-head knapsack type stainless steel hand sprayers are the most popular. Nearly 105,000 hand sprayers are being used covering an area of nearly 9 ha sprayers. The average capacity of such a sprayer is about 1 ha/day (FMRC). This data shows that there is a deficiency of sprayers in the field. In general for high demand application of chemicals at least one sprayer is needed to cover up an area of 2 ha. Therefore, to be on the safe side, nearly 300,000 more hand sprayers would be needed for timely application of agro-chemicals. 4.1.4 Weed control Weed control by mechanical means is practiced by less than 1% of total area (FMRC). The basic requirement for application of any type of mechanical weeder is to have a crop established in rows. In Sri Lanka two types of weeders are used. They are Japanese single and two row designs and IRRI conical type single and two row versions. The comparative study by FMRC indicates that the IRRI conical weeder has superior characteristics in the cases of capacity, manuarability, and also simplicity in manufacture. The capacity of this weeder (0.25 ha/day) also would have to be increased to gain popularity. Cost comparison of weeding techniques is given in the table below Method Cost/ha Advantages Disadvantages (Rs.) Chemical 4000 Easy and quick, Hazardous to the weeding method of environment, establishment of development of crop is immaterial resistance by weeds for weedicides, control depends on weather

Page|78 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Mechanical 1000 Environmental Crops should be weeding friendly, efficient established in rows use of fertilizers. Weather condition is immaterial 4.1.5 Harvesting and threshing Harvesting and threshing is the most labour intensive operation requiring immediate attention providing a suitable mechanical aid. Mechanization of this operation has been attempted to do in three steps; first the threshing and then reaping and finally the combine harvesting. Mechanical threshing could give a quality output with less cracked grains increasing the percentage of head grains in milling. In addition, because of the absence of impurities mixed with the grain there is an increased demand by the mill owners on such paddy The properly handled the mechanical threshing also could be made use of for reducing field losses that could incur during reaping and threshing. In the conventional methods, a substantial quantity of paddy go waste as shattering losses when transporting the reaped crop to the threshing ground. The straw thus transported is set on fire later collecting the paddy, loosing a valuable organic matter and nutrient. The portable mechanical thresher can leave the straw spread in partially chopped from in the field itself facilitating easy digestion. This method also averts the requirement of transporting the cut crop to the threshing ground, which incur extra cost. Performance comparison of threshers with the buffalo and tractor is given below:

Buffalo Tractor Threshers Impurities % 4.4 78 0.3 Cracked grains % 7.8 11.7 6.3 Loss in head rice % 6.2 7.0 2.0 Moisture % 15.2 14.7 14.1 (Source: RPRDC 1983) 4.1.6 Reaping This operation is done almost 100 % by using sickles. A reaping attachment to a popular two-wheel tractor was designed and introduced. This attachment had a good demand, but the limited applicability on lodged crops restricted the potential market. 4.1.7 Combine Harvesters The labour scarcity has now become so aggravated that the harvesting and threshing operations could not be done in time resulting in heavy yield losses.

Page|79 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

In order to overcome this situation, farmers in the large-scale paddy growing areas sought after combine harvesters to take over the task. Unfortunately the exorbitant prices of new combine harvesters directed the farmers to look for imported second hand machinery. These machines had two main disadvantages. Firstly, the frequent repairs needed and secondly, the inability of the machines to work on the lodged crops. In contrast to the above head feed type combine harvester from Japan, a whole crop type machine imported from China have given some encouraging results. Because the disadvantages associated with the Japanese one could have been mitigated by making the machine smaller and by having an adjustment to cut the crop as close as possible to the panicle. The price is also at the affordable limit to the farmer. 5.0 Manufacturers of farm machinery Most of the agricultural machinery & equipment needed by the country are manufactured locally, except tractors and combined harvesters. Majority of manufacturers belong to private sector. Many large companies manufacturing agricultural machinery are located in and around Colombo. The manufacturers and categories is given in table:

Indigenous production Large scale Medium Small Machinery / manufacturer scale scale Sl.no Import equipment s manufactur manufact (10) ers urers (25) (232) 1 Combined harvesters ü 2 Tractors ü 3 Power tillers ü 4 Paddy reapers ü 5 Paddy threshers ü 6 Knapsack & power ü sprayers 7 Paddy milling ü machinery 8 Electric & engine ü driven water pumps 9 Nine tine tillers ü 10 Cage wheels for ü tractors 11 Other tractor parts ü and trailers 12 Seeders & weeders ü 13 Cage wheels ü

Page|80 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

14 Trailers ü 15 Winnowing fans ü 16 Animal drawn ü equipments 17 Rotavator blades ü ü 18 Paddy processing ü machinery 19 Mammoties. Hoes & ü Sickles 20 Seeders & weeders ü 21 Levelers and ü Harrows FMRC listed manufacturing agencies It should be ensured that the farm machinery /equipments financed should be in the approved list of Farm Machinery Research Centre(FMRC) The problems of increasing gap between the demand and supply of farm power due to migration of farm labour to cities, increased demand for quality agricultural products in the domestic and international markets, decreasing farm incomes could all be effectively addressed by a carefully planned farm mechanization process. Through proper mechanization environmental hazards could also be substantially mitigated. The land and crop conditions must be made conducive for efficient usage of farm machinery and tools. 6.0 Need for mechanisation The scarcity of manual labour and the drudgery required alternative sources of power to carry out different farming operations. Machines could replace the labour bringing advantages such as timely cultivation, increase in quality of produce and lesser production cost. But in a country like Sri-Lanka there are often restrictions to introduce such machinery due to various socio- economic reasons. Hence the agricultural mechanization process, is selective to ensure a balance between available labour and the need of machines for timely operations. With the influence of free trade economy the subsistence level of farming may gradually change into commercial level requiring labour saving machinery. Among the machinery used tractors play an important role in farm mechanisation. 6.1 Tractors in paddy production In paddy cultivation, both four & two wheeler tractors are widely used in Sri Lanka. Hence the sales of tractors is closely reated to the expansion and growth of rice industry. From time to time the need has been changing and today the major concern in rice is the need to lower the cost of production, increase the produce quality and solve the problem of labour shortage. In a

Page|81 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

survey conducted jointly by farm machinery centre - FMRC and the University of Peradeniya, it has been found that 65% of the farmers give top priority for mechanization in rice cultivation. Since the importance of farm machinery has been well realized, planned mechanization programs are being launched to achieve sustainability in rice production. 6.2 Tractor market in Sri-Lanka Initially there were only four wheel tractors in the market but later in the early 1980’s the two wheel tractors were introduced. Now these 8HP - 12HP versions dominate the rural market, be it, the brand new ones or the reconditioned items. The two wheel tractors have gained popularity among the farmers for its lower cost, easy usage, and scope for many attachments / accessories. Thus as a multipurpose machine it benfits the farmers. The farm machinery presently deployed for paddy cultivation is given in the table below:

Farm machinery / equipment No. of units Two wheel tractors (6-12hp) 55,000 Four wheel tractors 15,000 Ploughs Mould board (for two wheeler) 18,000 Mould board (for animal) 75,000 Rotary plough (for two wheeler) 54,000 Nine tine tillers 10,000 Source: FMRC 1999 From the above fingers it is very clear that two wheel tractors dominate the market due to several reasons: • Unit cost is affordable to the farmer community. • Both recondition & brand new units are available. • Customer could buy the product at their convenience in the local market. • Funding available from banks and other sources • Multiple usage of the machinery has its advantages. • They are more versatile in small crop growing plots • Out of the two wheel tractor segment the 12HP hand tractors are most popular

Capacity and fuel consumption of different tractors is shown in the table below:

Tractor Fuel Capacity Capacity Remarks or power consumption ha/ ha/ li of

Page|82 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

hp li / h 08 h day fuel O7 1.0 0.40 0.05 Walking type two wheel tractor 12 1.4 1.00 0.09 Riding type two-wheel tractor 35 4.5 1.40 0.04 Four wheel tractor Source: FMRC 2000. In accordance with the table the 12 HP riding type two-wheel tractor gives the maximum work output per liter of fuel consumption. Another important aspect to be considered is that the smaller horsepower tractors do not last as long as the larger ones. But as the power increases the cost of tractors also increases and the cost per unit power decreases. 6.3 Tractor suppliers 6.3.1 Suppliers of four wheel tractors • Sifang lanka (pvt) ltd- Browns • Hayleys Agro Products Limited • Agro consolidated • Semuthu agro • Jenasena group • Farmers (Pvt) Ltd 6.3.2 Two wheel tractor suppliers: • Agro Trac Lanka (Pvt) Ltd • Wimal Tractors (Pvt) Ltd • Edna Engineering (Pvt) Ltd • Prabash Trading • Regal Motors (Pvt) Ltd • Asia Tractor Lanka (Pvt) Ltd • Darshana Enterprises • Dharmadasa Group • Honshu Enterprises • Kusumsiri Motor Traders • Nandha Trac Motors (Pvt) Ltd • Seneveratne Motor Enterprise • Diesel & Motor Engineering PLC • Wimal Tractors (Pvt) Ltd • Diesel & Motor Engineering Co Ltd • Nandha Trac Motors (Pvt) Ltd • Nawa Rajarata Appliances (Pvt) Ltd

Page|83 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

• Seneviratne Motor Enterprises • Nawa Rajarata Appliances (Pvt) Ltd • New Dharmasiri Enterprises • Ranatunga Motors (Pvt) Ltd 7.0 Appraisal of farm mechanization proposals In terms of national agriculture policy there is need to encourage the public and private sectors as well as the Universities to develop and manufacture agricultural machinery, with appropriate technology suitable to the agricultural sector. There is also need to promote mechanization to make agriculture more efficient and cost effective. The policy thrust is on encouraging the state and private sectors to supply modern, low – cost, high quality machinery with improved technology in order to sustain agriculture in a profitable manner. 7.1. Considering the policy focus as above, farm machinery loans are to be considered on priority by banks for financing purchase of tractor, power tiller, trailer and accessories, combine harvesters, grain threshers, sprayers, dusters, ploughs, drills and such other farm implements and equipments needed for agricultural activities. 7.2. It should be noted to finance purchase of tractors, of economic size HP only. Further, only such tractors/power tillers, which are in our approved list, are to be financed. The guidelines on expansion of portfolio of tractors and the list of tractors / power tillers, which are on bank’s approved list, are to be used as a basis for lending 7.3. In case of tractor loans, the applicant should have at least … acres of perennially irrigated land or …. acres of dry land, provided the sanctioning authority is convinced that the tractor can be gainfully employed for a total period of 1000 to 1200 hours per annum either on the farmers own land or by custom hire. 7.4. In case of power tiller, .….. acres of irrigated lands or equivalent dry land provided the sanctioning authority is convinced that the power tillers can be gainfully employed for a total of 600 hours p.a. either on own farm or custom hire. 7.5. Loans can also be extended for purchase of tractors, power tillers, accessories, other farm machinery to employed entrepreneurs under self employment scheme without insisting the land holding criteria, after satisfying the scope for custom hiring loans for other farm machinery can be granted to farmers as well as unemployed entrepreneurs, either for farm use or custom hire, on merits of individual case. The land holdings should be in preferably compact blocks which helps in

Page|84 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

economic usage of farm machinery the applicant should have knowledge in the maintenance of machinery and there should be adequate facilities available for servicing of the machines 7.6. Since higher HP tractors would have a higher unit cost with direct bearing on the financial viability and bankability of such proposals, tractors of above 35 HP should not be normally financed unless viability is clearly established. Financing tractors of over 50 HP may be considered only on a case to case basis, particularly for field operations like leveling, land shaping (in dry land cropped areas) and for deeper ploughing (in areas where crops like sugarcane, cotton and tobacco are raised) after carefully examining the financial viability and bankability of such investments based on the number of hours of tractor use, land holdings, scope for custom hiring etc. 7.7. Preference can be accorded to power tillers with a lower investment requirement which will enable smaller farmers to mechanize their farms at an affordable cost. 7.8. Though the minimum land holding norm is only a pre-requisite for considering tractor/power tiller loan and that alone cannot make the application worthy of consideration for a loan. Each application should therefore be appraised on a case to case basis for its financial viability and bankability. The important considerations in this regard are as follows: • The farmer should be in a position to put the tractor to maximum use throughout the year. A tractor to be economical should be put to productive work at least for 1000 hours per year on own-farm or both on own-farm and on account of custom services. In case of power tillers, it is 600 hours. • It must be noted that the use of tractor will be more useful and economical if, - the farmer is going in for multiple cropping - there exists adequate demand for custom hiring in view of limited tractor population in the area; and - the labor is not easily available and comparatively costly in the selected area • The tractor selected by the farmer should be of appropriate and economic size (HP) so as to ensure optimal utilization of the tractor's capacity. This can be decided by the branches taking into

Page|85 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

account the type of soil (light, medium and heavy), farm size, crop mix, cost of tractors, labor availability, degree of mechanization of farm operations and prospects for custom hiring. 7.9. For tractor models chosen by the borrower, Commercial Test Report issued by FMRC should be available. 7.10. In case of power tillers the following points are to be noted: • Power tillers are normally used in areas where the farmers switch over to cash crops in a big way after mechanization; • More than 70% of the incremental income including that from custom hire is reckoned towards servicing the loan; and • At least 50% of the total amount required for repayment of installment of loan together with interest from the incremental income derived out of mechanization of beneficiary's own farm. 7.11. While appraising the proposals for farm mechanization loans it should be ensured that in each case the AO / branch manager has conducted pre-sanction visit to assess the technical feasibility economic viability of the proposal. In the inspection reports, the following points should be clearly noted in addition to the eligibility clause, terms and conditions of the scheme. • Whether the prospective borrowers have Ø Knowledge in the maintenance of the machinery proposed to be purchased? Ø Experienced hands to drive the tractor/ power tiller? • Whether there is good scope for hiring the power tiller/farm machineries? • Whether the tractor selected by the borrower is of appropriate capacity and economic size (HP) so as to ensure optimal utilization of the tractors on own farm and for custom service. • In addition to the above, particulars mentioned in the checklist should be gathered. 7.12. In the appraisal note there should be clear stipulation on disbursement asects.The loan amount should be disbursed directly to the dealers/ suppliers along with money collected from the borrower against receipt. The payment of the loan proceeds to the tractor dealers should be made only after the tractor and all other accessories as per proforma invoice are supplied and bank’s lien painted on tractor and trailer. This has to be confirmed by inspection of the asset. Payment to the dealer should be released only after ensuring that the assets have been delivered.

Page|86 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Ø The quotations should clearly indicate the price of tractor/trailer/accessories separately. It should be ensured that the margin norms are not circumvented by inflated quotes on the cost of tractors/accessories. Ø As soon as a tractor loan is sanctioned, a letter of confirmation is to be issued to the dealers, indicating that the payment will be made once the tractor and trailer (applicable) along with all accessories are supplied as per proforma invoice. Ø Branches should ensure that our lien is noted in the RC book within one month of disbursement of the loan and RC book copy should be obtained. This aspect has to be very closely followed up by the branches. In case of undue delay, help should be sought from the dealer who has supplied the tractor/tiller/trailer. For recovery of overdue instalments also, the help from the dealer can be enlisted. Ø Branches to ensure that borrower can effectively use the tractor as per the norms and has ability to manage tractor. Ø The bank lien should be got noted in the registration certificate and registered with the RTO. It should also be painted on the tractor/power tiller/trailer and other implements in bold letters. Ø The Registration Certificate (RC) has to be verified for the first time soon afte4r registration in the name of the borrower with hire purchase endorsement in favour of the bank. Thereafter RC has to be verified once in a year to confirm that the taxes have been paid upto date. The format for letter to the bank from the borrower for payment to vendors / dealers is given in Annexure – 1 and format of letter from bank to suppliers is given in Annexure -2. 7.13 The pointers in the following check list covers technical feasibility, economic viability and bankability aspects of farm mechanization loans : n Technical feasibility Ø Is the need for a tractor justified? Ø Does the applicant own and cultivate the required land holdings? Are the lands situated in compact blocks? Is there demand for use of tractor in neighbours fields? Ø How many tractors are there in the village or locality? Ø Is he going to buy the implements also along with the tractor? If not how is he going to use the tractor? Is he going to buy trailer also? Can it be utilised properly? Ø What are the purposes for which the machinery can be put into use? What is the expected minimum working hours per year?

Page|87 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

What is the total cropped area in which the tractor is expected to be used in a year? Ø Who is going to drive and maintain the machinery? Is he a trained person? Ø Is there any servicing centre to undertake repairing and servicing of the machinery? Ø Are the spares readily available? What are the after sales service arrangements of the supplier? Ø What is the present cropping pattern? Is the pattern proposed after the investment reasonable and feasible, with reference to soil conditions, irrigation facilities, location of the farm etc? What is the production potential on account of higher crop intensity expected on introduction of the tractor? Ø Whether the tractors have received commercial test report? n Economic viability Ø Can the applicant meet the stipulated margin on the cost of machinery and accessories to be purchased? Ø Whether the applicant has adequate repaying capacity to pay the loan instalments with interest? Ø Are the cost of cultivation and gross income and income through hiring reasonably worked out? Ø What is the marketing arrangement?

Page|88 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

n General aspects Ø Do the particulars of the holdings given in the application tally with the particulars given in village officer's certificate? Ø Are the holdings in any way affected by land ceiling enactments? Ø Has he borrowed from elsewhere? If so for what purpose and on what terms? Have necessary certificates been received from those institutions? Ø Who is going to supply the machinery to the applicant? Has the applicant already registered with the supplier for the machinery? Is the machinery ready for delivery? Has he produced the proforma invoice for the machinery? Is it in any way inflated by including excessive spare parts etc? Ø If the applicant had already availed credit facilities from the branch, how was the performance? Ø What is the arrangement for his crop loan requirements? Ø What is the mode of repayment? Does it coincide with harvesting season? Based on the income can the repayment period proposed be considered reasonable and realistic? Ø What is the security offered? Is it sufficient? If not, what are the other securities to be obtained? Ø If land is to be taken as security, whether valuation certificate produced? In case of guarantors, what is their worth? Ø What are the documents to be taken? Ø Is any other information to be furnished or any formality to be complied with by the party before availing the loan? 8.0 Guidelines for estimating cost of operation of farm machinery is given Annexure - 3

Page|89 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

ANNEXURE - 1 Letter to the Bank to be written by the borrower for making advance payment to vendors / dealers The Branch Manager ______Branch Dt…………. Dear Sir, I / We propose to purchase the under mentioned goods / items from Ms. ______(full name and address of supplier / dealer) and require for that purpose a total amount of Rs.______Rupees ______only). Details of goods / items to be purchased Sl No Description Amount to be Paid Remarks, if any

I / We request you to kindly remit to Ms. ______(full name and address of supplier / dealer) as advance payment for purchase of the above mentioned goods / items. It is understood that the payment is being made to the suppliers at my / our risk and responsibility and that the goods / items proposed to be purchased are charged to the bank. The goods / items will be received in our possession on or before ______(date). Please instruct the supplier / dealer to dispatch the goods / items to us at the following address ______Copy of our order accepted by the supplier / dealer and supplier’s / dealer’s proforma invoice / quotation are enclosed.

Yours faithfully,

Authorized Signatory Borrower

Page|90 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

ANNEXURE – 2 Format of Letter to Suppliers to be written by the bank while making advance payment at the request of borrowers Dt:……………. To (name and full address of supplier)

Dear Sir,

We refer to Order No: ______dated ______placed on you by our constituents Ms.______(name & address of the borrower) for purchase of certain items / goods described below. We are also forwarding herewith a copy of the order accepted by you and / or your proforma invoice No:______dt….

