KARACHI: Agricultural marketing in Pakistan is a multi-layered and complex system that gives all room to the grain, vegetable and fruit brokers and arhthis (middle man) in the rural areas to exploit small farmer. These arhthis and brokers are closely linked to the brokers and traders in the city, who manipulate and rig market, control supplies and get maximum from the consumers.
A weak regulatory framework and an ineffective monopoly control authority in Pakistan gives all opportunities to big business — cement barons and sugar tycoons — to form cartels and business syndicates and fleece consumers as is being seen in Pakistan for last several years.
The real target market for all these brokers, traders and big businesses in Pakistan is hardly 35 to 40 million from where they get big chunk of profits. The real victims of this atrocious marketing system are the fixed wage earners. About 20 million of these people are those, who work in offices, are school and college teachers, professionals like lawyers, small medical practitioners, low grade government employees and those who work in low positions in banks, insurance companies and trade houses.
Since the market is small, the profit margin has to be big and hence all the manipulations and rigging. The government joins at the policy and operational level to help the profiteers in their ventures and the banks and many service institutions provide the infrastructure support to big business and traders.
How prices are manipulated in Pakistan can be understood from the wild fluctuations seen in case of tomatoes only recently. A few weeks ago tomatoes were being sold at Rs5 a kilogram in retail. A bumper crop created a virtual glut in the market and for a change consumers got tomatoes at a low price.
On Friday, a cart puller at Soldier Bazar market sold tomatoes at Rs40 a kg with a warning that prices may go further up because of hostile weather and the fear of troubles from two rallies in the city on Saturday, which may disturb transportation of greens from upcountry.
A bumper tomatoes crop this winter did help a few food companies — local and multinationals - to purchase tomatoes in bulk at low price for domestic consumption to prepare pulp and ketchup. A good quantity is said to have been exported to their branch factories network in neighbouring countries.
But the bumper tomatoes crop failed to ensure a fair return to growers. The consumers did not benefit from the availability of tomatoes for long at affordable prices.
Reports reaching from the rural areas say that big quantities of tomatoes were crushed under the wheels of heavy vehicles. A cut in vegetables supply to market ensures a good price for the broker in the village and the wholesaler and retailer in the city.
More than 70 per cent of the farmers depend on their inputs on credits from local arhthis and brokers, who demand 80 to 100 per cent interest rate. Before the crop is ripe, the lender — local arhthi or broker —reaches farmer to demand his credit with accumulated interests. The deal is made on the crop in which farmer gets a mere peanut. The broker is in touch with the city-based broker and the wholesaler. The city brokers and wholesalers have connection with the factories and local retail market.
While the grower gets a bare minimum price on his produce because he does not have the holding capacity and is at the lowest rung of social and economic order in his village, the arhthi and broker have money power to even grab the crop and negotiate a better price with the city-based broker and wholesaler. The city-based broker and wholesaler are relatively more influential socially and economically and get the best of deal the consumer pays.
The rural market is driven by the inherent caste system of the villages where a small farmer is reduced to bonded labour. While, in the city the private cartels and business syndicates of brokers and wholesalers operate at small and big level to transfer resources from rural areas to the cities.
Clustered in about 7 to 8 square kilometres, the Jodia Bazar is perhaps the biggest commodity market in South Asia. All big future and ready transactions of grains, pulses, spices, kitchen items, industrial goods like chemicals, medicines and other items are done in this place.
These future and ready transactions are in respect of local goods, imports and also for exports. More than Rs2.5 trillion worth of transactions are said to be done here. Transactions at Jodia Bazar set the price for consumers in other parts of the country.
These days the rice export is on fast track and hence the domestic price of basmati rice is on high side. Farmers are harvesting a bumper wheat crop. The government fixed Rs425 for 40 kg or Rs10.62 a kg. Farmers in many parts of Sindh and in Muzaffargarh complain that they were paid only Rs380 to Rs390 for a kg because they were helpless before their creditors.
Much against the advice, the government has given a go ahead signal for exports. The brokers are working overtime. The exporters have booked orders for more than 0.7 million tons and market price of wheat is about Rs12 a kg.
Way back in 2003 when interest rates of banks came down to five and six per cent, the traders borrowed heavily to purchase wheat from the market and stocked it. The wheat flour price went up to Rs17 and Rs18 a kg from Rs9.50 but then it stabilised at Rs16 a kg.
Ramazan is another example of price hike. The traders build up commodities inventory weeks before Ramazan. The cartels are formed to regulate supplies and high prices are obtained by creating shortages of various items. A schedule is worked out for release of commodities in such a way that entire inventory is disposed of with Ramazan and good profits are made.
Instead of developing an effective monitoring system of the crops and production, a fast transportation, storage and above all to ensure bank credits at reasonable rates to small farmers, the government resorts to administrative measures to control prices and ensure supply of goods.