Instead of farmer, it is the middleman who decides about the crop price when he purchases it from farmers and sells it to next buyer and thus sets the trading pattern.

In the absence of effective alternative institutions, all official attempts to limit the role of middleman have failed. Because of financial hold of the middleman on the market and strong network, farmers cannot sell their produce directly to processors, factories and markets. If a farmer takes his produce directly to the market, he has to face numerous problems due to close links of middlemen, with commission agents, brokers, transporters and market committees. Commission agents refuse to buy produce from farmers.

Some studies have concluded that middlemen have been skimming off excessive profits and that should be eliminated, so that the growers get better return of their produce. In a study covering Rawalpindi/Islamabad area intermediaries in agriculture have been treated as business firms having profit motives and performing specialised functions which both producers can not do efficiently.

Among three principal categories of middlemen, commission agents emerged as the leading money makers as compared to beoparies and wholesalers and they have market specific organisations for protecting their economic hold on market operations. Return on investment for commission agents ranged between 58 per cent and 121 per cent whereas beoparies and wholesalers earned five per cent and three per cent respectively on their capital. Based on cost and return, commission agents were flourishing due to lower cost and risk free source of earning compared to beoparies and wholesalers whose investments were far bigger and riskier.

Elimination of the middleman as credit source depends upon the ready availability of institutional credit at the right time and without cumbersome formalities. Their role in marketing is a more intractable problem. The middleman plays a key and facilitating role between stakeholders including producers, retailers and consumers. The present management and regulations governing the activities of middleman are in fact to blame for his exploitative leverage.

It is unadvisable to eliminate the middleman from the supply chain until a viable alternative to his facilitating role is available. Rather it is recommended that the government devise sound regulations that limit the exploitative power in the form of profit margins of the middleman instead of eliminating his role.

The Asian Development Bank (ADB) Rural Revitalisation Programme mission visited Sindh in July 2008 and put a precondition on future finances which would be contingent upon the elimination of market distortions and barriers for promotion of private sector participation.

The ADB had insisted that the Sindh government submit to the cabinet an amendment in the Agriculture Produce Market Act to enable the private sector to establish and manage the wholesale market and bulk market. The Agricultural Produce Markets (Amendment) Act 2009 aims at promoting private sector participation and allows the procuring of rural agricultural produce without government interference. It is likely to be presented before the Sindh Assembly for approval.

This has created an uproar and uncertainty among the market stakeholders who fear that around 2.5 million people would lose their jobs due to elimination of the role of government-run market committees. It is being argued that under this act wholesale markets will be established on the pattern of Metro and Makro across the major cities of Sindh.

According to the dealers, the act would cause great joblessness in the province due to direct dealing of multinationals companies with growers. The role of commission agents would be eliminated and subsequently the existing wholesale markets would gradually be made non-functional in three years in accordance with the act.

The chairman Karachi Wholesale Grocers' Association, however, maintains that 'companies that operate on the pattern of Makro and Metro have massive overhead charges compared to local wholesalers which would not allow them to compete. The present set-up could not be changed overnight and systematic changes brought over time would help stakeholders better adapt to the changes. He further said that “labour involved in the wholesale market will be affected if the wholesale markets are made nonfunctional.”

But the president Malir Fresh Fruit Merchant and Growers Association is of a different view. According to him at present 71-government-run market committees are operational in the entire province and they are inefficient and corrupt. These market committees have embezzled funds given under the different programmes, such as that of ADB which were meant to help them streamline their affairs.

He was of the view that even if it was attempted, the role of commission agents i.e. middlemen could not be eliminated in the present circumstances given that, in many cases, the middleman pays the growers in advance for his crops besides helping them to get seeds and fertiliser as well.

The elimination of the role of middleman is not the solution to the problem of giving fair return to the growers. Instead there is a need to end his monopolistic role in providing multiple services to farmers and create institutions which may cater to the various needs of the farming community.