2. Ms. ______(name of borrower) have been extended financial assistance for purchase of the said items / goods by us. At their request and on their behalf we enclose our draft / pay order No: ______dated ______for Rs.______. Kindly accept this amount as full payment for the said goods / items.

3. Please note that the amount should be appropriated only towards supply of items / goods mentioned below and should not be appropriated / set off against any other debt / liability due or owing to you by Ms.______(name of the borrower)

4. In the event of your not supplying the items / goods within ___ days of receipt of this payment, please arrange to refund the same to us. The goods are to be dispatched to ______

All documents pertaining to the shipments including RR / LR / Other documents of title should be made out and sent to us by registered post.

5. Till the supply is made please note that you will be holding this amount on our behalf and at our disposal. Kindly send us the receipt and original invoice after you effect the supply. Please acknowledge the receipt of this letter and its enclosures.

Details of goods / items to be supplied

Yours truly,

Authorized Signatory Encl: ______

We confirm the contents of your letter being sent as per our request Authorized Signature(s) of Borrower

Page|91 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

ANNEXURE- 3 Page – 1 Guidelines for Estimating Cost of Operation of Farm Machinery For any economic analysis of farm machinery use, it is important to know the various costs of operation, of the prime movers and its attachments. Broadly, the costs of operation are classified into fixed costs and variable costs which are incurred during an year of operation. Guidelines on this aspect providing certain standards to arrive at fixed and variable costs are as follows: 1.0 . Fixed costs 1.1 Depreciation This cost reflects the reduction in value of a machine with use and time. The following formula is recommended for calculation of depreciation. D= (P-S)/L…………………………….. (a1) Where Depreciation cost, average per year (The depreciation cost per hour should be D = calculated by dividing D by the number of hours the machine is expected to be utilised) P= Purchase price of the machine in a year S= Residual value of the machine L= Useful life of the machine in year Residual value (S) may be taken as 5 per cent of the purchase price. Useful Life (L) of some of the commonly used machines is given in table 1 for guidance. Table : 1 Useful Lives of commonly used farm machinery Useful life Sl. No Name of machine Hours Years 1 Tractor 10,000 10 2 Power tiller 8,000 10 3 Agricultural trailer 3,600 12 4 Plough 3,000 10 5 Disc Harrow 3,000 10 6 Cultivator 4,000 10 7 Blade 92errace 2,000 10 8 Planter 2,000 10 9 Seed drill 2,500 10 10 Rotavator 2,400 8 11 Seed-cum-fertilizer drill 2,000 8 12 Ridger 1,500 12 13 Stationary engine 10,000 10 14 Electric motor 15,000 15 15 Power sprayer 2,000 8 16 Seed cleaner 2,500 8 17 Power thresher 2,500 8 18 Centrifugal pump 10,000 10 19 Power chaf cutter 5,000 8 20 Cane crusher 10,000 10 21 Ruddler 2,500 10

Page|92 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Annexure – 3 Page 2 1.2 Interest:- The rate of interest in the banks are declared and revised from time to time. To work out the actual amount of annual interest following formula is suggested. AI = ((P+S)/2)*(1/100) Where, AI=Annual interest charges I= rate of interest in per cent

P & S are same as used in equation (a1) 1.3 Insurance And Taxes :- Actual amount paid or to be paid annually for insurance and annual taxes; for any, should be charged. If the information is not available, it may be taken as 2 per cent of the average purchase price of the machine. 1.4 Housing :- It should be calculated on the basis of 1.5 per cent of the avg purchase price of machine. 2.0 Variable Costs: 2.1 Fuel Cost- Fuel consumption depends on the size of the power unit, load factor and operating conditions. The actual consumption can be observed while the machine is working or may be taken from the results obtained at official testing stations. Average fuel consumption can also be estimated by the following formula : a) A= 0.112xB Where A= average diesel consumption in l/h. B= Rated power in HP C= 0.187xB Where C= Average petrol consumption in l/h. is a conversion of Kilo Watt standard to Horse power 2.2 Cost of Oil The actual oil consumption should be recorded while the machine is working. In case oil consumption data is not available, oil consumption may be taken as 2.5 to 3.0 per cent of the fuel consumption on volume basis. 2.3 Repair & Maintenance - Repair and maintenance expenditures are necessary to keep a machine operable due to wear, past failure, renewal of tyre & tubes and accidents etc. The costs of resting a machine are highly variable. For general consideration on average use of machines, the value of repair and maintenance may be assumed at 10 per cent of initial costs of purchase. 2.4 Wages & Labour Charges: - The actual cost prevalent in the area may be considered for deciding the wages and labour charges. 3.0. Overhead Charges: This includes charges for supervision, establishment and interest on working capital if applicable. Generally the overhead charges may be assumed as 20 per cent of the sum of fixed and variable costs.

Page|93 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

INSP - 4.0 Annexure to General field visit report common for all loans Pre sanction inspection report for advances for purchase of tractors / agricultural machinery and implements

I. Details of tractor/ agricultural machinery Make Size H.P. Cost and other implements proposed to be (Rs.) purchased 1. Tractor 2. Other farm machinery (full details) 3. Implements (full details) Whether the farm machinery proposed to be acquired conforms to FMRC (Farm machinery Research Centre) norms II.4. Extent of area under cultivation before purchase of tractor /farm machinery 5. Extent of area under cultivation after purchase of tractor /farm machinery 6. Details of standing crops and extent 7. Extent of utilization on own farm 8. Extent of utilization for custom hiring 9. Facilities for repairs and service centres

Date: ………………. Signature of Agri Officer

Branch Manager’s Observations/Remarks :………………………………………

Page|94 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

INSP – 8.0 Annexure to General field visit report common for all loans Post-sanction Inspection Report on Advances for Sinking of New wells / Deepening of existing wells I. In case of sinking of new well 1. Depth/ distance of the nearby wells 2. Water level in nearby wells 3. Command area of the nearby wells 4. Crops raised in the command area of the nearby wells II. In case of sinking of new wells 1. Dimensions of the well to sunk as on date of inspection 2. Progress of work at the time of' inspection and value of work done 3. Final dimensions of the well sunk 4. If the well is completed what is the discharge (in lps or gph) 5. Command area irrigated by the well – crop wise 6. What type of water lifting device the party has? (EMP or Diesel engine) Indicate HP III. In case of deepening/repairs to existing well 1. Brief details of works to be undertaken (Length/ Breadth/ Depth) 2. Dimensions of the existing well (in metres) 3. Water level before starting the proposed work 4. Progress of work at the time of inspection 5. Final dimensions of the well to be sunk IV. Water level at the time of inspection 1. Arrangements for lifting of water from the well 2. Details of standing crops & extent

Page|95 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Post-sanction Inspection Report for advances to Electric Motor/Oil Engine with Pump sets I. Details of pump set purchased and other works undertaken Pump set with electric motor/Oil Engine Make Size H.P. Cost / handling Charges 1. Electric motor 2. Oil Engine 3. Accessories for pump sets (Full details) 4. Cost of construction of pump house (Give dimensions) 5. Sl. No. of Pump set & Oil Engine/ Electric motor 6. Whether complete pumping system/ replacement equipment conforms to FMRC (Farm machinery Research Centre) norms/of approved brand 7. Date of installation of pump set 8. Date of energisation of Electric Motor /Pump set II. Extent of area under irrigation before installation of pump set 1. Extent of area under irrigation after installation of pump set 2. Whether the advance has been fully and properly utilised for the purpose for which sanctioned 3. Details of standing crops and extent 4. Water level in the well at the time of inspection? 5. Whether copious water is available for the capacity of the pump set installed? 6. Whether the pump set is in good working condition? 7. Whether the words hypothecated to bank painted on the pump set? 8. Whether the pump set and its accessories have been fully insured? 9. Is there a service centre available for repairs to irrigation systems like drip and sprinklers. 10. Availability of after sales services for pump sets and irrigation systems like drip and sprinklers

Date ………. Signature of Agri Officer

Branch Manager’s Observations/Remarks :………………………………………

Page|96 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Chapter – T 5

Financing allied activities

DAIRY DEVELOPMENT LOANS 1.0 Introduction: Dairy Farming plays a vital role in improving rural economy as it provides not only subsidiary income but also gainful employment. It is taken up either as a main occupation by entrepreneurs, mostly in and around urban areas or most commonly as a subsidiary occupation by agriculturists to supplement their income from farm/non-farm activities. In a way dairying is a logical extension of farm activities as it utilizes the farm by-products such as straw/stalk, husk, bran etc., as fodder and the by-product of dairy viz. cow- dung as manure is used to increase crop production as well as fuel in the form of cake and raw material in bio-gas plants. This more important in the present context as the focus is on organic farming. Hides and skins of the dairy animal are the best source for manufacturing leather goods and hence foreign exchange earners. Dairying is the integral part of Agriculture. Both are complimentary and interdependent. It also helps in maximising the labour output. 2.0 Dairy sector in Sri Lanka: The Dairy Sector has been identified as the priority sector for development among other livestock sub sectors in the country. There had been much focus on dairy farming and production due to several initiatives taken by the government in the recent past. At present, 33 percent of the national milk requirement is met through local production. The consumption of milk and other dairy products is expected to increase over the next few years, with increasing per-capita income and living standards of people. About 63,876 mt of milk and milk products valued at over Rs. 30 billion (US$ 296 mn.) were imported in 2009 and it represented 2.1 percent of Sri Lanka’s food imports. Hence, with the aim of reducing the drain on the country’s foreign exchange resources and supporting employment generation and family income, dairy industry is being promoted as complementary economic activity across the wide section of the population by introducing improved breeds, feed resources, better animal health, a well developed collection and processing network along with good research and extension services. Infrastructure facilities for milk marketing such as milk collecting centers, chilling centers and milk sales outlets increased in 2010. Demand for milk and milk products is on the increasing trend and there are positive trends of

Page|97 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

investments in commercial dairy farming. Thus there are plans to increase domestic dairy production to 100 percent of self-sufficiency by 2016. The data on the milk production during 1998-2011 is given in the following table :

Average Monthly Milk Total Annual Milk Production Total Production(Litres) Monthly (Litres) Annual Year Milk Milk Buffalo Production Buffalo Production Cow Milk Cow Milk Milk (Liters) Milk (Liters)

1998 12,281,800 2,475,620 14,757,420 147,381,600 29,707,445 177,089,045

1999 12,473,900 2,516,400 14,990,300 149,686,800 30,196,800 179,883,600

2000 12,603,800 2,517,512 15,121,312 151,245,600 30,210,148 181,455,748

2001 12,730,400 2,521,900 15,252,300 152,764,800 30,262,800 183,027,600

2002 12,736,740 2,529,510 15,266,250 152,840,880 30,354,120 183,195,000

2003 13,045,500 2,521,500 15,567,000 156,546,000 30,258,000 186,804,000

2004 13,308,000 2,550,000 15,858,000 159,696,000 30,600,000 190,296,000

2005 13,484,700 2,577,100 16,061,800 161,816,400 30,925,200 192,741,600

2006 13,748,100 2,637,180 16,385,280 164,977,200 31,646,160 196,623,360

2007 14,144,000 2,690,100 16,834,100 169,728,000 32,281,200 202,009,200

2008 14,370,200 2,970,890 17,341,091 172,442,406 35,650,685 208,093,090

2009 15,338,740 4,104,280 19,443,020 184,064,880 49,251,360 233,316,240

2010 15,993,300 4,636,200 20,629,500 191,919,600 55,634,400 247,554,000

2011 16,954,500 4,570,800 21,525,300 203,454,000 54,849,600 258,303,600

2.1 Production areas According to the 2002 agriculture census, the largest cattle populations are found in the country’s dry and intermediate zones. The wet mid- and up- country areas are often perceived as the main dairy-producing areas (Table 2). The dry and dry intermediate zones produce 50 percent more milk than the wet and wet intermediate zones Table 1 : Milk production zones in Sri Lanka

Zone Dry zone Coconut Mid-country Upcountry & Wet zone &

Page|98 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

features triangle estate urban Location Dry zone Intermediate Wet zone Nuwaraeliya Districts in the districts in the and wet zone areas in the district in the Western, NC, Northern areas of the Central Central Southern and and Eastern NW Province, Province – Province and Sabaragamuwa Provinces and and Gampaha Kandy and Badulla district Provinces and parts of Central, district of the Matale in the Uva cities Southern and Western districts Province NW Provinces Province Animal types Indigenous Crosses of Pure exotic Pure exotic Crosses of cattle, Zebu exotic breeds, animals and animals and exotic breeds cattle and Zebu types, crosses, and crosses and Zebu type crosses, buffalo crosses of Zebu crosses and indigenous indigenous animals and animals and buffalo buffalo Husbandry Free gazing, or Medium-sized Small herds, Small herds, Limited nomadic-type herds, limited some zero grazing grazing, Large herds or grazing tethering, stall medium-sized sedentary tethered under feeding herds or small small/medium- coconut palms herds, zero sized herds grazing Herd size Few: 2 - 5 5 cows 2–3 cows 1–2 cows 2–3 cows Average 2.1 li/cow/day 3–4 2–4 6 or more 3 li/cow/day yield Total 300–400 li/cow/day li/cow/day li/cow/day Total 1500 – litres/cow over Total 500–800 Total 1300 Total 1700 1600 180–200-day litres/cow litre/cow litres/cow litres/cow lactation over 200-day lactation Source: Ranaweera and Attapattu 2006 2.2 Location and scale of livestock operations The majority of livestock are reared in small-scale operations. Many factors influence the distribution of livestock in Sri Lanka; dominant among them are agro-ecological zoning and proximity to markets and feed resources. Tables 2 and 3 present some of the important topographical and climate information regarding dairying systems.

Page|99 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Table 2 : Main dairy production systems in Sri Lanka

Average daily milk production per Production systems Popular management system cow (litres) Hill country 6–8 Intensive Mid country 4–5 Semi-intensive Coconut triangle 3–3.5 Tethered Low country dry zone 1–1.5 Extensive Low country wet zone 3–3.5 Tethered Source: Bandara, 2007 Table 3: Cattle and buffalo systems: Topography, climate and animal types

Rainfall Temperature Production system Animal species (mm) range (°C) Hill country >2 000 10–32 Pure exotic and crosses Mid country >2 000 10–32 Pure exotic and crosses; some Zebu crosses Crosses of exotic breeds, Zebu types, Coconut triangle 1 500–2 500 21–38 indigenous animals, buffalo Low country dry Zebu types, indigenous animals and their 1 000–1 750 21–38 zone crosses, buffalo Low country wet Crosses of exotic breeds, Zebu types, 1 875–2 500 24–35 zone indigenous animals, buffalo Source: Ibrahim et al. (1999a and b)

3.0 Techno economic aspects of dairy development loans: 3.1 Suitability of climate Climate should be suitable for maintaining high milk yielding animals in good health and production. Exotic Cross breed animals need a cool climate. Similarly high rainfall may affect the production levels of cows. High rainfall may cause many diseases in the cows. Hence, it is necessary to obtain information on rainfall, environmental temperature before proceeding with the dairy proposal. Avoid water logged area which would affect the health of the cattle. Land should be elevated and well drained. An existing successful dairy will be a good indicator. Enquire if dairy cattle management has been generally successful in the area. 3.2 Housing the Cattle A normal house hold dairy with a couple of cows follows the practice of tying the animals with rope on to a nearby pole / floor. However it is important to understand that the animals must be properly housed so that their health improves and productivity increases.

Page|100 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Loose housing may be defined as a system where animals are kept loose except while milking and at the time of treatment. The system is most economical. Some features of loose housing system are as follows. • Cost of construction is significantly lower than conventional type. • It is possible to make further expansion without change • Facilitates easy detection of animal in heat. • Animals feel free and therefore, proves more profitable with even minimum grazing • Animals get optimum exercise which is extremely important for better health. Cattle Shed: However, bigger dairy farms have their cattle sheds constructed to house the animals. The shed has mangers (a trough or box of carved stone or wood construction used to hold food for animals in a stable) and water trough which provides clean drinking water. The shed should not be constructed on a low lying land. The floor should be hard and non slippery. The shed should also have a good drainage mechanism. Cost of sheds should be reasonable. Separate cattle shed may not be required where only two animals are given. Necessary approval should have been obtained for construction of shed. In the case of large commercial dairy farming, assess the housing space required for adult animals, calves and heifers. Housing space requirement for crossbreed cattle is as follows:

Age-group Manger Space Standing or covered area Open space (mtr.) (sq. mtr.) (sq. mtr.) 4 - 6 months 0.2 - 0.3 0.8 - 1.0 3.0 - 4.0 6 -12 months 0.3 - 0.4 1.2 - 1.6 5.0 - 6.0 1-2 years 0.4 - 0.5 1.6 - 1.8 6.0 - 8.0 Cows 0.8 - 1.0 1.8 - 2.0 11.0 - 12.0 Pregnant cows 1.0 - 1.2 8.5 - 10.0 15.0 - 20.0 Bulls* 1.0 - 1.2 9.0 - 11.0 20.0- 22.0 *To be housed individually.

Page|101 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

3.3 Availability of animals It is desirable to purchase freshly calved animals in first or second lactation. Ensure that the purchase committee includes the veterinary officer and a certificate indicating identification marks, age, milk yield and health of the animal would be available after the purchase. Not all animals should be purchased at the same time as it will lead to all of them going dry at the same time and affecting the cash flow of the borrower. They should be purchased in batches at an interval of 4-6 months so that the dairy activity continues enabling the farmer to have enough income throughout the year for meeting domestic expenses and also feeding the non- lactating animal during its dry period. The cost of animal would depend upon age, milk yield, number of lactations completed and whether the animal is having a male or female calf with it at the time of purchase. However, as a thumb rule of Rs.1,200 to Rs.1,500 per liter of milk yield can be kept in mind. Availability of cross-bred animals suited to the area, their cost and source should also be cross checked and ascertained that they are as per project details. 3.4 Availability of water Clean drinking water at the rate of 130 to 150 Ltrs per animal per day is required. Water is also required to clean the sheds and fodder cultivation. Ensure assured supply of adequate fresh, clean and soft water. 3.5 Feed and fodder supply Feeding of Cattle:

Animals During- LP/DP Green Fodder Dry Fodder Concentrates Kgs Kgs Kgs CB Cows yielding 8- LP 25-30 4-5 4 – 4.5 10 lts per day CB Cows DP 20-25 5-6 1- 1.5 It is essential to feed the cows during the Dry Period (DP) and the young ones to ensure good milk production during lactation. The feeding is divided in to two i) Maintenance Ration and ii) production ration. It is also divided into two a) Lactating period (LP) and b) Dry Period (DP). Availability of Concentrate Feed Agency to supply the concentrate feed e.g. government or private feed manufacturers and cost of feed should be identified. Further requirement of feed per animal during lactation and dry period/depending upon body weight, quality of fodder available, amount of milk produced and fat content of milk should also be worked out. Adequate supply of concentrate should be assured.

