(Adds new outbreak)

By Bappa Majumdar

KOLKATA, India, Jan 25 (Reuters) - Inadequate compensation for villagers in exchange for culling their poultry may be hampering India's efforts to contain a serious outbreak of bird flu that continues to spread, officials said on Friday.

Some villagers in the affected districts of the eastern state of West Bengal have chased out culling teams, complaining that 40 rupees ($1) on offer for every bird culled is below market rates. The state government has managed to cull only about 700,000 birds so far. Its target is 2 million.

"A villager can sell a chicken for at least 80 to 100 rupees for a single chicken, so their resistance to culling is not wrong at all," said Nazrul Islam, the president of the West Bengal Poultry Association.

Bird flu has spread to 11 of West Bengal's 19 districts, with two new districts hit by the virus on Friday.

Officials, who fear the outbreak could spiral out of control, are worried the disease could break out in the crowded state capital of Kolkata.

"One of the newly affected districts is Howrah ... very near Kolkata, which means we have to be extra careful that the virus does not hit the capital," Anisur Rahaman, the state's animal resources minister said.

The central government's laboratory tests have confirmed the virulent H5N1 strain of the disease is present in at least two of those districts; officials expect further tests will show the same strain in the remaining districts.

India's bird flu action plan makes clear that efforts to stamp out the disease will only succeed if adequate compensation is offered for forced cullings.

"We are also thinking about raising compensation if possible," Rahaman said.

But not everyone is resisting the culling. In some areas, children without protective gear helped out culling teams by chasing and catching birds for them.

The World Health Organisation (WHO) worries that the H5N1 strain, which has already killed more than 200 people worldwide since 2003, could mutate into a form that passes easily between humans and infect and kill millions.

This is the fourth outbreak of the strain in India since 2006, although it has never recorded a case of human infection. The WHO says this is the most serious outbreak in India so far.

Hundreds of chicken deaths have been reported since Thursday in West Bengal's Jalpaiguri district, along India's border with Bhutan.

Bhutan has already banned Indian poultry. Guards on both sides of the border are watching out for chicken smugglers. But officials in Delhi have already conceded little can be done to stop infected wild birds flying across.

Animal husbandry officials in Delhi have speculated that sick birds hailing from Bangladesh may have spread the disease into neighbouring West Bengal.

Bangladesh has been fighting to contain the H5N1 strain since last March, and the livestock ministry said on Friday that it had now spread to 27 of its 64 districts. (Additional reporting by Ruma Paul in Dhaka; Editing by Jonathan Allen and Jeremy Laurence)

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