Middleman dominance

April 25, 2019

Email

AGRICULTURE is a commercial proposition taking care of many a livelihood. Every farmer adopts a cropping pattern where his comparative gains are higher. However, it is the middleman who has a complete stranglehold over the farmer as the former controls the payments for what the latter produces. Successive governments have failed to change the prevailing system. For decades, farmers in Pakistan have had little or no say in choosing markets or buyers for selling their produce. The government mandates marketing and selling of farm produce of essential crops only through state-owned institutions on minimum support price as announced by the government for each crop. In order to avoid delay in receiving payment by the government departments, the farmers prefer to sell their produce to the middleman or to local buyers.

“We have our own aarhtis – as the middlemen are called locally – since the time of our forefathers. We sell all our produce, primarily wheat, to them. In return, they take care of all our needs and demands in cash or kind. We do not have to face any problem in case of any tragic or happy happening in the family as the aarhtis have to meet all our demands,” said Mohsin Ali, 55, a farmer in village Jagiot, in the outskirts of Islamabad. Explaining the challenges involved in direct payment, Mohsin Ali says a majority of the farmers would not understand the basics of the system, and the government in any case cannot provide the services provided by an aarhti.

In Pakistan, farmers do not sell their produce in the open market. The middlemen purchase their produce by paying a little higher price than the prevailing price — in books alone — and fulfil farmers’ productive and non-productive needs. Middlemen continue to act as the custodian of the produce and sale proceeds because all procurement happens through them and the payment from procurement agencies reaches the farmer through them as well. This indirect system of payment puts the cash in the hands of the middlemen, which they leverage to exploit the farmers.

Giving the middlemen complete hold over farmers is actually a parallel business of money-lending. Between sowing and harvesting, any time farmers need money, the middlemen are happy to provide a loan at a high rate, which would be higher if it is for a wedding. After the harvest, the middlemen first deduct the debt and/or interest, if any, from the payment due for the produce. As the input costs of farmers increase and relative returns diminish, they often find themselves in need of loans. Here again, the middlemen are their saviours. Besides high interest, the farmers are also made to hand over blank signed cheques to the middlemen so that they could recover their loaned amount as and when a cheque is deposited in the bank.

Marketing is the weakest link in the agriculture chain, creating more and more space for the middlemen who overrule both the growers and the consumers.

“Eliminating the middlemen would enable the growers to get 35-40 per cent higher returns. The only constraint is that the local demand is limited,” says Raja Basharat, a farmer-cum-builder in village Barma in the vicinity of Islamabad.

In such a situation, it seems that setting up of private agricultural markets has become inevitable where farmers could sell their produce then and there without the influence of the middlemen. The setting up of modern private agriculture markets would facilitate proper grading, processing, packaging and marketing of quality produce. Provision of cold chains would also facilitate access to high-end domestic and international markets of perishable farm commodities. The presence of competitive private markets will have healthy effect on the existing markets in terms of prices offered and facilities provided.

The farmers do need protection. They have to face a raw deal amid market fluctuations. Every now and then, cotton does not fetch the expected price; the onion-growers have to shed tears as the prices slump, and the wheat producers feel cheated when they have to sell the commodity at below-market prices despite a bumper crop. It is common knowledge that the traders manipulate prices in connivance with officials of various procurement agencies when the farmers bring their produce to the markets. As a result, the middlemen make more profit than the growers. So it makes sense to strengthen the marketing mechanism to protect the farmers’ interests. The farmers too will have to make efforts. They can, for instance, form cooperatives and store their produce for deferred disposal.

Achieving economic sustainability is the biggest challenge for small and marginal farmers. Production and marketing of all products, industrial or agricultural, are interlinked issues. But this principle vis-a-vis agriculture has not been given due consideration and marketing of food grains has continued to be quite outdated. Marketing is considered to be the weakest link in the agriculture development chain, creating more and more space for the middlemen.

There is a need for reaching out to the farmers with a multi-disciplinary approach to develop agri-business information hubs to provide them with the latest information regarding the sale and purchase of agricultural produce.

Apart from providing information on agricultural marketing and agronomic practices, these centres may play a key role in improving the quality of agricultural produce by educating the farmers about the scientific approach to farming with the aim of making the farmers aware of the latest advances in the field and help them getting a competitive price for their produce besides providing the relevant information on agro-marketing, organic farming and improvement of crop quality.

These centres should have computers, television sets, libraries containing videos and literature on farm education for the benefit of the farmers besides guiding the farmers and organising regular training programmes, seminars, workshops, buyer-seller meetings, laboratories to test and grade farm produce, providing complete information on marketing, post-harvest management of crops and prevention from various diseases.

All in all, the move to set up centres to educate the farmers about various aspects of agricultural practices besides providing them much-needed information on marketing their produce will be a step in the right direction.