Page|102 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

The requirement of concentrate can be substantially reduced if high quality farm grown legume fodder like berseem, lucerne, cowpeas, etc. can be made available. Ideally the legume and grass mix in the green fodder should be 30 and 70 percent. This helps in reducing the more costly concentrate mix. The green fodder should be chaffed before feeding. This helps in better fodder conversion ratio. It is also advised to have silos for preserving the green fodder during the peak production. Proximity of pasture land, forest grazing, grass lands and / or assured commercial supply of green and dry fodder and its adequacy are essential. Cost of fodder grown by the farmers on their own lands and / or purchased in the market should also be included in the total cost of the project. Farmers should ascertain if the selection of fodder crop is based on the agro-climatic conditions and local preferences. If finance is to be given for establishment of a fodder farm, estimate necessary inputs required e.g. land development, irrigation resources and equipments, transport equipments, seeds, fertilizers, labour charges, estimated yields of fodder and their cost of cultivation. A suitable annual fodder calendar may be suggested giving yields and costs. The requirement of fodder per animal during lactation and dry period will depend mainly upon body weight, quality of fodder produced and level of milk production. While considering project for large dairy farms suitable herd projections for the scheme period be made and requirements of land for fodder production worked out. • It is advisable for the unit to have its own green fodder cultivation. Dependence on outside supplies may affect the project economics adversely. Hence any financing program for commercial dairy should make it incumbent on the applicants to possess adequate irrigated land (owned or leased) for fodder cultivation. Roughly, fodder cultivated in one acre will serve 10 milch animals. • About 25 kgs of green fodder, 4 to 5 kgs. of dry fodder and 1 kg. of concentrate feed is required per animal per day for maintenance purpose, for an animal having about 450 kgs. body weight. • In case of cow, about 1 kg. of concentrate feed is required for every 3 liters of milk produced by the animal. The maintenance requirement is constant for both dry period as well as lactation period, while production requirement is only during lactation period and is required in addition to maintenance requirement. 3.6 Equipments

Page|103 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Equipments such as cow tie-chains, buckets and milk pails, chaff cutter, fat testing equipments, machinery for fodder farm and dairy processing plant may be required. The need and the cost of these should also be ascertained. 3.7 Estimated milk yield The production criteria of the suggested breed of animal- including lactation period, dry period, yield of milk per day and average fat content of milk should be assessed 3.8 Labour, Medicine and Contingencies Insurance and Risk or Mortality Fund The requirement of labour, medicines and contingencies and the cost involved there may be assessed. Adequate provision for covering the risk due to cattle mortality by providing cattle insurance or a separate cattle mortality fund may be ensured. 3.9 Income by Manure, Sale of Calves, etc. Assess the yield and cost of manure and market price of calves. Usually the expenditure on feeding and maintenance of calves of indigenous breeds is equal to the receipts obtained by their sale. 3.10 Marketing Facilities Fresh milk can be kept at room temperature for about 2 to 2.5 hours. It is therefore, advised to have chilling arrangements if it is not possible to dispose off the milk within 2 hours. Ensure that existing milk collection center is at a reasonable distance. Nearness of the collection centers to the selected villages and adequate communication and transport arrangements should be ensured. Give the location and existing capacity of nearby chilling centers and pasteurization plant and the amount of milk handled by them during the flush and the lean season. Procurement cost of milk paid by Government/Dairy Department/ Milk Union for different milk may be obtained. Arrangements for fat testing of milk at the collection and chilling centers should be ensured. In the case of commercial dairy farms, arrangements for marketing of milk to the nearby urban areas and the market price of milk may be obtained. Transport cost, if any, should be calculated and included in the project costing. 3.11 Veterinary services Consult the staff of Government Veterinary Department officials in the area to get locational details of veterinary hospitals in the scheme area where dairy farming activities hold potential. Facilities in terms of qualified staff, laboratory, treatment and vaccination of animals should be factored in loan evaluation. . In the case of endemic diseases like liver-fluke, foot and mouth,

Page|104 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

HS etc. precautions to be taken by periodical treatment of animals and should be indicated. 3.12 Facilities for Breeding of Animals Normally cows will come to heat between 2-3 months of calving. Well maintained heifers of exotic breed come to first heat at the age of 1 to 1.5 years. Any heat lost will delay conception of the cow / heifers and hence delay of over 1 month till the next heat. Some animals do not conceive if the heat is missed for the first time. Hence it is very important that the heat in cows is detected in time and artificial insemination is done. Ideal time is the mid heat i.e. 2nd day of the heat. Success of conception depends on proper identification of the heat. Inputs of the Animal Animal Husbandry Department’s officials will be useful in this regard. Location of animal breeding / artificial insemination centers in the area and their nearness to selected villages need to be ascertained. Ensure availability of good pedigree bulls or semen of such bulls, qualified staff and laboratory facilities. Ascertain if the entrepreneur has adequate knowledge and experience in dairy cattle management including housing, feeding, sanitation, breeding and disease prevention. If not, the agency to provide the training should be indicated. 3.13 Need for Training Identification of animal in heat, diseases like F&M, HS etc are important in the success of any dairy. The entrepreneur if trained in these aspects helps in making the venture a success. Ascertain if there is a need to provide additional / refresher training for technical personnel supervising the project and indicate the possible agencies which could impart the training. 4.0 Appraisal The following aspects should be kept in mind while appraising dairy proposals: i. Lactation yield: The lactation yield in local breeds is very low compared to exotic breeds. This is dependent on number of calving, frequency of milking, persistency of yield .Normally in dairy cattle 30 - 40 % increase in milk production from first lactation to maturity is observed. After 3 or 4 lactation the production starts declining. After birth of the calf, the milk yield per day will be increase and reach peak within 2-4 weeks. This yield is known as peak yield. The maintenance of peak yield for more time is important for better milk production. The lactation period in local breeds is low and so the production is also less. ii. Lactation period: The length of milk producing period after calving is known as lactation period. The optimum lactation period is 280 - 300 days. iii. Persistency of Milk Yield: During lactation period the animal reaches

Page|105 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

maximum milk yield per day within 2-4 weeks which is called peak yield. Longer the period of peak yield better will be the persistency of the yield. High persistency is necessary to maintain high level of milk production. iv. Age at first calving: The age of the animal at first calving is very important for high life time production. The desirable age at first calving in local breeds is 3 years, 2 years in cross breed cattle and 3 1/2 years in Buffaloes. Prolonged age at first calving will have high production in the first lactation but the life time production will be decreased due to less number of calving. If the age at first calving is below optimum, the calves born are weak, difficulty in calving and less milk production in first lactation. v. Service period: It is the period between date of calving and date of successful conception. The optimum service period helps the animal to recover from the stress of calving and also to get back the reproductive organs to normal. For cattle the optimum service period is 60-90 days. If the service period is too prolonged, the calving interval will also be prolonged; less no. of calving will be obtained in life time and ultimately less life time production. If the service period is too short, the animal will become weak and persistency of milk production will be poor due to immediate pregnancy. vi. Dry Period: It is the period from the date of drying (stopping of milk production) to next calving when the animal is in pregnancy. The animal should be given rest period to facilitate growth of foetus. A minimum of 2 – 2 ½ months dry period should be allowed. If the dry period is not given or is too low the animals suffer from stress and in next lactation, the milk production drops substantially and the calves become weak. Animal suffers from calcium deficiency and may suffer at the time of calving. On the other hand if the dry period given is too high, it may not have that much effect on increasing milk yield in the next lactation, but decreases the production in the present lactation. vii. Inter calving period: This is the period between two successive calving. It is more, profitable to have one calf yearly in cattle and at least one calf for every 15 months in buffaloes. If the calving interval is more, the total number of calving in life time will decrease and so also total life production decreases. viii. Reproductive efficiency: This leads to more number of calves during life time, so that total life time production is increased. The reproduction or breeding efficiency is determined by the combined effect of hereditary and environment. Several measures of breeding efficiency like number of services per conception, calving interval, and days from first breeding to conception are useful. Reproductive efficiency has generally a low heritability value indicating that most of the variations in this trait are due to non genetic factors. In adverse environmental conditions, the poor milk producing animals may not be affected much compared to high milk yielding animals. ix. Efficiency of feed utilization and conversion into milk: This is the rate at which feed is converted into milk reflecting feed to milk yield. x. Disease resistance: Generally, local breeds are more resistant to a majority of

Page|106 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

diseases compared to exotic cattle. Cross- breeding helps acquire this character of high milk production while maintaining the disease resistance capacity.

Page|107 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Chapter – T 6

POULTRY DEVELOPMENT LOANS

1.0 Introduction: In Sri Lanka poultry meat and eggs form a valuable food supplement in the diet. Its relatively low price makes it an economical source of food. Taken gram for gram, poultry meat contains more protein than other meat products and even some varieties of fish. The other advantage with poultry is the relatively short time it takes to rear a chicken for consumption. While the cycle lasts only 6 -7 weeks for poultry meat production, it takes only about 20 weeks for a layer to start producing eggs. In comparison it takes over six months for the production of pork and over two to three years for the production of beef. The poultry industry, both meat and egg type has been growing rapidly in the recent past. There is much potential for the continued growth if one compares the per capita consumption of poultry meat and eggs with the consumption levels of these items in other developing countries. As per CBSL Annual Report 2011, chicken production marked a growth of 12 per cent to 116,760 metric tons while egg production grew by 4 per cent to 1,185 million. The measures implemented to subdue price hikes in the poultry market helped gradually improve the production of chicken and eggs. The government directed the National Livestock Development Board to import parent birds and hatching eggs of day old chicks to fill the shortage of the day old chick supply in the market. Accordingly, the layer chick production showed a remarkable increase of 42 per cent during the year leading to an increase in egg production. Moreover, six new parent poultry breeding farms were established during the year, which helped sustain the emerging demand for day old chicks. Further, during the year, animal feed production also increased significantly by around 30 per cent while reducing the cost of average feed prices. This reduced the cost of production of chicken and egg of poultry farmers in 2011. Accordingly, the average price of chicken declined to Rs. 344 per kg from Rs.356 per kg and egg prices declined to Rs. 11.80 from Rs. 13.20 per egg during the year over 2010. As per DAPH, poultry industry monthly report 2011, there was substantial growth of broiler industry as shown in the following table:

Page|108 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Cumulative December Growth Activity ( Jan – Dec) Forecast (%) 2010 2011 2010 2011 1. BROILER a. Procurement Grand Parent Stock 0 1650 15254 16290 6.79 Parent Stock 82676 92509 919145 1030839 12.15 Imports (45676) (49402) (390743) (471133) Local Purchase (37000) **(43107) (528402) (559706) b. Production of DOC(m) 8.55 8.58 82.45 *96.52 17.06 96.95 c. Exports Chicken & Chicken 45.25 106.57 661.87 1417.36 1114.15 Products(MT) d. Imports(MT) Chicken & Chicken 332.51 50.19 1235.14 1839.51 48.93 Products Whole Chicken (92.01) (92.01) (404.33) MDM (240.49) (27.20) (995.35) (1138.08) Other chicken parts (22.992) (114.32) (211.792) Lunchen Meat (2.52) Other Poultry Meat Duck (6.03) (38.44) Turkey (27.42) (44.33) Value added Products

In case of layer industry also there has been an upward trend in parent stock and production of DOC as depicted in the following table:

December Cumulative Growth Activity ( Jan – Dec) Forecast (%) 2010 2011 2010 2011 2. LAYER a. Procurement Parent Stock 12325 8181 80142 112201 40.00 Hatching Eggs 0 340640 476640 b. Production of DOC(m) 0.55 *0.79 5.08 *7.47 47.05 7.01 c. Exports Table Eggs 87470 114710 768201 1410267 83.58 D/O Chicks 800 550 46327 58669 26.64 d. Imports D/O Commercial Chicks 102362 0.00 102362 102966 0.59 Table chicks 100238 - 100238 8047940 - Egg Products (MT) 0.20 3.20 21.00 13.62 -35.14

**Note: Out of 43107 broiler parents produced by local breeders farms, 5512 have been exported in December

Page|109 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

The day old pullet production and day old broiler chick production for the year 2011 is depicted in the following graphs.

As per DAPH Annual Report 2010, contribution of the Agriculture sector to the national GDP had been 11.93 %in 2010 and the livestock sector contribution to the Agriculture component recorded as 7.1%.The total contribution of the livestock sector to the national GDP in 2010 was around 01 percent. Though poultry sector has shown a remarkable growth over the past three decades or so and, is nearly self-sufficient in chicken meat and eggs at current purchasing power levels. However, chicken meat and eggs are yet to be available at competitive prices, in order to fulfill consumer demands and further expansion in this industry. With growing market trends and the Sri Lankan economy predicted to reach over 8 per cent growth in 2012, it can easily be said that the poultry industry's contribution to the economy will increase multiple-fold in the coming years. With a heightened emphasis on infrastructure development by the government, it is hoped that new markets emerge with the necessary framework for new farms to be established throughout the island. It is interesting to note that about 70 per cent of the contribution to the livestock sub-sector in Sri Lanka comes from chicken and eggs, which remains as the cheapest source of animal protein. With the country's economic progress, the domestic per capita income also increased to US$ 2,830 (from US$ 2,400 in 2010) improving Sri Lankan purchasing power. Currently the annual consumption of chicken in Sri Lanka is approximately 5.7 kg and 54 eggs per person. Chicken consumption is expected to increase to 8 kg per capita within the next four to five years. 2.0 Importance of financing poultry Poultry egg and meat are important sources of high quality proteins, minerals and vitamins to balance the human diet. Specially developed breeds of egg

Page|110 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

type chicken are available with traits of quick growth and high feed conversion efficiency. Depending on the farm-size, layer (for eggs) farming can be main source of family income or can provide income and gainful employment to farmers throughout the year. Poultry manure has high fertilizer value and can be used for increasing yield of all crops. Considering the foregoing, poultry farming is an important activity and plays an important role in rural economy and therefore needs to be supported by bank funding. 2.1 Poultry segments Chicken are reared mainly for two purposes namely eggs and poultry meat. For this purpose the chicken selected and reared with specific end use in mind. Chicks indentified for egg production are reared in a separate fashion while those identified for meat are reared differently. Even the birds that produce eggs are used for their meat once their useful productive life is over. The broilers vs. layers comparison is as follows:

• Broilers are reared for meat purpose while layers are meant for egg production • Broilers grow very fast and are highly efficient in converting feed into meat. Layers are good in egg production • Broilers can be used for meat purpose any time commencing from 4-8 weeks • Layers start egg production in 18 weeks and continue giving eggs for one year • The feed requirement and other rearing aspects are different for broilers and layers • Broilers are generally reared in deep litter system on open floors where as cage rearing for layers Generally layers start egg production from 18th to 20th week of their life. An economic production level of around 75% is reached when the bird is around 24 weeks and continues up to 72 weeks. After 72 weeks the birds will be sold and culled for their meat. 2.2 Stages and life span of poultry birds 2.2.1 Brooders: Newly hatched chicks require special care including additional heating till they grow feathers. Brooding can be carried out in deep litter houses or in electrically operated brooder batteries. Brooding is done up to 7 weeks. 2.2.2 Growers: The chicks are in the grower stage from about their 9th week till 20th week (when they start laying eggs). This period is known as grower period.

Page|111 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

2.2.3 Layers: This is the period during which the chicks are in their productive life and start laying eggs. The period spans from the 20th week till about their 72nd week. On the other hand birds genetically selected for fast growth and reared mainly for meat – known as broilers (also fryers, roasters, etc.) are sold off after 6 to 8 weeks. Commercial layer strains are Bowans white (35.1%), Hyline (19.1%), Shaver 579 (18.7%), Shaver 288 (13.4%), Novogen (8.3%), and Bowans brown (5.4%). Commercial broiler breeds include Cobb (40%), Hubbard (33%) and Indian River (25%). 3.0 Funding different poultry activities 3.1 Breeding farms: The breeding farms are the source of high quality stocks of birds with desirable traits; both for egg laying and meat production. The breeding process starts with purelines followed by grandparents and parent birds. The eggs produced by parent birds are the hatchable eggs which are incubated in hatcheries to get DOC of commercial layers and broilers.

3.2 Hatcheries: Hatcheries produce very young chicks (days old) to be sold as layers or broilers. The breeding farm in a hatchery is where female and male birds usually in the ration of 10:1 are reared for producing fertile eggs which

Page|112 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

in turn will be hatched to produce commercial chicks. The hatching of course takes place in the hatchery. While selling the birds for layers, only female birds are sold whereas for broiler purposes both female and male birds are sold. 3.3 Commercial layer Farms: These farms purchase one day old chicks from hatcheries and rear them through three stages mentioned above – brooder, Grower and Layer. At the end of the birds’ productive cycle of about 72 weeks they are sold for culling and meat. 3.4 Commercial broiler Farms: As already seen, broiler farms rear chicks for their meat. Like the layer farm, the broiler farms also buy one day old chicks and nurture them up to 7 to 8 weeks when the birds gain weight of around 1.20 to 1.50 kgs before they are sold. 4.0 Sheds for poultry birds Rearing chicks either for laying or meat requires expertise and experience. The birds have to be fed correctly keeping in mind the purpose for which they are meant and also protect them from many diseases, predators and other natural / man induced situations. Hence housing of the birds assumes a great importance. Two often used systems are 4.1 Deep Litter System The floor of the shed is covered with saw dust or some soft materials such as paddy husks, groundnut shell etc., to a height of 3-4 inches and the excretion of the birds are allowed to drop over the same. The litter together with the accumulated droppings of the birds will serve as good manure. The cost of construction of poultry shed under deep litter system varies depending upon the construction material used but is normally cheaper than cage system. Advantages of Deep Litter System • Economical • Production efficiency • Locally available materials like straw, saw dust, dried leaf, etc can be used 4.2 Cage System In a cage system, cages are placed one over the other (up to three tiers). Cages will have facilities for collection of eggs laid, feeding channel and waterway etc. Brooders, growers and layers will have to be separately reared under cage system for better management. Advantages of Cage System are:

• It is more hygienic and value of the cage manure is high • Labor requirement is less and More birds can be accommodated per unit area • Wastage of feed can be minimized

Page|113 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

• Increased egg production due to restricted movement of birds in the cage resulting in conservation of energy for the birds. • Clean eggs are obtained • Easier to identify low producing birds and initiate culling - Easier to take steps to control feed wastage • Easy to maintain records - Spread of contagious diseases is reduced

Page|114 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Page|115 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Fig: Cross section of shed under cage system Fig: Cross section of shed under cage system

Fig: Layer Shed with three blocks of Cages on elevated platform 4.3 Housing System and Flock schedule To enable effective and efficient use of space and to (a) streamline graduated movement of flocks from brooder to layer in case of egg producing birds and (b) ensure timely supply of broilers based on sales cycles, it is necessary to have a logical flock movement system within the poultry. 4.3.1 Layer Farm: In layer farming two combinations of brooder / grower / layer are normally used they are: 1 to 3 System or 1+3 system which uses one brooder cum grower and three layers: Under this method, chicks from hatcheries are brought and reared in the brooder cum grower shed (BGS) for the first 16 weeks. Thereafter that flock (batch) is moved to Layer Shed No: 1.This flock will stay in Layer Shed No: 1 till the 72nd week after which it will be sent for culling. After giving a gap of 4 weeks during which the BGS is cleaned and disinfected, the second batch of birds are brought from the hatchery. The second batch stays in BGS from the 20th week till the 36th and then is moved to Layer Shed No: 2. Likewise a third batch will come into the BGS on week No: 40 and will move to Layer Shed No: 3 in the 56th week. By the time the fourth batch of birds in the BGS is ready to be moved to a layer shed (76th week), the Layer Shed No: 1 would be emptied, cleaned and disinfected – 72 + 4 weeks. This cycle will

Page|116 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

continue. A diagrammatic representation of this process is given below:

Growth period (Housing) in weeks Batch Brooder cum Layer Shed Layer Shed Layer Shed Grower shed 1 2 3 I I 0-16 16-72 II 20-36 36-92 III 40-56 56-112 IV 60-76 76-132* V 80-96 96-152** VI 100-116 116-172@

1 to 1 to 5 System or 1+1+5 system which uses one brooder, one grower and five layer sheds: In this system, one day old chicks are first kept in the brooder shed for 8 weeks and shifted to grower shed for rearing up to 16th week. Thereafter the 16 week old pullets will be shifted to layer shed. A time gap of 4 weeks will be allowed for cleaning and disinfecting the sheds. Thus the second batch will be brought to the brooder shed and grower shed at 12th and 20th week respectively. After keeping the growers for the next 8 weeks in the grower shed, the growers will be shifted to the second layer shed. Thus at 64th week, all the five layer sheds will be full. Basically this system breaks up the first stage of Brooder-cum-Grower shed (BGS) in the 1 to 3 system into two separate operations namely brooder and grower independent of each other. Due to this break up, the production is speeded up. A diagrammatic representation of this process is given below. It can be clearly seen that due to the break up the batches of birds (starting from the second batch) reach the layer shed earlier (on the 28th week as opposed to the 36th week for the second batch, on the 40th week as opposed to the 56th week for the third batch and so on).

