Meat Product of India Limited,Koothattukulam

Introduction Meat Product of India Limited was incorporated in 1973 with the objective of establishing an export oriented meat processing unit. In 1976 the Company took over Bacon factory at Koothattukulam for processing meat for internal market. Since then activity of the Company was confined to operation of meat processing unit and maintenance of livestock farm attached to it. Financial Position and Working Results
The company has been continuously incurring operating loss since inception. As per

the latest Audited accounts the accumulated loss of Rs 909.47 lakh for the year 2007-08 had wiped out the equity capital of Rs 181.11 lakh. 11 was Rs.1141.36 lakh. (Annexure-1) Audit observations: The Company has been incurring losses continuously since inception (except during 1992-93, 1993-94 and 2001-02 when it made book profit). During the last five years the Company registered operating loss. The major reasons for continued operational loss as identified in Audit are increased cost of production, reduction in production due to decline in availability of raw meat etc
1.

As per the

provisional account prepared by the company the accumulated loss as on 2010-

Low Production/ Turnover During the last five years the company could not meet the operating expenses from the value addition/ margin achieved in the production process. To meet the present operating expenses, which is semi variable in nature, Company has to increase its turnover at least by 23 percent . (Annexure-2)

2.

Low labour productivity

Underutilization of labour productivity and high labour cost per unit of production compared to norms fixed by the Company has resulted in high overhead cost (77percent of raw material cost). (Annexure-2&3) 3. Shortfall in supply Though the Company had sufficient orders in its books it was not able to meet demand due to low production which is stated to be non availability of raw meat. (Annexure-4) . 4. Failure to take advantage of Government scheme and ensure availability of The Company derived maximum margin from its pork products. But over the years there was decline in production of pork products due to scarcity of Pigs (Annexure -5). In order to increase the availability of pigs and increase in the employment opportunities and thereby enhance the living standards of the farmers, Government of India, Under Rashtriya Krishi Vikas Yogana released assistants to the Company since 2008-09 onwards for providing onward assistance and guidance to pig farmers. Under the scheme the Company has received Rs 445.85 lakh (up to 2010-11) for the implementation of the scheme. As per the scheme the company has to identify 300 farmers every year and supply 3000 pilings per year and farmers were to return the pigs to the company on its maturity. Against this the company could supply only 810 pilings (against 6000 nos to be distributed) during the two completed years (2009-10 & 2010-11) and received 479 pigs from farmers. Thus the company could not take advantage of the scheme and ensure availability of pigs for production. 5. Assistance from Government: During the last five years the company received Rs. 303.99 Lakh (Annexure -5) in the form of grants from Government of Kerala for infrastructure development. As against this the company could achieve about 16 per cent increase only in turnover. In spite of the assistant from Government in the form of grant for pigs for production

development of infrastructure facilities the company could not improve its performance or achieve breakeven sales. ---------------

Annexure- 1.
Financial Position
Financial Position Rupees in lakh Particulars Share capital Accumulated Loss Percentage of Accumulated Loss on Share capital 2006-07 181.11 842.66 465.28% 2007-08 181.11 909.47 502.16% Provisional 2008-09 2009-10 181.11 181.11 983.213 1067.29 542.88% 589.30% 2010-11 231.11 1141.36 493.86%

Working Results Rupees in lakh Provisional 2008-09 2009-10 2010-11 386.28 248.03 50.58 134.67 -47.00 435.04 265.02 50.05 168.93 -48.96 498.02 302.83 56.25 221.23 -82.29

Sl.No. 1 2 4 5 6 7 9

Particulars Income Sales Expenditure Raw materials consumed Admn. and Sales expenses Employee benefits Operating loss(2)-(5+6+7)

2006-07 385.80 289.29 60.51 134.06 -98.06

2007-08 422.99 302.10 57.72 144.91 -81.74

Annexure-2
Value addition analysis Break even performance worked out by audit 631.03 415.25 52%

Particulars Income Sales Raw materials consumed Value addition

200607 398.83 289.29 38%

200708 420.38 302.10 39%

200809 386.28 248.03 56%

200910 435.04 265.02 64%

201011 498.02 302.83 64%

Average 427.71 281.45 52%

Admn. and Sales expenses Employee benefits Operating Expenditure Percentage of Employee cost and Admn expenses on Raw material

60.51 134.06 194.57

57.72 144.91 202.63

50.58 134.67 185.25

50.05 168.93 218.98

56.25 221.23 277.48

55.02
160.76 215.78

55.02 160.76 215.78

67%

67%

75%

83%

92%

77%

52%

Annexure-3
The company has fixed following bench marking for labour productivity (Unit: per man per day) Veal cutting 60 Kgs Pork cutting 84 Kgs Chicken cutting 165 Nos Beef cutting 78 Kgs Feed Mixing Unit 1500 Kgs Against the above norms the production in the company has been less leading to underutilization of labour productivity and high labour cost per unit of production as detailed below.
Year 2006-07 2007-08 2008-09 2009-10 2010-11 No. of Workers 78 80 84 76 71 Meat products Sales Productivity/Kg Quantity Amount per day 298397.4 26037437.86 10.48 302922.9 31977204.64 10.37 265051.2 33448499.92 8.64 281211.9 34584620.95 10.14 306551.7 40405458.02 11.83 Feed Mixing Unit Sales Productivity/Kg Quantity Amount per day 861705 10749052 30.27 668725 9310019 22.90 217769 3504204 7.10 216941 3857988 7.82 196365 3464320 7.58

Annexure-4
The company had sufficient orders in its books but was not able to meet them. A test check revealed that company could meet only 77 percent of market demand.
Comparison of Order received and quantity supplied (Source: Order Tabulation statements & daily product wise report (invoice) maintained in the sales department) Quantity in Kg Order Quantity Date Shortfall received supplied 2-Jan-12 293.6 225.04 68.60 3-Jan-12 1243.6 855.07 388.56 4-Jan-12 878.7 707.55 171.17 5-Jan-12 1143.6 1037.44 106.19 6-Jan-12 1961.5 988.11 973.37 7-Jan-12 965.3 652.66 312.67

9-Jan-12 435.4 416.89 10-Jan-12 1337.2 1079.89 11-Jan-12 940.4 837.58 12-Jan-12 657.1 229.17 13-Jan-12 1006.6 671.45 14-Jan-12 738.6 664.51 16-Jan-12 294.4 382.92 17-Jan-12 1584.7 960.89 19-Jan-12 2413.6 2040.56 20-Jan-12 2047.1 1221.38 21-Jan-12 1028.5 892.54 23-Jan-12 444.6 478.05 24-Jan-12 1059.4 916.71 25-Jan-12 1752.5 1583.24 27-Jan-12 800.8 597.48 28-Jan-12 930.3 674.30 30-Jan-12 682.2 693.95 31-Jan-12 2312.5 1922.27 TOTAL 26952.4 20729.61 Percentage of shortfall for the month

18.52 257.32 102.81 427.94 335.19 74.11 -88.47 623.81 373.09 825.70 135.96 -33.45 142.67 169.29 203.29 256.03 -11.74 390.24 6222.83 23.09%

Annexure -5
Sales pattern of Pork Products Particulars Sales Raw materials used 2006-07 143.908 231.172 2007-08 151.538 251.164 2008-09 99.227 170.097 Quantity in MT 2009-10 2010-11 88.448 105.049 156.258 176.848

Annexure -6
Government Year Assistance 2006-07 47.35 2007-08 0 2008-09 108 2009-10 0 2010-11 148.64 Total 303.99 Percentage of increase in sales Sales 428.17 453.75 365.44 417.64 496.18 16%