Growth Period (Housing) in weeks Batch Brooder Grower Layer Layer Layer Layer Layer Shed 1 Shed 2 Shed 3 shed 4 shed 5 I 0-8 8-16 16-72 II 12-20 20-28 28-84 III 24-32 32-40 40-96 IV 36-44 44-52 52-108 V 48-56 56-64 64-120 VI* 60-68 68-76 76-132

* Since the Layer Shed No: 1 will be vacant after culling of the first batch in the 72nd week and four weeks of cleaning and disinfecting.

Page|117 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Fig: Layout of layer poultry farm with (1+3) rearing system 4.3.2 Broiler Farm: There are two systems of flock replacement/movement in broiler farms. 'All in All out' system: Envisages introduction of second/subsequent batches only after the first/previous batch of birds are sold out. In this system only about 5 batches of broilers can be raised in a year. 'Relay cycle’ system: In this system fresh batches are introduced either at weekly or fortnightly intervals. When the batches are introduced at weekly interval, the unit should have eight sheds whereas in case of fortnightly batches, the unit should have four sheds. Since the 'relay cycle system' ensures a regular replacement of flocks resulting in continuous flow of income, this system should be encouraged from the view point of recovering

Page|118 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

loan installments periodically and promptly.

Fig: Layout of a broiler poultry farm with fortnighty cycle 4.3.3 Batch interval Keeping the house empty between two batches is very important. An ideal period of three weeks is suggested, which is required to clear the debris and conduct through disinfection. The pathogens are known to remain viable for years. Mud, manure piles or any accumulation of filth around the shed will provide the base to harbor the pathogens. Some germs spores which are resistant against weather conditions. After thorough disinfection, a further reduction in contamination is expected from the natural progressive death of large proportion of microbes in the absence of birds. In short, the entire operation takes three week in all, first week for cleaning, the second for disinfection and disinfestation, and the

Page|119 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

third for resting the shed. No extra advantage is obtained by prolonging the rest period beyond three weeks if disinfection is thorough. 5.0 Cost components 5.1 layer farm: • For construction of brooder/grower and layer sheds, feed store, quarters, water tank etc. • For purchase of poultry equipment such as cages, feeders, waterers, brooders etc. • For creating infrastructure items for supply of electricity, feed, water etc. • For purchase of day old chicks or ready to lay pullets. • For meeting working capital requirement in respect of feed, medicines and veterinary aid etc. for the first 5 to 6 months (i.e. till the stage of income generation). • The Cost of land is not usually considered for loan. 5.2 Broiler Farm: • For construction of broiler sheds • For purchase of equipment • Cost of one day old chicks, feed, medicine and labor cost for the first cycle • Cost towards land development, fencing, water and electricity • Essential servant’s quarters, godowns, transport vehicles • Broiler dressing, processing and cold storage facilities can also be considered for providing loan. • Cost of land is usually not considered for loan. 5.3 Investment needs of Hatcheries: • Construction of fumigation room, egg cooling room, vaccination and packing room, etc. • Equipments like air conditioners, refrigerators, incubators • Electric generator is necessary d. trolleys for transportation

Page|120 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

6.0 Critical Points for Appraisals

Poultry farming demands continuous and close attention and management. The 6.1 prospective borrower should therefore have the required aptitude, knowledge and commitment.

While undertaking the visit the RM should ascertain the following: • Sufficient space will be available for constructing poultry sheds as per requirements, store room for feed, etc., • Availability of water and electricity • Located in a calm area free from dust, disturbances and noise pollution • Veterinary care is available easily and on a regular basis.

6.2 • Suppliers of chicks feed, etc., as well as major buyers from the unit should be within reasonable distance and proper transport facilities should be available. • Sites where high tension electric wires are passing overhead should be avoided • Regular and constant demand for eggs and proximity of the farm to the market should be ascertained. • The distance between two poultry farm is more than 500 Mtrs.

Many hatcheries follow franchise model of business. Under the model major hatcheries develop their own strains and give out franchise to units to produce chicks in their hatcheries. When dealing with a proposal to finance a franchisee, the 6.3 branch should scrutinize the franchise agreement to ascertain the territory, number of birds, shed designs stipulated, equipment to be used, technical staff to be employed, support available from franchiser, buying / marketing arrangements, etc.,

A good practical training and experience on a layer farm will be highly desirable, 6.4 before starting a farm.

Branch officials should undertake pre-sanction field visit without fail to assess the techno-economic feasibility of the project. The proposal when submitted for sanction should be accompanied by the Pre-sanction Field Inspection Report. Pre- 6.5 sanction visit should be carried out before asking any documents from the client. Prima facie, basic documents can be checked (viz. land records) to verify if any charge of other Bank is noted. if there is no charge, then a visit may be conducted. If visit observations are satisfactory, borrower may be given checklist of documents.

Suitability of climate: The climate should be suitable for optimum broiler/egg production. Atmospheric temperature of 70-75 °F is ideal for layer/broiler farm and it should not generally exceed 105 °F. Excessive temperature causes decrease in egg 6.6 production in case of layers and results in increased production of unfertilized eggs in case of hatcheries. In areas where the temperature shoots up beyond 105 °F. the proposal should provide for sprinklers (foggers), curtain etc. so that birds will not

Page|121 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

be exposed to excess heat.

6.6 Potentiality of the area should also be considered.

The selected site should have adequate source of water, electricity and an all- 6.7 weather road. There should not be any water logging and it should be easily drainable.

Adequate supply of balanced poultry feed and the reputation of the suppliers should be ascertained. Price of the feed should also be compared and the branch should be satisfied that prices are reasonable. In respect of big poultry units, 6.8 backward integration by setting up of own poultry feed units should be encouraged as this will minimize the cost of feed and result in overall improvement of the project’s financial viability.

The branch should also consider availability of healthy chicks from nearby 6.9 hatcheries.

Based on the pattern of flock replacement explained above and the total strength of 6.10 the birds, number of poultry sheds to be constructed has to be decided. Depending on the rearing system (deep litter or cage), the type of shed will also vary.

In case of bigger operations, provision of housing for key staff and maintenance 6.11 personnel may also have to be considered.

Where equipments like automatic feeder, etc., are to be purchased, the supplier’s track record should also be considered. For large units, as far as possible automated 6.12 equipment should be considered to minimize the manual handling of feeds and water.

Availability of veterinary care is essential for a poultry farm. The project report 6.13 should include provision for the same and should clearly state the arrangements that are planned to make proper veterinary care available. Term loan to a poultry unit may include the following: • Construction of poultry shed. • Egg/feed store room including electrical fittings. • Installation of cages. • Other poultry equipments. • Feed plant (wherever required). • Double setters, hatchers, refrigerator and other machinery (in case of hatcheries). 6.14 • In case of layer farms, it will be in order to give the working capital required for the first six months as a component of the term loan. • In broiler farms adapting All-in-All-out system, cost of the first batch including rearing charges up to 8 weeks can be made a component of the term loan, for units following Relay Cycle system cost of all eight batches up to 8 weeks can be considered for term loan. The rationale is that the cost of the first batch become the core working capital for the unit and can therefore be considered for long term financing.

Page|122 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

• For hatcheries, their working capital requirement for the breeding farm and also other miscellaneous expenses for the first 6 months, (till commencement of commercial production of one day old chicks) will be considered for term loan.

Working Capital loan to a poultry unit may include the following: • Purchase of chicks • Poultry feed • Medicines for the birds 6.15 • Salaries & Wages • Other overheads • In case of hatcheries, financial requirement for both production and hatching of eggs can be considered for assistance.

For layer / broiler units already in operation only working capital requirement should be considered. Assistance can be extended either as short term loan for each 6.16 batch with bullet payment falling due before the batch is sold / culled or as normal cash credit limit worked out on the basis of inventory and other production expenses.

Feed cost is the most important factor (accounts for about 70%) that has a bearing on the viability of a poultry unit. Hence, utmost care has to be taken to assess the quantum and its cost in a realistic manner. An indicative feed and water requirement of a poultry layer is given below :

Age in Type of Feed Feed Consumed in Water Weeks Kgs Requirement / Day 6.17 Deep Cage Litter 0-8 Chick Mash 2.5 2.5 150 ml (20-25% protein) 9-20 Grower Mash 5.75 5.0 225 ml (18-20% protein) 21-72 Layer Mash 40 38 300 ml (16% protein)

Normal sources of income for poultry units are sale of eggs, chicks, manure, gunny bags and culled birds. It has been calculated that mature laying hen 2 kg bodyweight produces, on an average, about 42 liters weight of 0.036 tonnes a year. 6.18 A modest flock of 20,000 layers produces more than 700 tonnes of manure per year. Poultry house litter accumulated over period of 9-12 months is balanced organic manure par excellence.

When considering a proposal for construction of sheds, it must be ensured that the 6.19 end walls face east and west so that direct sun rays do not fall into the shed. Sheds should afford good ventilation. The sheds should be constructed as per the

Page|123 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

specifications and should be free from rodents and predators. They should be also free from draft winds non-marshy. When multiple sheds are constructed a distance of at least 40 feet should be kept between sheds in the same sector. The distance should be about 150 feet between growing and laying units. This will help better ventilation and also prevent spread of diseases.

Sheds should have sufficient space to facilitate healthy rearing of the birds. The branch may keep the following space requirement table as a base to cross check if the project provides adequate shed space vis-à-vis the number of birds to be handled.

Age in Stage Floor Space Requirement Weeks 6.20 Deep Litter Cage 0-4 Starter 0.50 sq.ft 0.25 sq.ft

5-8 Broiler 1.00 sq.ft 0.50 sq.ft

An overhang of 3 to 4 feet is to be provided to prevent entry of rain water into the shed.

It is very essential for adequate selling arrangements to be in place. Except in case of very small units, it should be ascertained that there are tie-ups with Poultry Development Corporations, hotels, etc., and that the borrower has a good 6.21 distribution and collection mechanism in place. It should be our endeavor to have an agreement with the buyers to remit sale proceeds directly to the borrower’s account with us.

Gestation period for term loans to layer units can be up to 18 months while in case of broiler units the period can be shortened taking into account the fact that cash 6.22 flows in case of broiler units will start much earlier. However while fixing the repayment installments, it should be ensured that the borrower is left with enough funds to meet further running expenses including purchase of chicks.

The AO should inspect the poultry unit at least once in 3 months. However the visits instead of being routinely planned should be coincided with the arrival of replacement stock whenever possible so that the RM can see the process and satisfy himself about the level and efficiency of activities. Similarly, a visit just before sale of broilers (in case of All in - All out system) or culling in case of layers, a visit may be undertaken with a dual purpose of knowing the flock strength and also the 6.23 condition of the birds to be sold out and reminding the borrower about repayment since the borrower would receive bulk amount immediately after selling the birds. In case of big units, this amount can be substantial and the branch will do well to be on top of these transactions to ensure that the proceeds are received in our account. The following three inspection report forms could be need for documenting the visit observations at various stages:

Page|124 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Annexure C- Pre – sanction inspection report for poultry units Annexure D - Post – sanction inspection report for poultry units Annexure E - Post – sanction inspection report for completed poultry units

It should be ensured that the borrower maintains batch-wise records/registers giving details of flock strength, feed consumed, veterinary care including 6.24 vaccination given, mortality, eggs produced etc. Such records should be verified by the branch officials during their unit visits.

The conceptual notes for techno – economics of poultry projects along with 6.25 technical norms for poultry loans given in Annexure – A & B could be used for comprehensive appraisal of poultry projects.

Conceptual Notes for Techno Economics of Poultry Projects Concept Index

Sl. No Particulars 1.0 Growth and Production 1.1 Age at sexual maturity 1.2 Body weight 1.3 Body Size 1.4 Body weight to shank length 1.5 Growth 1.6 Laying ability 1.7 Rate of egg production 1.8 Egg weight 1.9 Egg quality 1.10 Hatching of eggs 1.11 Fertility and Hatchability 1.12 Viability 1.13 Incubation 1.14 Hatchery management 1.15 Sexing of Chicks 2.0 Feed Management 2.1 Feed ingredients 2.2 Economizing feed cost 2.3 Feed efficiency 3.0 Processing, Preservation and Marketing 3.1 Egg quality & Grading 3.2 Egg marketing 3.3 Distribution channels 3.4 Poultry meat 3.5 Preservation and poultry meat

Page|125 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

3.6 Poultry by products 4.0 Poultry Diseases Conceptual Notes for Techno Economics of Poultry Projects 1.0 Growth and Production Egg production is one of the most important economic traits in domestic fowl. A modern commercial layer starts laying around 20 weeks of age and continues to do so till it dies. Rate of egg production varies with age and declines below the economic level after first laying cycle. Commercial layers therefore, are rarely maintained after first laying cycle i.e. after 72 weeks of age. Commercial layer's laying as high as 300 eggs during the first laying cycle is not uncommon at present. Peak production in each cycle is usually reached in about 6 to 8 weeks from the first egg is laid after which rate of production declines. Considerable variation is noticed among breeds/strains/lines with respect to magnitude and duration of peak production and decline thereafter. Egg production is measured either as number of eggs or per cent rate of lay. Each of them can be expressed in three different ways such as hen housed. hen day, and survivor’s. Hen Housed egg number is calculated by dividing the total number of eggs produced by the number of hens housed in the laying pens. Hen day egg number is calculated in a similar manner but by obtaining the bird numbers on the basis of functional days basis. Hen housed egg production does not take mortality into account, whereas hen day egg production takes into consideration the mortality by accounting for the number of days performed by the birds that died. Survivor’s egg production refers to the average number of eggs laid by each survivor and is calculated by dividing the total number of eggs laid by survivors by the number of surviving birds. Hen housed production provides a better picture about the economic production performance of a flock than the other two. Genetic factors like age at first egg, persistency, intensity or rate of lay, broodiness and pauses; and environmental factors like season, age, disease conditions, nutritional regimens and duration and intensity of light, affect egg production in chickens. 1.1 Age at sexual maturity A pullet is considered to be sexually mature when it lays her first egg. Early maturing birds are likely to produce more number of eggs during the given period than the late maturing pullets. Light breeds like Leghorn mature early compared to heavy/dual purpose breeds i.e. New Hampshire, RIR etc. Age at sexual maturity in chickens is in itself it quantitative trait and some of the genes influencing this trait are located in sex chromosome. Hence, early

Page|126 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

maturing commercial pullets can be produced by use of early maturing male line as male parent in the production of commercial crosses. Age at sexual maturity is moderately heritable and positively correlated with egg weight. Hence, egg size is poor in early maturing birds. Too early maturity therefore, may not be a desirable phenomenon in commercial layers. 1.2 Body weight Cost of feed alone accounts for more than 70% of the total cost of producing eggs. Feed given to a bird is used for body maintenance, growth and production of eggs. Large birds require more feed for maintenance than small birds. More feed is also required to produce larger eggs. Other conditions remaining same the birds which require less feed for body maintenance therefore will be preferred for commercial egg production. Feed efficiency is calculated in two different ways i.e. kg of feed required to produce one dozen eggs or kg of feed required to produce 1 kg of egg mass. There are differences among breeds/strains/families with respect to feed consumption and feed efficiency. 1.3 Body size Large body weight is of primary importance in broilers. Small or intermediate body weight is preferred in layers, although optimum body size is essential in egg laying chicken to obtain eggs of satisfactory size. Body weight at all ages is highly heritable and can be improved by mass selection. Body size involves both bones and fleshing. Bone size is more heritable than degree of fleshing. Husbandry practices like feeding, management and disease have a large effect on fleshing and a small effect on bone size. 1.4 Body weight to shank length Conformation refers to body proportions and is more important in broilers and turkeys. It is of secondary importance if broilers are not sold as whole birds. Both bone structure and fleshing influence conformation. It is measured either by ratio of body weight/shank length or by 'body weight/shank length. 1.5 Growth Rapid Juvenile growth is very essential in meat type birds. It helps to reduce the cost of production by saving labour, time and feed. Growth rate is fairly high up to approximately 12 weeks of age in broilers. 5 weeks of age in quails and 16 weeks of age in turkeys after which it slows down. Growth rate is moderate to highly heritable and can be improved by mass selection. 1.6 Laying ability Persistency is measured in terms of moulting performance of the laying hens

Page|127 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

during which old feathers are replaced by new feathers and there is complete or partial cessation of egg production. According to the most poultry men, the onset of moulting should take place after 365 days from the age at first egg or approximately at 72 weeks of age. Layers which continue to lay till this age or beyond is said to have good persistency. On the other hand moulting occurs much earlier in the production cycle in poor layers. Persistency therefore, provides a measure of laying ability. To improve persistency, selection should be practiced on the basis of annual egg production and not on part record egg production even though part and annual record egg production are positively correlated genetically. 1.7 Rate of egg production Intensity or rate of egg production is measured by the number of eggs laid by a hen during a standard time interval or by percentage of eggs during a variable time interval. Both total number of eggs and rate of lay are important for a commercial poultry man. The rate of lay is lowly heritable compared to egg number. Some workers have used clutch size as indicator of intensity of lay. Clutch is usually longer and interval between clutches is shorter for the good layers. Clutch as a trait is moderately heritable. This trait as a criterion of selection is not much in use as there is a great variation in clutch size not only between the birds but also between different clutches of the same bird.

Page|128 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

1.8 Egg weight Egg weight is an important economic trait, only next to egg production in commercial laying stocks. Very often egg weight and egg size have been used in the literature to mean the same thing. This is because both egg size and egg weight are directly related to each other and higher the egg size the more is the egg weight in freshly laid eggs. Among the environmental factors that have been known to influence egg weight, temperature of the air inside the house is most important. High ambient room temperature has an adverse effect on the size because of decline in food intake of the birds. Egg size increases with age. The first egg laid is the smallest in size and is about 75% of the maximum weight that can be reached. There are reports to suggest that birds housed in cages may lay eggs larger than those housed on deep litter. Egg weight increases after moulting. The major advantages of forced moulting are not only the increase in rate of lay but also increased egg size. 1.9 Egg quality External quality of eggs is judged from its colour, shape, texture and breaking strength (or shell thickness). The internal quality is assessed from the quality of albumen, yolk and presence of blood and meat spots. Most of the egg quality traits are highly heritable White and brown are the two most common egg colours. Colour does not make any difference in the nutritive value; some people however prefer brown-shelled eggs to white shelled eggs. As egg colour is a characteristic of a breed, the breeding material has to be different depending upon the preference of the shell colour are usually selected against these. 1.10 Hatching of eggs Hatching of eggs refers to the production of baby chicks. In early days eggs were hatched by placing them under broody hens. Desi hens proved to be ideal for this purpose. Only 10 to 12 eggs can be put under one hen. This method of hatching is highly unsatisfactory for large scale production of baby chicks. Incubators, which provide similar environment as that of broody hens, but more efficiently, are used at present for hatching of eggs. Embryonic development has already started by the time the fertile eggs are laid. To prevent further embryonic development outside the body fertile eggs should be collected as frequently as possible and stored in a cool place, especially so in hot and rainy months. Optimum temperature for holding the fertile eggs before incubation varies from 50 to 70° F (10.0 to 21.1° C). Better results can be obtained when eggs are stored for 7 days or less at 60° F (15.6° C). When eggs are stored for more days storage temperature should be

Page|129 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

around 50° F (10° C). When temperature is too low eggs do not hatch well. Duration of storage after a week is inversely proportional to % hatchability. Relative humidity of storage chamber should be maintained at 70 to 80% as less humidity promotes loss of water from eggs. Soiled or dirty eggs should not be used for hatching; when used they should be properly cleaned with a dry cloth before storage. 1.11 Fertility and hatchability Fertility and hatchability for a flock are expressed in percentage in relation to total eggs set. Hatchability can also be expressed in percentage as a proportion of fertile eggs set. Differences have been reported among breeds, strains, family and individuals within a family. Inbreeding depresses while outbreeding increases. Age of birds, season, nutritional status of flocks, diseases and management conditions affect both fertility and hatchability. Artificial insemination and mating in single sire pens is advocated to overcome preferential mating and social order. Flocks in high rate of lay have better fertility and hatchability. 1.12 Viability Viability is one of the most important economic traits of domestic fowl. It is expressed as percentage in relation to the total number of birds housed. Viability to a great extent depends on the incidence of the diseases in the flock. The onset of the diseases not only causes mortality but also morbidity causing drop in egg production and reduction in growth rate and quality of eggs and carcass. 1.13 Incubation The physical factors necessary for successful incubation are temperature, humidity, gaseous environment and turning of eggs. Optimum and uniform temperature inside the incubator is very essential for obtaining satisfactory results. The incubator temperature should be maintained as recommended by the manufacturer. It usually varies from 99.5 to 100.5° F (37.2-37.8° C) for forced draft-type incubators and about 1° F higher for still air incubators. Low temperature slows down the development of embryo and higher than optimum temperature hastens the embryonic development. When abnormal temperature conditions extend over a long period, hatchability is adversely affected by increase in embryonic mortality and weak and deformed chicks. Humidity in the incubator affects hatchability. Dry and wet bulb thermometers are used for measuring humidity. In fowl, egg takes about 21 days to hatch. The relative humidity should be around 60% during the first 18 days of incubation and 70% in the last 3 days for optimum hatchability. In the

Page|130 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

forced draft type incubators the temperature requirement decreases as the humidity increases. 1.14 Hatchery management At the beginning of hatching season the incubator and hatchers should be thoroughly checked for their functioning and defects, if any, rectified. They should be properly cleaned, disinfected and fumigated to kill disease organisms. Hatching eggs should be cleaned and fumigated before storing and after transfer of eggs to the Hatcher. This reduces the incidence and spread of diseases. Fumigation is usually done with formaldehyde gas using 40 ml of 40 % commercial formalin and 20g of potassium permanganate for each 2.8 m3 of space inside the incubator or Hatcher. Potassium permanganate may be placed in a glass or earthenware container and formalin poured over it. Fumigation should preferably be done at the end of the working day and then the rooms closed. It is a good practice to start the incubator and the Hatcher at least 24 hours before setting of the eggs to maintain a constant temperature. Entry to the hatchery complex should be restricted as far as possible. Persons working in the hatchery should use showers, change clothes and shoes before entering. Receipt of eggs from the farm and the delivery of chicks should be away from each other to reduce infection. When electric supply is uncertain use of a standby generator is advocated. 1.15 Sexing of chicks Sexing of chicks when day-old has been the most common practice with the hatcheries dealing with egg-type chicken. Japanese or vent method of sexing is commonly used. This involves identification of rudimentary testes in the cloaca of male chicks. 2.0 Feed Management Feeding constitutes the fundamental and major management concern in poultry production since major expenditure (60-70%) in poultry raising is feed cost. Efficiency in feeding therefore is one of the key factors for successful poultry production. More than 40 nutrients are required by the poultry. They can be arranged into six classes according to their chemical nature, functions they perform and the ease with which they are chemically determined. These groups of nutrients are: water, proteins, carbohydrates, Fats, minerals and vitamins. Carbohydrates and fats are the principal sources of energy. Fats are

Page|131 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

the concentrated form of energy and yield 2.25-times more energy than carbohydrates on weight basis. Fats are also the source of essential fatty acids. i.e. linolenic and arachidonic acids. The requirement for protein is essentially the requirement for amino acids. The essential amino acids for poultry are: arginine, glycine, histidine, leucine, isoleucine, lysine, methionine, cystine. phenylalanine, threonine, tryptophan and valine. Out of these, arginine, lysine, methionine, cystine and tryptophan are critical amino acids in practical diets. Minerals and vitamins do not supply energy but they play an important role in the regulation of several essential metabolic processes in the body. The minerals and vitamins that are critical in practical poultry diets are:

• Minerals: Calcium, phosphorus, sodium, copper, iodine. iron, manganese and zinc.

• Vitamins : Vitamin A, Vitamin D3, Vitamin E, pyridoxine,

riboflavin, pantothenic acid. Niacin, folic acid, B12 and choline. A balanced ration is the one which will supply different nutrients in right proportions according to the requirements for maintenance and various productive functions. The nutrients required by poultry must be supplied in rations through the ingredients available in sufficient quantity economically. 2.1 Feed Ingredients Conventional poultry rations usually include many cereals like maize, rice, wheat, oat, barley; and a few cereal by products such as wheat- bran or rice polish, animal and vegetable protein sources like fish- meal, meat-meal, soybean-oil-meal, ground nut-cake, etc. according to their availability. The whole ration is fortified with adequate quantities of minerals and, vitamins either in chemically pure form or through ingredients known to be rich in these nutrients. With the cost of feed soaring high and the availability of conventional ingredients becoming scarce, intensive and continuous efforts are being made to determine the nutritive value of agro industrial byproducts to replace more costly ingredients in poultry rations. The following are some of the common feed stuffs used for making poultry rations in this country. • Maize: It is highly digestible and contains very little fibre. It is used as a source of energy and is low in protein, especially lysine, and sulphur- containing amino acids. The yellow varieties are a good source of vitamin A and xanthophyll. The

Page|132 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

latter is responsible for the yellow skin in certain breeds of fowl. • Barley: Barley is not very palatable because of its high fibre content and should not constitute more than 15% of the ration. • Oat: Oat is not very palatable because of its high fibre content. It should not constitute more than 20% of the ration. Because of its manganese content, it may help in preventing hock disorders, feather pulling and cannibalism. • Wheat: Wheat can be used for replacing maize as a source of energy. • Wheat bran: It is bulky and quite laxative on account of its high fibre, manganese and phosphorus content. • Pearl millet: This is a very useful feed stuff, similar to wheat in its nutritive value. • Rice: Broken grains of rice can be used for replacing maize. • Rice polish: This is a very good substitute for cereal grains and can be used up to 50% of the ration. Because of the high oil content, it is likely to become rancid on storage under warm conditions. • De-oiled rice polish: Energy content of de-oiled rice polish is low because of the removal of fat but it is rich in protein and ash content. • Sorghum: The feeding value of sorghum is similar to that of maize. But it has higher protein content, quite palatable and may be used in place of maize. Sorghum-meal is a good source of some amino acids, but costlier than other oilcakes. • Groundnut-cake: It is quite palatable and is widely used as a source of protein in poultry rations. It contains about 40% protein. • Fish-meal: Fish-meal is one of the best poultry feed stuffs and a good source of animal protein. Its composition varies widely depending upon whether it is made from whole bony fish or fish cannery scraps. The presence of fish scales reduces its feeding value. • Lime stone: Lime stone is a source of calcium. It should not contain more than 5% magnesium. • Oyster shell: Oyster shell contains more than 38% calcium, and

Page|133 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

is a good substitute for lime stone. It is quite palatable. 2.2 Economizing feed cost Keeping the feed cost low and at the same time providing a balanced diet to poultry has been the main concern of both the poultry producer and the feed manufacturer. Economization of feed cost without impairing poultry production can be achieved by formulating low-cost diets by appropriate selection of feed ingredients. by imposing feed restriction at the desired level, by minimizing feed wastage, by making nutritional adjustments during extreme weather and by reducing stress and diseases. Nutritional requirements for various classes of poultry have been described in detail in ISI bulletins and also in several textbooks. There is no single feed formulae which can be claimed to be the best in all the cases. The primary consideration in mixed feed is whether the feed fulfils the nutritional requirements adequately consistent with economy 2.3 Feed efficiency Feed efficiency is a ratio of feed consumption to weight gain in broilers. Better understanding about the nutritional requirements and formulation of high energy rations has contributed significantly in improving feed efficiency. Feed efficiency although moderately heritable is laborious to measure. Most of the improvement in feed efficiency in commercial stock has been achieved as a correlated response to selection for high growth rate or egg production. Feed efficiency in layers is measured either as amount of feed consumed in kg to produce a dozen of eggs or as amount of feed consumed in kg/kg egg mass. Small bodied birds are considered to be most efficient for egg production as they consume less feed. It is possible to measure feed efficiency in laying stocks simply by measuring egg mass output and body weight without direct measurement of feed consumption. 3.0 Processing, Preservation and Marketing Poultry and poultry products are highly perishable. Hence due attention has to be paid to the problems relating to processing, preservation and marketing of poultry and poultry products for the benefit of producers, processors and consumers alike. The important quality attributes of egg size, cleanliness and soundness of shell, albumen and yolk quality nutritive value, the wholesomeness, functional properties etc. Shell colour is determined by the breed of the hen. Egg size can be adversely affected by inadequate level of protein and essential fatty acids in layer’s diet and high environment temperature.

Page|134 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

3.1 Egg quality and Grading The quality of egg starts deteriorating soon after it is laid unless proper care is taken to maintain it following better methods of assembly, cleaning, grading, packaging, storage, transport and distribution. Grading is the classification of eggs into different categories. It aids in reducing wastage, facilitates uniform packing and pricing, and quality assurance to the consumers. Egg grading involves inspection of the shell for cleanliness and soundness, checking the internal quality such as firmness of albumen, position of yolk, blood-and meat-spots, and the size of air cell and sorting them into categories on the basis of weight. Eggs can be individually or flash candled to detect the above defects. 3.2 Egg Marketing The wholesale trade of eggs in big cities, where potential demand exists, is in the hands of a few traders who have monopolized this trade for their own advantage. Egg prices vary from one market to another and from one season to another. In summer, the egg prices crash down to a level which is sometimes less than the cost of production. even though the retail price does not vary proportionately. Therefore proper attention has to be given to the problem of most efficient disposal of market eggs. 3.3 Distribution Channel The eggs are distributed through different channels, viz. producers to consumers, producers via retailers to consumers, producers via assemblers to consumers, wholesalers, retailers to consumers, and producers to consumers via co-op societies/egg marketing organizations. Eggs should be distributed through relatively shorter channels to speed up supply and avoid delay and repeated handling. 3.4 Poultry Meat Poultry meat is of high nutritional value and is easily digestible. Its protein content in general is higher than in most of the red meats. Chicken meat contains all the essential amino acids and qualitatively compares closely with milk and egg proteins. It has less fat than other red meats. Oleic, linoleic and palmitic acids are the major fatty acids which constitute about 97% of the total fat. Carbohydrates contribute to a small portion of the total nutrients present in chicken meat and it is a good source of B vitamins, iron and phosphorus. 3.5 Preservation of poultry meat The primary objective of poultry meat preservation is to inhibit microbial spoilage and arrest physio-chemical processes which bring deterioration in

Page|135 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

quality. Several methods such as refrigeration, freezing, smoking, curing and smoking, dehydration, freeze-drying, canning and radiation are being used to preserve meat. Antibiotics are also sometimes added to preserve raw meat. The tough meat of culled and spent layers and breeders can be made tender by using various proteolytic enzymes either alone or in combination. Enzyme solution with combination of salt and polyphosphates appears better for tenderization of poultry meat than enzyme alone. 3.6 Poultry by products In a poultry processing unit around 27% to 29% of raw materials go as waste in the form of blood, feathers, heads, feet and viscera. Hatchery wastes include infertile eggs, dead embryos, empty egg shell, unhatched chicks and unusable chicks. Similarly in egg processing units around 11% of raw material as shell and around 5% as unsound eggs are obtained. Large quantities of wet droppings from cage houses are also available. Processing and utilization of these byproducts will not only reduce the cost of poltry production but also solve the disposal problem and pollution hazard. A good deal of work has been done for processing of these byproducts into feather- meal, poultry byproduct-meal, hatchery byproduct-meal, egg shell-meal, albumen flake dried, poultry manure etc. for poultry feeding. 4.0 Poultry Disease The profit from poultry farming is greatly dependent on the incidence of diseases in the flock. The onset of diseases not only causes mortality but also morbidity. Although significant progress has been made in the control of diseases of baby chicks and growing birds mortality, especially of the laying flock, still remains as one of the great challenges to the poultry breeder. Poultry diseases may be classified either as infectious or non-infectious. Non- infectious diseases are caused by faulty management. Faulty feed formulation and inadequate diet may be responsible for nutritionally deficient diseases. Infectious diseases are classified according to the type of disease-causing organism described below. • Parasitic : External parasites: lice, mites, ticks and fleas • Internal porosities : Roundworms, tapeworm and hexamitiasis • Protozoan : Coccidiosis in chicken, black-head in turkeys, and Ieucocyto- zoonosis • Bacterial: Pullorurn, typhoid, paratyphoid, fowl cholera. Arizona infection in turkeys etc.

Page|136 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

• Viral: Ranikhet disease, fowl-pox, infectious bronchitis, infectious Iaryngo- tracheitis, infectious bursitis, avian encephalomyelitis, Marek's disease, leukosis, chronic respiratory diseases, duck virus enteritis, hepatitis etc. • Fungal: Aspergillosis, Moniliasis In commercial poultry production treatment of individual bird is not possible. Hence the golden rule "Prevention is better than cure" more appropriately applies to poultry than any other livestock species. As the poultry industry is growing very fast hazards of the diseases are obviously great. Efficient diagnostic methods are available for some of the common killer diseases like Ranikhet, and also prevention and available control measures are very successful.

Page|137 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

ANNEXURE - B Technical norms for poultry loans: The decision to establish a poultry farm by the beneficiary shall be after due consultation with local technical persons of veterinary department, poultry promotional agency, private commercial hatcheries in the area. If possible, the farmer should also visit the progressive poultry farms in the area and discuss the profitability of poultry farming. A good practical training and experience on a poultry farm will be highly desirable, before starting a farm. A regular and constant demand for eggs or broilers and nearness of the farm to the market should be ensured. The proposal should include information on land, water and electricity facility, marketing aspects, training facilities and experience of entrepreneurs and the type of assistance available from government, Poultry promotional agency and local hatcheries. It should also include data on proposed capacity of the farm, total cost of the project, margin money to be provided by the beneficiary, requirement of bank loan, estimated annual expenditure, income and profit and the period for repayment of loan and interest. It is always advisable that the entrepreneur undergoes the training normally given by the concerned departments or the Veterinary Colleges. This helps in early identification of any disease and avoids its spread; otherwise it is like to be fatal to the unit. For obtaining bank loan, the farmers should apply to the nearest branch of the bank in their area in the prescribed application form. The Technical Officer or the Manager of the bank can help/give guidance to the farmers in filling up the application form to obtain bank loan. For poultry schemes with very large outlays, a detailed project report will have to be prepared. Technical Feasibility would include basis for working out project costs, various technical aspects including facilities and infrastructure available for supply of inputs, veterinary aid, marketing and training/experience of the beneficiary. Illustrative, the critical technical aspects to be examined are listed below:

• Climate and temperature of the area. • Experience of the farmer. • Availability of land and land condition. • Availability of electric supply. • Availability of day - old chicks. • Availability of poultry feed. • Availability of clean potable water. • Availability of construction material for sheds, civil structures and other accessories. • Availability of poultry equipments.

Page|138 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

• Availability of technical services/guidance/poultry vaccines and medicines. • Availability of transport and marketing. Land:

• Layout map with dimensions indicating placement of different civil structures. • Need for fencing; provide proper estimate of the cost. • Justification for land development / internal roads, if investment for these is considered; • Engineer’s estimates/ cost. • Minim distance required from the existing farm: 500 mtrs • Site condition: Should be dry, without water logging, well drained and properly accessible. Water Source: • Existing source of water, if already available/potability of water / • quantity available etc. (Water testing report is essential) • If investment for water source is to be included in the project cost, requirements”: o Ground water survey report, Estimate / design for construction of well, Horse power and cost of pumpset, length and diameter of pipelines and their estimated cost Civil Structures: • Details about individual poultry sheds and civil structures with engineer’s maps and estimates Shed Construction: • Type of sheds - Deep Litter or Cages. • Distance between Brooder shed, grower shed and layer shed - 100 ft. from each other • Distance between two layer sheds - 70 ft. • East West orientation o Height of shed 16 ft - 22 ft. o Maximum width - 35 ft. o Length - 100 - 400 ft. • Roof - Tiled / light roof / Asbestos • Feed mixing unit to be minimum 300 ft away from sheds. System of Rearing:

Page|139 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

• Deep litter system - Ideal for Broilers & Breeder Stock (Purelines, Grand- parents & Parents) of Layers & Broilers • Cage system - Ideal for Layers

FLOOR SPACE NORMS : • SHEDS: (in Sq. Ft.)

No Civil Structures Layers Broilers Deep Litter Cage Deep Litter Cage System System System System 1 Brooder shed 0.5 0.40 -- -- (0- 8 Weeks) 2 Grower Sheds 1.0 0.70 -- -- (9-20 weeks) 3 Layer Sheds 2.0 0.80 _ _ (21 – 72 weeks) 4 Broiler Sheds 1.0 0.60 (0-8 weeks)

• Floor Space for Civil Structures and accessories Feed Godown 1000-2000 Layers 100 sq ft Egg Storage room 1000-2000 layers 50 sq ft Labour quarters One labour family 150 sq ft Supervisor Quarter One 450 sq ft Burial Pit Depends on the flock size Drying Yard Office Room Other Civil Structures should be discouraged unless requirements are essential and are fully justifiable

• Phasing for Broiler Production: Shed Requirement Weekly Batches 9 (8 weekly batches and extra shed: 1) Fortnightly batches 5 (4 fortnightly batches and extra shed: 1 ) Monthly batches 3 (2 monthly batches and extra shed: 1) All-in-All out system 1

• Physical Programme: • Specify unit size - the total flock is generally bought in batches depending on the availability of sheds.

Page|140 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

• Number of batches to be grown yearly • Interval between introductions of batches etc. - 12 weeks gap is found ideal for replacement of batches. A Bird Flow chart has to be prepared to indicate the movement of batches. • Economic Flock size (for high value new units) The economic size, as per experienced farmers’ view, is 50,000 birds for a layer unit in traditional area. For broilers, the unit size can be determined primarily based on the market potential in the area. Components of Financial Investment:

• Land development, fencing, water source and overhead tank etc. • Investment for construction of poultry sheds, feed godowns, civil structures and other • Accessories. • Investment for purchase of poultry equipment, including feed mixer-cum- grinder. • Investment for purchase of day-old chicks. • Feed cost for rearing the birds upto 72 weeks in the case of layers and upto 8 weeks for • Broilers. • Cost of medicines / vaccines, electricity, water charges, labour etc. • Arrangement For Insuring Birds: Indicative premium rate of insurance for birds, equipment and buildings etc. This is only an indicative and would need update by inquiring with the leading insurance companies Birds Layers LKR 4.23 /Bird Broilers LKR 0.71 /Bird Building & Equipments LKR 0.40 of cost Financial viability would include assessment of unit cost and loan requirement, input costs for chicks, feed, veterinary aid, labour and other overheads. Further, income from sale of eggs, culled birds, manure, gunny bags etc. are worked out. Annual gross surplus based on income-expenditure, profit/loss statement, schedule for repayment of loan and interest is the other calculations. Based on the above workings DSCR and sensitivity are worked out. To work out the technical feasibility and financial viability as above an understanding of the techno economics of the activity is important. The techno-economics of poultry development projects is given in Anenxure-B1.

Page|141 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

The recommended management practice for layer farming is given under Annexure-B2 and a pointer for higher egg production is given in Annexure- B3. A appraisal check list for poultry development loans is given in Annexure-B4.

Page|142 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

ANNEXURE – B1 - Page 1 Technical norms for layer and broiler farms

A. For Egger / Layer

Starter Grower Layer/Breeder (Adult Technical bird) 17 weeks and Parameters 0-8 weeks 9 - 16 weeks above 85°F - 88°F in cage 88°F - 92°F on floor Temperature (chick comfort is the 65°F - 75°F 70°F - 75°F ultimate guide to proper temperature

Space requirements on floor

Floor space 0.5 sq.ft./bird 1.0/sq.ft./bird 1.5 sq.ft./bird 25 bird / feeder when tube feeder and 3 Feeding space 1/25 bird 1/25 bird inches feeding space when trough feeder has been used 2 fountains/100 bird up to 2 weeks after which the number of Watering space 0.75 inches/bird 1 inch (2.5 cm) / bird fountains will have to be increased. After 2 weeks, 75 inches / bird

Space requirement cages

Floor space 44 sq. inches/bird 44 sq. inches /bird 108 sq.inches/bird Feeding space 2 inches/bird 2 inches/bird 3 inches/bird Watering space 75 inches/bird 75 inches/bird 4-6 birds/unit 110-115 gms. Per day Feed consumption 2kg 8kg or, 40kg. Feed for one year of egg production For the first 3 days 24 hours on the light - 8 hr. day length 14 hrs - 16 hrs day Duration of light after 3 days 8-10 hrs. natural light length Electric light constant day length is required. 3-4 foot candles at feed One foot candle at One foot candle at bird Intensity of light and water level bird level level Mortality 5-6% 3-4% 1% per month ANNEXURE – B1 - Page 2

Page|143 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

B. Broiler

Starter Broiler Layer/Breeder Technical (Adult bird) 17 Parameters 0-4 weeks 5 - 8 weeks weeks and above

90° to 95° F in the first week, as the chicks grow Brooding older, the temperature 70°F -75°F temperature may be reduced at the rate of 5°F per week

Floor space 0.5 sq. ft per chick 1 sq.ft./broiler

3 linear inches feeding Chick type linear feeders space per chick or, 5 Feeding space providing 2 inches linear hanging feeders per 100 feeding space until market time

Two - 2 litre capacity chick 2 one gallon capacity Watering space waterers for two weeks waterers per 100 chicks up per 100 chicks to 8-9 weeks of age.

Continuous light upto 8 Thereafter gradually weeks of age - provide reduce to a lower level of Lighting high intensity of light light intensity i.e. 15 w per during first 14 days i.e. 200 sq.ft.floor space. 60w per 200 sq. ft.

Thereafter not needed if Debeaking 10-14 days of age broilers are to be marketed at 8-9 weeks of age.

4-5 % upto the satge of Mortality finisher

Page|144 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

ANNEXURE – B2 - Page 1 Recommended management practices for layer farming Poultry Housing 1. Select well raised land for poultry sheds. Land with hard rock or Muram is more suitable. Avoid water logging and flooding near the sheds. Provide separate sheds for growers and layers. 2. Ensure adequate facility for water, electricity, approach road, supply of chicks, feed, veterinary aid and nearness to market for sale of broilers. 3. Obtain training/experience in layer farming before starting a farm. You should be prepared to stay on the farm and have constant supervision. 4. Provide adequate floor space per bird for construction of poultry sheds is available. 5. Construct sheds in such a way that the end walls face East-West direction and the side walls face North-South direction, so that rain water will not enter the sheds. 6. Provide strong roof and hard flooring. Raise plinth of the shed at least 6" above the outside ground level. 7. Provide 3’ – 4’ overhang of the roof to avoid entry of rainwater inside the shed. 8. Provide at least 20 feet distance between two sheds. 9. Provide adequate light and ventilation and comfortable housing conditions during all seasons (cool in summer and warm in winter). 10. Construct sheds in such a way that predators (cats/dogs/snakes) will not enter the shed. Avoid entry of rats. 11. Keep the sheds clean and free from flies/mosquitoes etc. 12. After every batch of growers/culled birds is disposed off, the dirty litter material and manure should be removed, walls and floors should be cleaned, white washed with lime and disinfected with 0.5% malathion or DOT insecticide spray. 13. If deep litter system is followed, always use dry and clean litter material (sawdust, paddy husk, etc.). Spread 4" layer of litter on the floor, keep clean/disinfect brooding, feeding and watering equipment and then introduce chicks in the house. 14. The litter material should be always kept loose and dry. Stir the litter twice a week. Any wet litter/droppings etc. should be removed and replaced with fresh/clean dry litter. 15. If cage system is followed, ensure that litter is spread with powder lime or 10% malathion spray twice a month to prevent menace of flies. The litter under the cage can be removed after 6 months. ANNEXURE – B2 - Page 2

Page|145 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Poultry Equipment • Use scientifically designed cages and equipment for brooding, feeding and watering purposes. 151 specifications for equipment are available. A good design can be shown and manufactured locally, so that cost can be reduced. • Furnish the details of poultry equipments required together with their costs, source of supply and numbers required etc. Quotations should be enclosed. Some of the basic equipments required for a unit are: • Brooders, Feeders, Waterers, Debeaking Machine. (No separate feeders / waterers required in cage system of housing). • Other Equipments: (a) Feed Grinder, (b) Feed Mixer, (c) Egg Trays, (d) Vehicles for large sized commercial poultry units, (Feed Mill - 0.5 Tones per hour capacity for 10,000 birds; 0.5 KVA Gen. set is essential. Pump set and Overhead Tank). (e) Foggers. Chicks 1 Buy hybrid one day old healthy egger type chicks from a reputed hatchery. Usually 2% extra chicks are supplied. 2 If cages are used for housing of birds ensure proper cage space i.e. half of the recommended floor space on deep litter. 3 Clean, wash and disinfect all equipments with 0.5% malathion spray after every batch of birds is disposed off. Feeding 1. Use high quality balanced feeds. Starter feed (upto 8 weeks of age), grower feed (9 to 16 weeks of age) and layer feed (17 to 72 weeks of age) manufactured by reputed institutions/companies should be used. With proper knowledge/experience, the feed can be prepared at the farm. 2. Store the feed in clean, dry, well ventilated room. A wet feed may bring fungus infection. 3. Use properly designed feeders and control the rats to avoid feed wastage. 4. Provide adequate feeding space per bird. More space is required as the bird grows in age 5. Keep proper records on feed consumption per bird for each batch. About 10 kg. feed upto 6 months and 40 kg. feed from 6 to 18 months of age is required. Excess consumption may be due to feed wastage, rats, low temperature of shed or poor feed quality (low energy feed). Too low feed consumption may be due to disease condition, low quality/unpalatability of feed, high temperature in poultry shed. Watering of Birds 1. Always give fresh and clean drinking water. Water should be always available to birds. 2. Use properly designed watering equipment. Provide adequate watering space per bird Always keep water-pots clean. Avoid birds entering inside pots. 3. Provide cool water during summer. Store the water in tanks that are not exposed to hot sun in summer.

Page|146 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

ANNEXURE – B2 - Page 3 Disease Prevention/Control 1. Clean sanitary conditions of poultry sheds and equipment, balanced feed, fresh clean water, healthy chicks are essential to prevent diseases. 2. Avoid entry of visitors to egger farm, especially inside the sheds. If visitors come, ask them to dip their feet in a disinfectant solution, wash and clean hands and to wear apron/boots provided by the farm. 3. Use proper vaccination schedule. All vaccinations to be completed before 15- 16 weeks of age. 4. Use high quality vaccines purchased from reputed manufacturers. Keep vaccines in cool, dry conditions away from sunlight. 5. Any left-over vaccine should be properly disposed off. Vaccines should not be used after their expiry date is over. 6. Any dead birds should be immediately removed from the shed and sent to laboratory for diagnosis or buried/burnt suitably away from the poultry sheds. 7. The waste of egger farm should be suitably disposed off. Different workers should be employed in brooding and laying sheds. 8. Any bird showing advanced signs of a disease should be removed from the shed and culled. It can be sent to laboratory for diagnosis. Birds showing preliminary symptoms of disease should be shown to a qualified veterinarian and suitable medication/treatment be given as per his/ drug manufacturers recommendations. 9. Poultry manure, if infected, can spread diseases, from one batch to another. Keep the litter dry, remove it after every flock is sold and dispose the manure properly and quickly. 10. Keep proper records on mortality and its causes and the treatment given to birds. Dates of vaccination for each flock should be properly recorded. 11. Rats are important carriers of poultry diseases. Avoid rats. Use suitable rat poisons/ rat traps. 12. Many poultry medicines can be given in drinking water. When medication is to be given, remove the waterers in poultry sheds on the previous evening. Next morning give medicine in measured quantity of water, so that entire medicine will be quickly consumed and there will be no wastage of medicines. 13. Mild infection of a disease may not cause mortality, but it will reduce growth. Keep sample record of body weight for growers, mortality rate and egg production. Study the possible causes, if weight is low or egg production is low and take steps to improve the management of the subsequent batches. A constant vigil and analysis of records/results is necessary to keep up the efficiency in farming.

Page|147 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

ANNEXURE – B2 - Page 4 Processing/Marketing 1. Ensure that constant and steady demand for eggs is available and the market is nearer to the farm. 2. Study the market demand for particular egg weight. Provide one nest box for every 5 birds. Collect eggs from the shed 4 times a day. Store them in a cool dry place and market them quickly. A proper study and record of market demand of eggs and chicken enables the poultry farmer to plan the batch size and the time of each batch. This helps in maximizing the profit. 3. Provide 14 hours total light for layers in 24 hours. Depending "upon day length (sunrise to sunset), provide additional electric light by giving one 40 watt electric bulb for 200 sq.ft. area. Birds should not be kept on the farm beyond 18 months of age, as their egg production will go down considerably and comparatively their efficiency of feed conversion will reduce progressively as they grow older. 4. If live culled birds are transported, use properly designed crates and provide proper space so that there is no weight loss during transportation. 5. If culled birds are sold after dressing (processing) use clean dressing hall and processing equipment. Dressed birds should be chilled in ice- cold water for 3-4 hours and excess water removed. Birds should then be packed in clean plastic bags and the mouth of bag sealed. 6. Processed birds should be marketed as early as possible. If they have to be preserved, deep freezing equipment (-10 to -20°C) be used. Refrigerated vans may be required for long distance transportation.

Page|148 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

ANNEXURE – B3 -Page 1 Pointers for higher egg production 1. Quality Bird Choose the strain that will perform best and is known to have good livability under reasonable environmental conditions. Good chicks may cost more but they will perform better and pay more too. 2. Housing There should be ample fresh air, free from drafts. Air must be circulating. High levels of non-desirable gases decrease growth rate and increase flock's susceptibility to respiratory diseases. Ensure that the litter is dry. A well managed litter helps the birds in putting on feathers and improves feed conversion. It also reduces coccidiosis problems. 3. Crowding Overcrowding increases mortality, stress, increases problems as well as production cost. 4. Feeding Ensure adequate fresh feed always. Birds that are without feed for six hours will record a drop in production and a 12 hour starvation will result in moult of wing feathers. There should be adequate feeder space for the birds. Guard against feed wastage. Maintain records of daily feed consumption. It will enable to determine feed utilization and bird's performance. 5. Watering Provide plentiful and clean disinfected water. This management factor, although obvious, is commonly violated. Water restriction is a quick way to accidentally force the flock to moult. Ensure that the waterers are so placed that they are easily accessible to birds. 6. Lighting The duration of light should be 16 hours per day, but not beyond 17 hours. No advantage is obtained by exceeding this limit. The amount of light given to the flock in one day should never be less than that given the day before. A decreasing day length can prematurely cause hens to go out of production. 7. Vaccination Ensure that all birds are vaccinated for Marek's Disease. Birds not vaccinated are highly susceptible to these diseases.

Page|149 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

ANNEXURE – B3 -Page 2 Debeaking Follow correct debeaking programme. Poor debeaking can adversely affect egg production. Culling Unsuitable and uneconomic birds should be timely culled. Health Watch for early signs of disease for its timely treatment before it flares up in a big way. Some of the symptoms that indicate the onset of disease problems are: • Drop in egg Production and feed consumption • Increased morbidity and mortality • Inactivity and lack of vigour • Droopy ruffled appearance and respiratory distress. Look for any sudden change in egg quality. 11. Sanitation Sanitary measures are of vital importance in poultry operation. Keep roundworms, tapeworms and caecal worms under control. External parasites are a serious farm hazard, and can reduce production if unchecked. Deworming at regular intervals should be practiced. 12. Egg Quality Respiratory and intestinal diseases should be kept under control for the maintenance of quality of egg shells. Indiscriminate use of sulpha drugs can affect the egg shell quality. The use of tetracyclines can, however, improve it. 13. Records A daily record of feed consumption, egg production, mortality, income and expenditure is essential to help improve farming efficiency and pinpoint troubles and their solutions. 14. Routine Checking All critical items of management should be listed on a daily, weekly or seasonal check list. Every item must be checked. It helps to locate the cause of trouble when it occurs. Routine chores are: • Cleaning and refilling of waterers and feeders • Cleaning the house and spraying insecticide • Stirring the litter • Dusting, culling of birds • Egg collection, etc.

Page|150 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Annexure-B4 -Page 1 Checklist for rating good management practices in poultry farms

1.0 Sourcing of Quality inputs Yes No

Day old chicks, which are free from diseases are procured 1.1 from reputed hatcheries

2.0 Feed Management

Adequate, fresh and timely feeding is made available to 2.2 the birds. Six hours without feed will result in a drop in production.

Testing feed ingredients/feeds is being arranged 2.3 regularly to ensure that they are free from microbial agents or toxins.

Storage facilities for feed ingredients/feeds are managed 2.4 hygienically.

Feed manufacturing area (where applicable) is free from 2.5 dust, cobwebs and is equipped with appropriate screens to protect from fly problem.

2.6 Birds are fed with pellets for improved bio-security.

There is a system in place to ensure that sheds having 2.7 infected flocks are served with feed at the end of a delivery day to prevent infection from spreading.

3.0 Water supply

Adequate waterers are placed to give the birds easy 3.1 accessibility to clean and sufficient water.

3.2 Supply of clean and potable water is always available

The unit carries out periodic inspection of wells, piping 3.3 and tanks to ensure that water supplied is clean.

4.0 Medication, vaccination and health management

Proper records of vaccinations administered, diseases, 4.1 treatments and mortality should be kept.

Page|151 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Sourcing of Quality inputs Yes No

Vaccinations is being carried out as per schedule and 4.2 records kept for inspection.

An area specific vaccination schedule as recommended 4.3 by hatchery doctor is practiced with utmost care.

5.0 Lightening and electricity

Lighting for about 16 to 17 hours is available for the 5.1 flock. (A 200 sq.ft area can be adequately lit by a 40 watt bulb).

6.0 Biosecurity, disinfection and hygeine

The unit follows clean practices where visitors are required to dip their feet in disinfectant solution, wash 6.1 their hands and wear aprons / foot wear provided by the farm.

After each batch of birds is culled and disposed off, the 6.2 litter and manure are being removed, the shed cleaned completely and disinfected.

Dead birds are immediately removed and sent for post 6.3 mortem examination if necessary or buried / burnt sufficiently away from the sheds.

Rodent control programme, where ever necessary, is 6.4 adopted by employing mechanical (traps) or chemical techniques along with strict sanitation measures.

After disposal of each flock, thorough cleaning of sheds is done by removing all fixtures, equipment, litter dust, 6.5 debris followed by brooming and burning. The rat holder cracks, worn out area are packed with cement.

Regular thorough cleaning of vegetation at least six feet around the sheds and spraying of bleaching powder (1 6.6 part) with lime (3 parts) around the sheds for a minimum of 3 feet is carried out.

6.7 Litter is not used as manure in the vicinity of the farms.

Page|152 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Chapter – T 7

LOANS FOR MINOR IRRIGATION

1.0 Introduction Minor Irrigation (MI) projects aim to exploit ground water resources (from below the ground level or from over the surface like tanks, ponds, lakes and rivers). Normally schemes comprising several types of works with capacities to irrigate up to 2,000 hectares are categorized as Minor Irrigation schemes. Before undertaking any MI availability of ground water and sustainability of supply over a period of time should be checked. Availability depends mainly on the hydrogeology of the area, the extent and duration of rainfall in the area and the present level of exploitation of water resources in that area. The ground water resources can be assessed in terms of 'safe yield', which is the amount of water that can be extracted annually without producing any adverse effect either by way of progressive decline of water levels or deterioration in water quality. This implies that for the development of ground water resources through institutional finance, availability of adequate quantity of replenishable ground water resources in a defined area, say, block or water basin and its proper assessment by an agency to the satisfaction of bank are essential. 1.1 Components of MI Schemes • Construction of structures like digging of wells, boring, and tube wells, etc. • Lifting the water to ground level through water lifting devices like centrifugal, submersible, turbine and jet pumps • Distribution of water for irrigating the crops through lined channels or underground pipelines. 1.1.1 Open (dug) wells: Open wells, also referred to as Dug well, is an open earth excavation made till sustained quantity of water is obtained for irrigation purposes. Open wells are recommended in areas where shallow water table aquifer exists. An aquifer is a wet underground layer of water- bearing permeable rock or unconsolidated materials (gravel, sand, or silt) from which groundwater can be usefully extracted using a water well. The average depth of dug wells is generally about 30 to 50 feet. Open wells in hard rock areas requiring blasting to a depth of, say more than 50 to 60 feet, may not be remunerative in relation to the cost involved and the quantity of water obtained.

Page|153 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Though the size of the dug well varies depending upon the local practices, it must be borne in mind that the recharge of the well is not directly proportional to the size of the well. To get more yields, the depth of the well can be increased instead of going in for a well of larger size. The depth of a dug well should be such that at least 2 meter water column is available even during the summer months. Similarly the well diameter should be such that a minimum percentage of daily pumpage is provided as storage in the well. While open wells can be dug in red soil areas or in areas which tend to be red or alluvial, sinking of wells in black soils should be done after a careful study of the water quality in the neighboring wells as the water obtained in such well is usually saline and alkaline and no good crops can be raised after one or two years of irrigation. 1.1.2 Dug cum bore wells : A dug cum bore well has the combination of digging open well say up to a depth of 30 to 40feet and boring up to layer or layers of aquifers to tap sufficient quantity of water. Boring can be done in the existing wells of 30 to 40 feet depth also either vertically or horizontally tapping the aquifers to augment the water supply. Dug-cum-bore-wells are preferable in sand stone areas and in hard rock areas. 1.1.3 Tube wells: Tube wells are generally constructed by drilling. The tube well may be a shallow tube well owned by an individual farmer and drilled up to a depth of 50 meters or a deep tube well, drilled normally for the benefit of a community, up to a depth of 200 to 300 meters. Shallow tube wells are found suitable in sand stone areas. Loan for bore-wells should not be given as a matter of course as the chances of failures are high especially in un- surveyed areas. In areas where copious water supply is available and where the bore-wells that have already been dug are proving successful, fresh loan for sinking bore-wells can be considered. Filter points : In deltaic regions/alluvial tracts, where the aquifer is held in coarse sand and gravel, the tube wells are shallow and consist of a well screen and a short length of casing pipe. Such wells are called filter points. 1.2 Water Lifting Devices: Pumping systems, to derive optimum efficiency, should have properly matched pump sets and delivery mechanism. Branches should ensure that only a complete pumping system is financed. Submersible pumps are not covered by the standard. Hence, branches should ensure that only SLS certified submersible pumps are financed.

Page|154 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

1.2.1 A pumping system consists of the following components: § Pumps Centrifugal Pump is one in which an impeller rotating inside a close fitting case draws in the liquid at the centre and by virtue of centrifugal force, throws out the liquid through an opening or openings at the side of the casing. They are most common among the pumps because of their suitability over a relatively wide range of operations. They are more suitable when the pumping is required against a total head exceeding approximately 3 mts but within 6-7 mts. They are simple in construction, easy to operate, low in initial cost and produce a constant supply. They require priming by filling with water up to the top of the casing to initiate pumping. Self-priming pumps are also available. Submersible Pump is a vertical turbine pump close coupled to a small diameter submersible electric motor. The motor is fixed directly below the intake of the pump. The pump element and motor operate while entirely submersed. Submersible pump can be used in very deep tube wells where a long shaft would not be practical. A submersible pump has no working part above surface and hence found suitable in places where construction of pump pits and pump house would be inconvenient. Unlike turbine pumps, its installation is easy. It can be installed even in a well whose inside diameter is as small as 10 cm. It does not require any priming or lubrication. But its use is limited to places where electric power is available. Turbine Pumps are adapted to high lifts and have high efficiency. A multi- stage vertical turbine pump can discharge up to 2000 litres/sec and develop heads up to 500 mts. It can be driven with an electric motor or an engine. It is more sturdy but costlier than a submersible pump of identical capacity and head. Its installation is more difficult. Turbine pumps are specifically adapted to tube wells where the pumping water level is below the practical limits of a centrifugal pump. Jet pumps are used to pump small to medium quantities of water of high suction lifts. This pump can be installed in wells of as small as 5 cm inside diameter. However its use for agricultural operation is limited due to low discharge of water. A ready reckoner showing suitability of common types of irrigation pumps to specific pumping applications is furnished. 1.2.2 Prime Mover : It can be either an electric motor or a diesel engine. Selection of prime mover should be such that its power output matches the BHP of the pump which is again decided based on the required discharge (denoted as 'Q') and the head over which water is to be lifted (denoted as 'H').

Page|155 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

The BHP of the motor should always be about 20% more than the BHP of the pump. The branch manager/Rural Development Officer can be guided by the following ready reckoner to cross-check whether the proposed electric motor/oil engine is suitable for the field conditions of the farm Q(lit/sec) H(M) 5 10 15 20 5 0.64 1.20 1.93 2.57 6 0.77 1.54 1.32 8.00 15 1.92 3.85 5.79 7.72 40 5.15 10.29 15.44 20.58 1.2.3 Piping System : An efficient piping system would offer minimum friction to flow of water. It is preferable to use Rigid Poly Vinyl Chloride (RPVC) pipes in suction and delivery lines of centrifugal pumps. If unavoidable, galvanized iron (GI) and Flux PVC pipes can also be used. 1.2.4 Foot Valve : The foot valve selected should offer the least friction while at the same time keeping the velocity of water flow at the desired level. The open area of the foot valve for entry of water should be about 2.5 times the open area of the suction pipe to which it is attached. 1.3 Distribution of Water (Conveyance) Line Channels have certain advantages over unlined channels • High seepage loss of around 20 to 40% of the water delivered in soils like sand and sandy loams is avoided. • Free flow of water without any obstruction caused due to growth of weeds is ensured. • Low maintenance cost • Water logging problem, caused by seepages is avoided. • For a given discharge of water, the gross sectional area of the lined channels is lesser than the unlined channels and it renders availability of more area for cultivation. • Concrete and brick or stone masonry are commonly used for lining irrigation channels. Underground Pipelines : They are mostly used to carry water to places/areas of different levels which is not easily feasible through open channels. The system offers many advantages over open channels. Since the pipes are laid underground, there is no reduction in cultivable area and there is no

Page|156 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

interference with farming operations. They have long life and low maintenance costs. Their placement below ground level prevents damage to pipes and eliminates water loss by evaporation. They are ideally suited to undulated topography to reach water to fragmented and isolated locations. The underground pipes are made of different materials and the choice depends on the conditions under which the pipe is to operate and the relative cost factor. Concrete pipes are widely used as they are cost effective. Where soils contain salts in quantity, the specific salt resistant materials should be used. Vitrified clay tiles with joints are suitable almost under any kind of field environments. While non-RCC pipes are used in low pressure areas with operating head not exceeding 6 metres, asbestos cement/PVC pipes are adopted to a wide range of pressures and rigid PVC pipes adopted in higher pressures. In case of sloppy lands, when the land slopes in nearly opposite direction, the pipeline can be laid in the middle whereas when the slope is in one direction, pipeline can be laid giving a spacing of 100 to 200 metres vertically. High class pressure pipes should be used near the water source and low pressure class pipes or non-pressure pipes towards the tail end. Structure for underground pipelines : Specialized structures are used with underground pipeline system to control the water and protect the pipeline from damage. They are: Pump stand : A vertical pipe extending above the ground and connected to the underground pipeline is known as a pump stand. It permits dissipation of high velocity stream and release of entrapped air before the water enters the pipeline. Pump stands must extend upwards to a point where water will not overflow except when unusual pressure occurs and must have sufficient water column to create required pressure head to permit the discharge of water through the outlet at any point of the farm Gate Stand : Gate stands are provided to control the flow into laterals when pipelines branch off in different directions. They also prevent high pressures and act as surge chambers. Structurally, they are similar to pump stands but are provided with slide gates or valves to control flow in the laterals. Air vents : Air vents are vertical pipe structures to release air entrapped in the pipeline and to prevent vacuum They are installed near the pump stand, at all high points in the line, at sharp turns, at points where there is a downward direction of more than 10 degree and at the end of the pipe line. Vents are generally installed at every 150 metres on straight pipelines and uniform slope.

Page|157 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

End Plug : End plug is provided where the line terminates. The function of an end plug is to close a line and to absorb the pressure developed at the end of the line on account of water hammer. 2.0 Appraisal The Agriculture Officer should appraise the proposal and give his appraisal report, which should consider several angles. Needless to add, the appraisal exercise must be done after a field visit and through discussions with borrowers and others as necessary. Some of the points to be considered are given below. Wells, bore wells and tube wells Nature, type, texture of soils and soil-profile and their suitability to the cropping pattern Consider how many acres a similar well in the same area can irrigate and compare the same with what is proposed. This can be done by discussing this with other well owners in the area / with other borrowers in that area. If the type of the well proposed is common and suitable for the area and whether the depth and dimensions proposed are adequate Whether the proposed well will have a minimum water depth of six feet even during summer (to be ascertained by local enquiries and physical inspection of nearby wells) The quality of ground water in the area and its suitability for irrigation should also be considered. If the proposed well is in a coastal area, no loan can be sanctioned for minor irrigation investments within the minimum safe distance of 10 kms. On the east coast and 2 kms. on the west coast (unless and otherwise relaxed by State Ground Water Department on special cases). While considering an application for well the branch should check if the borrower has a pumping unit with adequate capacity without which water from the proposed well cannot be utilized for irrigation. Availability of diesel motor / electricity connection should also be verified. Estimates submitted by the borrower and Engineer’s estimate (if submitted additionally) should be thoroughly studied with regard to cost, size of the well, depth of drilling, type of construction, etc. and also compared with approved unit costs. Where the estimated cost exceeds unit costs, the branch should carefully re-evaluate the proposed costs and satisfy itself that cost additions are justified. Even when the branch accepts the higher cost estimates of the borrower, the appraisal memo sent to sanctioning authorities should carry a mention of this.

Page|158 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

In case of dug wells there are two major cost components. The first one is for digging out the earth also known as cost of excavation. This cost is dependent on the type of soil and requirement for fortification of side walls by bricks / stones / other materials. The second component is the cost of carrying the earth dug out and dumping the same in another place. This distance also known as ‘lead’ will also affect the total cost of the project. For tube wells, after the drilling is done, a casing will be inserted and the space between boring and casing pipe will have to be filled with gravel. Slotted pipe or strainer is placed against the water yielding formation (aquifer) and for the remaining length blind casing pipe is provided. In the case of cavity well, only casing pipe is used at the end of which a cavity is formed from where water is pumped out. Overall viability calculation of the project should take into account the net incremental income after the project is up and running. To this end, the total area brought under the irrigation, change in cropping pattern / numbers, yield, and other aspects should also be considered. Lifting Devices Location of well and its expected command should be ascertained. Recouping capacity of well also should be ascertained (the time likely to be taken for the well to recoup its water level after a normal pumping session) from near by well owners by enquiry. Present as well as proposed cropping pattern and their adaptability in the area should also be studied. Cross checking with nearby farmers and village workers will help the branch ascertain this. Suitability of the pump set to be bought taking into account water discharge, head over which water is to be lifted, cropping pattern etc., The pump should be in a position to be operated at least for four / five hours a day. Adequacy of water supply will be a major determining factor in this. This can be observed in the nearby wells. In case of electric pump sets, availability of power connection for agricultural purposes is a pre-requisite (In case of submersible pump, power connection is a must) Based on the field condition, the branch should also examine if the particular pump set (make / capacity) is the most cost effective from among various alternatives available. Estimates submitted by the borrower and Engineer’s estimate (if submitted additionally) should be thoroughly studied and also compared with approved unit costs. Where the estimated cost exceeds unit costs, the branch

Page|159 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

should carefully re-evaluate the proposed costs and satisfy itself that cost additions are justified. Even when the branch accepts the higher cost estimates of the borrower, the appraisal memo sent to sanctioning authorities should carry a mention of this. Overall viability calculation of the project should take into account the net incremental income after the project Conveyance Systems While appraising conveyance systems, its adequacy and suitability should be considered taking into account the water yield of the well and the water lifting device(s) being used (with reference to its capacity, etc.) Cropping pattern proposed and its adaptability based on the soil condition, water Quality and yield should also be studied. In case of fragmented / split land holdings, the pipeline may have to pass through others’ lands or even poromboke (waste land), the written consent of the owner clearance from respective local body is essential before the proposal is considered favorably. The length of pipeline proposed should neither be on the low side or excessively generous. Normally a pipe line length of 60 meter per hectare is considered adequate. Where the water source is situated at a distance from the lands to be irrigated, there will be additional requirements for pipe line which can be considered on a case to case basis. The plan for laying pipeline with reference to the location of the well, farm boundaries, land slope, etc., Overall viability calculation of the project should take into account the net incremental income after the project is up and running. To this end, the total area brought under the irrigation, change in cropping pattern / numbers, yield, and other aspects should also be considered. The branches may receive proposals for financing more than one component of the MI. In such cases the appraisal should take note of inter dependencies of one stage with the other and accordingly appraise the proposal. Even where for example, the branch is considering only a proposal for water lifting devices, it is important for the branch to satisfy itself about the following (in addition to various aspects directly connected to financing the water lifting devices): • Sufficient water resources are available within the farmer’s control to effectively exploit the capacity of the proposed water lifting device.

Page|160 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

• The water drawn can be economically distributed to the entire command area and necessary channels (lined channels / pipe lines) are already in place. • Where the farmer is spending on development of water source and / or distribution channels from his resources it is important to study the economic viability of the whole project. The incremental income should be sufficient to generate a comfortable return for the farmer on his investments besides enabling repayment of bank’s loans. 3.0 Micro irrigation 3.1 Drip irrigation Increasing costs of water and consequent irrigation efficiency would be one of the keys for survival of agriculture. A properly designed system can increase yields from 50 - 100 per cent and repay it in 5 years Drip irrigation system in the recent past has been gaining popularity for efficient water use in crop cultivation. It is should be adopted in soils with a low moisture holding capacity which requires small, frequent irrigations and in highly erosive soils which require pressure irrigation system. This system is also effective where steep slopes exist in the field and costly levelling of land is to be avoided. Even in poorly drained soils and saline soils, drip irrigation is highly suitable for crop cultivation. This system is also highly desirable in high value crops. Advantages of drip irrigation: In this system water is supplied through drips directly to root zone uniformly in required quantities based on crop requirement and hence wastage is minimized. It also enables in bringing more area under irrigation for same quantity of water compared to other systems. Another most important advantage is that nutrients can also be supplied to the plants in required quantities at different stages of plant growth. Adopting drip irrigation and fertigation (supplying nutrients to plants through drips) also helps in realizing higher yields owing to optimum soil moisture and nutrient conditions and elimination of physiological stress to the plants. Limitations of drip irrigation system: Some of the problems encountered include clogging of system especially emitters (drippers), high investment costs, risk of salinity in improperly designed system and requirement of high skills for design, installation and operation

Page|161 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Components of drip system Various components that are used vary depending upon individual farm needs. For instance components like fertiliser tank, water meter etc., are used at the option of individual farm. However the main components and their functions are as under:

Component Function Main line pipes Conveys water from source to field (HDPE/PVC) Sub-main pipes (PVC) Conveys water from main line pipe to laterals Lateral pipes (LDPE) Polythene pipe laid parallel to crop rows Spagati pipe or drip lines Draws water from submains to plant. Can also act as (Polythene) drippers if a loop is made (Note: Diameter of these pipes should be based on desired discharge and distance to which water is to be carried). Drippers/emitters Water drops from the small orifice drop by drop which delivers 1.00 litre to 8 litres or more per hour fitted to the drip lines. Number of drippers vary based on water requirement of the crop, The following are some of the drippers in use: a) Orifice drippers (button type) b) Long path drippers i) Spiral drippers ii) Internal spiral c) Tube emitters d) Pressure 'compensating drippers e) Vortex emitters. Plan for emitters based on peak water requirements at different stages of crop, season etc., Sand/Screen filter Filters impurities contained in water to minimise clogging. It is the heart of the system. Saving money on filter is a short sighted approach. Fertiliser tank To supply nutrients through drip system Water meter Water applied and to regulate water applied. Pump To pump with pressure, water from well or other source into the system. Overhead tank can also be employed for this purpose Stakes/peg To keep drippers/micro tubes in position. Valves To ensure proper water flow. Pressure regulator To regulate pressure at various points of the system.

Page|162 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Hydraulics of drip irrigation systems The water moves from water source by static pressure or through a pump to mainline, from the mainline to sub main line or in small systems directly to laterals, from sub main line to the lateral and then to the emitter. The emitters distribute the irrigation water to the soil and the plants extract the water from the soil. 1. Emitters: Emitters are devices which allow water to flow from the supply to the soil. The hydraulic characteristics of the emitters determine the rate of water flow through the emitter. Emitter characteristics are: a) Flow regime b) Pressure dissipation c) Lateral connection d) Water distribution e) Flow cross-section f) Cleaning characteristics g) Pressure compensation h) Construction material 2. Drip irrigation lines: Flow in drip irrigation lines is hydraulically steady, spatially varied pie flow with lateral outflows. The total discharge in a drip irrigation line, lateral, sub main or main is decreasing with respect to the length. of the line. 3. Calculation of water & ·irrigation requirements Soil wetting: The distribution pattern of soil water wetting resulting from trickle irrigation call be very different from those resulting from conventional modes of irrigation. In addition to generally higher frequency of application, water is added at discrete points on the soil surface rather than the entire area. In the design of drip irrigation the rooting pattern of the particular crop must be taken into account. Differences 'in emitter spacing as well as irrigation scheduling will occur according to the planting pattern' and crop characteristics." For shallow-rooted crop, for example some vegetables, the emitters should be placed close to soil surface and should irrigate frequently for short periods. On the other hand, for a tree crop the rooting volume would be more substantial and perhaps a less frequent irrigation should be in order. Crop water requirement are usually expressed in units of water volume per unit land area, (depth) per unit time.

Page|163 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

For calculating water requirement of crop under drip irrigation, the following factors have to be worked out. The-loss of soil moisture is due to evaporation from soil surface and transpiration from plants known as evapo transpiration apart from leaching. Class A pan evaporimeter is used to measure evaporation. It is worthwhile to instal evaporitmeter in big farms: In other cases, this information can be arrived at by any of the following methods: • Daily evaporation rates in a region available with local Government departments can be a guide to the evaporation on farm. In the absence of above information, the following guide can be used: Type of weather Evaporation / day (in mm) Cool humid 2.5 - 3.8 Cool dry 3.8 - 5.1 Warm humid 3.8 - 5.1 Warm dry 5.1 – 6.3 Hot humid 5.1-7.6 Hot dry 7.6-11.5 However it would be safe to consider 10 mm evaporation rate and work out water requirements. a. Crop factor : Loss of moisture due to evaporation varies with general climate, size of plants, type of plants, spacing etc. Besides plants have a different water use characters, a crop factor should be taken into consideration. Usually this can be worked out by using "tensio meter" The tensiometer readings are recorded at regular intervals along with the evaporation and rainfall measurements. The desired readings should be in 10-20 KPA range. Watch the trend for a few days. 3.2 Sprinkler system Sprinkler irrigation has been in wide usage in different parts of the world, attracting wide adoption in plantation crops in the hills in the last few years. It helps to give supplemental irrigation in times of drought, and further helps to distribute the available water efficiently. It also avoids the possibility of excessive watering leading to the rise in subsoil water level and subsequently to water logging. A sprinkler can apply irrigation at a rate which is less than the infiltration rate of the soil thus eliminating runoff losses. Water soluble fertilisers can also be applied uniformly to the plants along with irrigation water. Hence, sprinkler irrigation is advantageous to one or more of the following situations:

Page|164 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

• Where the land is highly undulated with steep gradients. • Where the soils are light and sandy and the rate of percolation is excessive. • Where the profile of light soils is shallow with underlying hard and compact impermeable strata which leads to the water- logging conditions under flow irrigation. • Where the available water supply is scarce or inadequate so that the economic use of water becomes imperative. • Where by any means the gravity irrigation is not feasible and intensity of irrigation is lower. There are many types of sprinkler systems available, but only the rotating or revolving system is common, and that too the conventional small rotary sprinkler. The boom type self-propelled can be used, but is advantageous only for large sized holdings varying from 20 to 60 ha With proper management and with only minor repairs, the expected life of sprinkler irrigation system may be in the order of 15 to 20 years.

Page|165 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

Chapter – T 8

Fishery development loans

1.0 Introduction A significant characteristic of the fishing industry in Sri Lanka is that it has always been dominated by the private sector. Except for a handful of boats owned by cooperative societies or by the very few companies, the fishing boats and gear deployed in the industry are owned and operated by thousands of individual fishers, family units or informal groups. The fishing industry plays a major role in providing the animal protein so important in the diet of the Sri Lankan population. According to the Food Balance Sheets (Department of Census and Statistics), fish has consistently contributed around 65 percent of the animal-based protein intake of the population. Although religious and cultural biases and prejudices preclude the consumption of animal flesh, fish is generally acceptable and hence always in great demand. Fishing has been the most important economic activity in the coastal areas of the country and it is estimated that at present nearly 250 000 persons are directly employed in the fishing industry, including the inland sector. In addition, a further 100 000 persons are estimated to be employed in fishery- related economic activities such as boat building, fish net manufacture, ice production, processing, trading and marketing, and in providing ancillary services required by the industry, such as transport, engine maintenance, shipwrighting, etc. It is estimated that there are about one million persons, including the dependents of industry participants, who derive their sustenance from the industry. Its contribution to Gross National Production (GDP) has stood at around 2percent for the past few years. In recent years, the fisheries sector has also emerged as an important source of foreign exchange through the export of several items of high value fish and fishery products, such as chilled and frozen tuna, and other marine products such as shrimp, lobsters, shark fins and sea cucumber. Exports of fish and fishery products was 13 680 t and valued US$ 94.3 million in 2004, while imports of fish products (mostly dried and canned) amounted to 67 284 t, valued at US$ 59.4 million. From an economic viewpoint, there is significant scope for increasing the level of contribution from the sector through increased output, exploiting the potential for value addition and import substitution.

Page|166 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

The fisheries sector consists of three main subsectors, namely coastal, offshore and deep sea, inland and aquaculture. These three subsectors employ around 250 000 active fishers and another 100 000 in support services. This workforce represents a population of one million people. 2.0 Marine sub-sector Marine fisheries are of considerable social and economic importance around the entire 1 770 km of Sri Lanka's coastline. The Exclusive Economic Zone (EEZ) covers 517 000 km2, of which some 27 800 km2 form a continental shelf. The marine area from the shore to the edge of the continental shelf (the average width of which is 22 km) is referred to as the coastal subsector. The balance beyond the continental shelf and out to the 200 nm EEZ boundary is considered the offshore and deep-sea subsector. 2.1 Catch profile Total fish production in 2004 increased marginally by 0.5 percent over the previous year. This was the combined outcome of inland fish and aquaculture production increasing by 9.6 percent and marine fish production declining by 0.6 percent. Marine fish production contributed nearly 90 percent of the total fish catch, of which the coastal fish catch was 60 percent. Even though the offshore fish catch reported an increase of 9 percent, the coastal fish catch declined by 6 percent, due to unfavourable weather conditions affecting overall marine sector production. The aquaculture-based prawn industry has had difficulties in recent years, causing heavy losses for investors. 2.2 Landing sites Fishing activities take place around the entire coast of the country, with landings made, prior to the disaster, at 12 fishery harbour centres, several large and small anchorages and as many as 700 village-level sites. Some brackish-water aquaculture (mainly shrimp farming, producing an estimated 6 000 t in 2003) occurs along the coast. 2.3 Fishing crafts The marine fishing fleet consists mainly of small- to medium-sized craft, owned and operated by private individuals. The total fishing fleet in 2004 consisted of 31 663 boats of diverse types, broadly classifiable into:

• Non-motorized traditional craft;

• Motorized traditional craft;

• Fiberglass hulled boats of 6–7 m LOA;

• Larger boats of about 3.5 t;

• Offshore multi-day boats; and

Page|167 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

• Beach seine craft. Traditionally, fishing has been inshore using simple canoes with outriggers and, despite development efforts spanning over 50 years, this type of boat still makes up nearly half of the fleet. Some 2 percent of fishing boats are canoes powered by outboard motors, and a further 3 percent are beach seine craft without motors. Larger, motorized “day boats” were introduced in the mid-1950s and consist of two types of craft: 18-foot flat-bottomed fibreglass reinforced plastic boats (FRP) with outboard motors (37%), and 3.5 t/28 ft FRP motorized boats (5%). In the early 1980s, 59 ft motorized multi-day boats were introduced (5%). Table 3 shows the development of the country's marine fishing fleet in recent years. 3.0 Main resources On the basis of resources studies carried out in the past, annual sustainable yields from the coastal subsector have been estimated at 250 000 t, consisting of 170 000 t of pelagic species and 80 000 t of demersal species. The actual reported coastal fish production in 2004 was 154 470 t. About 610 species of coastal fish have been reported from Sri Lankan waters, of which the more common species caught are Sardinella spp., Amyblygaster spp., Rastrelliger spp., Auxis thazard, Anchova commersoni and Hirundichthys coromandelensis. Most of these species live near the surface or high in the water column (pelagic species). These small pelagics account for about 40 percent of the coastal fish catch. Species such as Lethrinus spp., Trichurus spp., Caranx spp., species of skates and rays, Cynoglossus spp., Jojnius spp. and Tolithus spp. are bottom dwellers (demersal species). In addition, there are various mid-water species. Though there are no comprehensive resource studies available for offshore and deep-sea areas, about 90 species of oceanic pelagic species of fish have been reported from Sri Lankan offshore and deep-sea waters. Katsuwonus pelamis and Thunnus albacares dominate the large pelagic catches. These are migratory fish species and therefore fall under stocks shared with other countries. Other important species are Scombcromorus commerson, Platypterus spp., Telrapturus angustirosstis, T. audax, Makaira nigricaous, M. indica, Xiphius gladius and Caryphaens hippurus. Moreover, it has been reported that about 60 species of sharks live in the oceanic waters off Sri Lanka. Some of the more common shark species are Carchanius falciformis, C. longimanus, C. malanopterus, Alopices pelagicus, Sphyrnee zygaena and S. leveni.

Page|168 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

About 215 demersal species have been reported from the oceanic waters around Sri Lanka. The commercially important, larger species are L. lentjan, L. nebulosis, Lutjanus spp., Pristipomoids spp. and Epinephelus spp Some surveys have indicated that surface tuna schools are available in areas offshore from the west, south and east coasts, with higher concentrations of fish within the 60 to 70 km range from the shore. Skipjack and yellowfin tuna have dominated the catches. Preliminary results of some trial fishing have indicated an abundance of sub- surface tuna resources within Sri Lanka's EEZ. 4.0 Fishery management Current fisheries management and administration has developed from the initial creation of a Department of Fisheries in 1940, under the Fisheries Ordinance promulgated that year. However, it proved inadequate to address the issues in the comparatively more complex fisheries industry that had developed by the late 1970s, and new legislation was introduced: the Fisheries and Aquatic Resources Act, No. 2 of 1996. The main objectives of the Fisheries and Aquatic Resources Act are the management, conservation, regulation and development of the fisheries and aquatic resources of Sri Lanka. Under Sections 31 and 32 of the Act, fisheries management areas and fisheries management authorities have been introduced to manage the fisheries resources of the country. By 2004, seven management areas had been declared under the Act for the management of fisheries resources through community participation. In addition to the declaration of management areas and management authorities, resource conservation and regulatory functions were also identified and regulations introduced. Areas addressed included:

• Registration of fishing craft Section 15 & 16 of the Act and Regulations imposed by Gazette No. 109 dated 03.10.1980, No. 1055/13 dated 26.11.1998, and No. 948/24 dated 07.11.1996. • Fishing operation licences Sections 6–14 of the Act and Regulation 948/25 dated 07.11.1996. • Prohibition of destructive fishing practices and dynamiting of fish Sections 27–29 of the Act. • Prohibition or Regulation of export and import of fish Section 30 of the Act. • Declaration of closed and open seasons for fishing Section 34 of the Act.

Page|169 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

• Declaration of fishing reserves Sections 36–37 of the Act. • Aquaculture management licences Sections 39–43 of the Act. In Sri Lanka, output control tools such as total allowable catch (TAC) limits, individual transferable quotas (ITQs) or non-transferable quotas have not yet been introduced. 5.0 Fish utilization Traditionally, fish processing in Sri Lanka consisted of activities such as drying and curing. Currently, the major means of fish preservation is the use of ice. The quality of fish landings in the country is generally poor and wastage is high, especially in catches of multi-day boats. About 25–30 percent of the catch landed by these boats is of poor quality, as the fish holds of these boats are not refrigerated. These boats aim at quantity rather than quality, and sell the poorer quality or spoiled fish to dried fish processors at a low price. Lack of knowledge regarding improved fish handling and post-harvest practices has contributed to the poor quality of fish and fishery products. A concerted effort to introduce and adopt improved handling, storing, transporting, processing and other related post-harvest practices is being implemented by the Department of Fisheries. In addition to framing and enforcing regulations on par with EU standards, education and capacity- building programmes are also being implemented for multi-day boat owners, day-boat owners, processors, ice plant owners and other stakeholders. 6.0 Fish markets Of the total fish landings of the country, about 95 percent is handled by the private sector. About 70 percent of landings of fresh fish are transported to urban markets. A small percentage (less than 3 percent) is handled by the Ceylon Fisheries Corporation (CFC), a Government entity. Although the Ceylon Fisheries Corporation was established with the aim of offering competition to private fish traders and thereby ensuring better producer prices for fish, the CFC was never able to compete fully with private traders. Fish purchased from local auctions by private traders are normally sent to the Colombo wholesale fish market, where the retail traders purchase their requirements for urban markets. Export earnings in the fisheries sector have shown a steady growth during recent years, although the contribution of this sector to overall external trade still remains at about 2 percent. The country exports mainly fish (both wet and frozen), shrimp, lobster, crab, sea cucumber and shark fins. The main

Page|170 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

markets are EU, China, Japan, Singapore and the United States of America. The value of exports increased from US$ 36 million in 1995 to US$ 94 million in 2004. The quantity exported increased from 7 126 t in 1995 to 13 681 t in 2004. (These figures include ornamental fish exports, the value of which was US$ 7 million). Shrimp is the major export commodity. It accounts for nearly 40 percent of total export earnings. About 60 percent of the shrimp production comes from aquaculture, and the balance from capture fisheries. 7.0 Appraisal of fishery development loan The following important aspects need to be noted in appraisal : 7.1 Fishing zones Generally marine fishing resource is divided into three operational zones i.e., in shore, off shore and deep sea fishing. 7.1.1 In shore fishing zone: The area from shore to 10 fathoms (1 fathom = 6 feet) depth is classified as inshore fishing zone. Mostly traditional boats such as catamaran, dug - out canoe, plank built boats etc. operate in this area. This sector generally contributes substantially to the total marine fish production. 7.1.2 Off shore fishing zone: After inshore fishing zone, the next important zone is off shore fishing zone. The area from 10 fathoms to 40 fathoms depth is considered as off shore area and fishing in this zone is done mostly by mechanized boats. 7.1.3 Deep Sea fishing: The area currently being exploited is 40 fathoms depth. The mechanized boats which are under operation in various states generally range from 10 m in length and are made of wood. For exploitation of fishery resources in Deep Sea, the operational range of the vessel (endurance capacity) should be minimum of 20-30 days duration. Naturally the vessel should have necessary facilities on board for preservation of fish, storage of ice, fuel, freshwater and necessary amenities for the crew members. The vessel, intended for deep sea fishing operations should therefore, be of a large size, about 20-25 meters in length. Such vessels can be operated for exploitation of Tuna fisheries by use of long lines and purse-seines. However, the capital costs as well as operational costs of such vessels are very heavy. The deep-sea vessels are constructed of steel and there is limited number of boat building yards capable of building deep-sea vessels. 7.2 Fishing by mechanized boats Mechanized boats are operated in inshore and off-shore area upto 60-80 kms from the coast. The main types of mechanized boats operated generally are Trawler, Gill netter, Purse-seiner etc. The size and type of mechanized boats

Page|171 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

depend on the particular fishery in the area and the type of fishing methods to be employed. The mechanized boats contribute a substantially high portion of total marine catch. Marine engines used on wooden fishing boats are indigenously available. Marine engines are normally supplied by engine manufacturers along with stern consisting of stern tube, propeller shaft and propeller. Mostly the cost quoted for the engine is inclusive of stern gear also. While indicating the unit cost of mechanized boats, the breakup costs of hull, marine engine (horse power to be indicated), fishing nets, deck equipment (trawl, winch etc.) and other accessories like navigational lights and life saving appliances should be given separately. The unit cost varies according to the size of boats, horse-power of engine, type of fishing nets and deck equipments. Registration of mechanized boats is done by the Govt. authorities and this is compulsory. Fishing boats (mechanized and non-mechanized), are registered with the different departments under the various enactments. The boats registered are given vessel registration certificates. The financing banks can endorse their charge on these certificates as a part of security due deligence. 7.3 Fishing nets used in marine fishery Fishing nets are made of synthetic monofilament or multifilament twine like polythene and nylon. Even the traditional boats have now switched over to synthetic twine from vegetable twine like cotton or hemp. Synthetic twine has better fishing efficiency. The major types of nets used in marine fisheries are: 7.3.1 Gill Net : Gill nets are the most important traditional net, used to catch different types of quality fishes like Pomfrets, Seer fish, Hilsa, Perches, Lobsters, Prawns etc. The gear is a long wall of netting, laid across in sea either on the surface, midwater or bottom. The mesh size and length depends on species to be caught. When the fish tries to pass through the mesh opening, it gets caught at the gills. Hence the name ‘Gill nets’. The upper margin/edge of the netting is mounted on a rope called head rope and the lower margin is mounted to rope called the foot rope. The head rope is provided with floats and foot rope is provided with weights or sinkers. By adjusting the amount of floats and weights, the net can be operated at desired depth. 7.3.2 Trawl Net : Trawl nets are conical shaped bag nets with wings. The nets are dragged on the sea bed with the help of a boat to catch shrimp and other demersal varieties of fish. The mouth of the net is kept open while dragging by the use of a pair of otter boards attached to the wing. 7.3.3 Purse-seine Net: These are encircling nets which are operated to surround a fish shoal. The principle employed in the net is to close the bottom

Page|172 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

of the net after circling shoal of fish thereby preventing the escape of fish through the bottom. Closing of the bottom is effected by attaching a series of rings to the foot rope through which, a line is passed. By pulling the line, the rings get bunched up and the bottom gets closed. The closed structure of net looks like purse, hence the name purse-seine. The rings are termed as purse- rings and the line is termed as purse-line. These nets are used to catch pelagic fishes like Mackerel, Sardine and Tuna. Fishing nets are made of synthetic mono-filament or multifilament twine like polythene and nylon. They can either be manually fabricated or obtained from net making plants. Cost of nets depend on the material used for fabrication, as well as on their length, depth, mesh size, the floats and sinkers used to rig them etc. Information on these aspects greatly helps to estimate the cost of nets. 7.4 Area of operation Area of operation of the boats should have enough fishery potential to support the number and type of fishing boats proposed. The information on fishery potential can be obtained from local fishery office. Duration of fishing voyage depends on the location of fishing grounds from the base of operational area. When the fishing grounds are far away from the base of operation of boats, each fishing voyage may last for 3 to 4 days. In other cases, the boats conduct daily fishing trips lasting 12-15 hours. The boats generally can have a fishing period of about 200-250 days in a year. The fish catch is landed either on the beach or on jetties. The fish is either sold through auctions or given to fish trader at a negotiated price. The prawn catch is sold to processing plants either directly or through the intermediaries. The information on all these aspects may have to be collected from the operational area for appraisal of marine fishery proposals. Similarly for the proper handling of fish and efficient operation of fishing boats the infrastructural facilities required are ice plants, cold storages, transport vehicles (insulated or refrigerated vans), workshops or service stations for repair of engines, boat repair yards, bunkering facilities for supply of high-speed diesel oil etc. similarly facilities for distribution and marketing of fish are also very important. While appraising a proposal, availability of these facilities in the area or in its vicinity has to be carefully examined. If some of the facilities are either not available or inadequate then it can adversely affect the feasibility and viability of the proposal. 7.5 Processing In order to ensure maximum use of fish in fresh condition there is need for ice plant and cold storage facilities. It is desirable to establish large ice plants

Page|173 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

in important consumption and distribution centers and to connect the small fishing villages by using insulated vans. A few fish meal plants and oil extraction plants need also to be put up for proper utilization of large resources of Sardines and Mackerels. 7.6 Marketing Prime varieties of fish like pomfrets, seer etc. can be readily marketed either as fresh fish or in frozen from. The main difficulty lies in the proper utilization of low quality fish which is landed in large quantities, particularly by the mechanized boats. Currently such varieties like dhoma, silver bellies etc. are sun-dried. However, if these are converted into suitable by-products, it will certainly fetch better monetary return to the boat operators, thereby improving the economics of operation of the fishing boats. The diversified products should cover items like fish sausages, fish kababas, fish cutlets, breaded fish, fish fillets and other easy cooking and ready to serve food items. The establishment of a chain of cold storages and frozen storage in the domestic market may help to stabilize the prices of important varieties of fish to the advantage of both the fishermen and the consuming public. 7.7 Transport In order to enable the fish to reach the consumer in good condition proper transport facilities in the form of refrigerated rail transport refrigerated and insulated vans are considered essential. Whereas provision of rail transport will be in the purview of the Govt. provision of refrigerated and insulated vans for road transport of fresh fish can be provided by the co-operative and private sectors. 7.8 Economics of Fishing Boats 7.8.1 Capital Investments: Includes the cost of fishing boat complete with engine, nets, deck equipment and life saving appliances. 7.8.2 Recurring Expenditure: Estimates of operational costs should show separately the cost of fuel, crew wages, maintenance cost of boat and engine, cost of repairs of fishing nets, boat and engine insurance, port dues and marketing commission if any for disposal of fish. 7.8.3 Operational Income: While working out the estimated income, it is necessary to give estimates of fish catch, showing the probable quantities of important varieties and the expected sale prices at the landing sites. 7.8.4 Repayment Period: Repayment period depends on the available operational surplus. Capital investment on fishing boats depends on the size of fishing boats and fishing methods employed. Considering the various

Page|174 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

types of fishing boats, repayment of loan in three to nine years is generally possible. In the case of integrated marine fishery proposals, apart from the fishing boat component, unit economics for other items of development such as ice plants and freezing plants may have to be indicated separately. The infrastructure facilities created under an integrated proposal can cater to the requirements of both fishing boats covered under the proposal as well as other boats operating in the area. This aspect has to be kept in mind while suggesting the capacities of ice plants and freezing plants and working out the economics of such integrated units. 7.9 Technical aspects The main aspects which are considered during technical appraisal of the proposal are briefly outlined here. A brief description about the existing activities concerning marine fisheries in the area should include information on the following aspects: • Number of mechanized boats in operation • Number of non-mechanized boats in operation • Annual fish landing by mechanized and non-mechanized boats • Information on infrastructural facilities available in the area: ü Landing, berthing and bunkering facilities ü Ice and cold storage plants and their capacities ü Freezing plants and frozen storage capacities ü Working facilities for the repair and maintenance of marine engines, boat building and net repair facilities ü Supply of fishery requisites like fishing nets, fishing nets, fishing twine, ropes, marine paints, etc. The following information regarding mechanized boats is essential for determining the capital cost of hull and engine • Size of boat ü Over-all length (OAL) ü Keel length ü Breadth ü Depth • Type of timber to be used

Page|175 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

• Source of supply of boats • Details about deck equipment like winch, power take- off arrangement, gallows, line huller etc. • Horse power and make of marine engine Type of fishing nets to be used such as trawl nets, gill nets etc. while proposing gill nets and purse-seine nets, specification of nets may be given. The specifications should include information on length of net, depth of net, mesh size, type of netting twine, floats, sinkers etc. In the case of trawl nets, length head rope and number and size of meshes at the mouth should be indicated. 7.9.1 Estimates of annual operational cost of mechanized boats : Estimates should include • Cost of fuel and lubricants • Crew wages/share • Repairs to engine and hull • Insurance • Replacement of fishing nets • Port dues • Marketing commission 7.9.2 Estimates of annual income : The estimates should indicate composition and quantity of fish catch which may include different varieties of prawn and fish, expected to be caught by fishing vessels. The sale price may be estimated on the average prices at landing centre for various varieties of prawn and fish. 7.10 Fisheries potential in the area For this purpose year wise fish landing in the area for a period of 3-6 years may be mentioned. This will help to indicate the general trend and fluctuations, if any. Necessary information should be normally available from the local office of Fisheries department. The data may prove useful to determine whether there is sufficient scope to introduce additional fishing boats in the area or not. The aspects that need to be reckoned are: • Locational advantages • Whether required power and water supply is available • Types and quantity of fish catch in the area will justify capacities of processing plants

Page|176 Agriculture Operational Manual - Techno-Economic Aspects March 2013 Hatton National Bank Ltd – Colombo

• The required machinery is available indigenously or imported • Arrangements envisaged for shipment of finished products either for export or for domestic market are to be assessed.

Page|177 Agriculture Operational Manual - Techno-Economic Aspects March 2013