The middleman is an evil and responsible for all ills of agriculture and farmers’ miseries. This is the prevailing narrative in government circles these days. We can find many government officials and advisors, busy preaching the need to eliminate the role of middleman. It is good that the government has realised middleman are the exploitative link in whole supply chain and that they need to be removed to benefit the farmers. The question remains as to whether the government done its homework and fully understood the role of the middleman.
We need to first understand the role of the middleman before devising any elimination strategy. First of all, middleman is accessible to farmers at their doorstep. They can approach him at any time, even in the middle of the night. He is like an ATM machine for farmers, knock at the door and get the money. Most of the time he also has deep roots in the society. On the contrary, such forthcoming response is no where to be seen in case of banks and governmental institutions. Second, farmers can approach him for any sort of loans like education of kids, health or even for marriages. Middlemen also lend money to meet the other social obligations like family functions and community related activities. Again, banks and government institutions do not entertain such requests without realising the family and social obligations of farmers.
Third, banks and government institutions require a number of documents as a guarantee. Farmers also have to go through a lengthy process of cumbersome procedures and documentation, which is beyond their comprehension. It is common reality that majority of small farmers are illiterate or have little knowledge of procedures. So, they avoid contacting the banks and government institutions. On the contrary, middleman does not demand or engage farmers in complicated documentation. It is easier for farmers to negotiate loan terms with middlemen.
The majority of farmers are illiterate or have little knowledge of documentation procedures. So, they avoid approaching banks and government institutions. By contrast, the middleman neither demands nor engages farmers in complicated documentation. Thus it becomes easier for them to negotiate loan terms with dubious middlemen
Fourth, without any exaggeration, the supply chain management system is outdated in our country. The road infrastructure, which acts as a conduit in supply chain is in real bad shape. The quality further deteriorates in rural areas, where the farms are located. Although, CPEC helped to overcome the major challenges of road infrastructure but government needs to look at farm to market infrastructure, which requires substantial improvement. The transportation is another weak link, which discourage the farmers to go to market. We know that many agriculture and livestock commodities are perishable in nature like vegetables, milk, fruits etc. These commodities require careful transportation methods with refrigerated vehicles. Besides, there is also lack of availability of cold storage facilities at farms and markets.
These all elements discourage farmers to work in supply chain. The reasons are obvious. First of all, they cannot afford transport, especially refrigerated transportation, which is out of question. Second there is no cold storage. Famers also lack bargaining skills, which is required to sell the product. These all factors along others, place farmers at higher risk to lose the commodities and potential income. Thus, they prefer to work with middlemen and compromise on lower prices.
This is the context, in which middleman is operating and farmers prefer to work with him instead of banks or government institutions. To eliminate middleman government will have to have answers for these challenges.
Firs of all, the government will have to work on accessibility of financial resources without interest rate. It is good to note that government has launched Kissan card to solve the issues. However, still farmers will have to go through registration and open bank accounts to avail the facility. Although, it is a good initiative, but the government needs to further refine it by making it simple and user friendly. The registration process can be eliminated by using NADRA data, which have all the details. The agriculture extension department can take a lead on it and assist NADRA in identification of farmers. Government can also introduce barcoded cards, which can be used as proxy to ATM.
Second, supply chain management requires serious reforms and investment. First, there is a need to reform the governance system of agriculture markets. It should be made more transparent and easily accessible. The price control mechanisms must be strengthened and there should be tools to implement price at all levels. Agriculture Extension and Marketing departments should join hands and make sure that farmers are receiving comparative prices. Second, government needs to invest in road, transport and cold storage facilities. There is dire need to invest on farm to market road infrastructure. It will require substantial investment, which is beyond the capacity of government. However, the government can bridge this gap by engaging private sector without compromising on the rights of farmers. Government will have to put in special efforts to ensure that businessmen and investors do not assume the role of middlemen in a different way and at wider scale. It will create problems for farmers, and it may lead to agitation and resentment like it happened in India.
Third, Pakistan has a flawed subsidy policy. Pakistan is providing blanket subsidy, without proper homework. It has negative implication on the government’s financial resources, without any tangible benefits for small farmers. As, most small farmers are unable to benefit from the subsidy. For example, the government has announced that it will provide subsidy of 1000PKR on fertiliser bag. It has little or no incentive for small farmers, especially farmers with less than 2.5 acres. According to government statistics, about 43 percent farms in Pakistan are less than 2.5 acres and 3.6 million farmers (families) are working on these farms. They do not have financial resources, even to buy the subsidised products. Hence, government needs to change the blanket subsidy policy and introduce the targeted subsidy by keeping small farmers at top priority.
Lastly, the government also needs to devise some instruments to meet the non-farm, family needs and social obligations of the farming community. Presently, banks and government institutions only talk about farm loans or more precisely loans for cultivation or rearing of animals. The government should think some initiative like Sehat Card for non-farm obligation like introduction of Education Card. It would be a game changing intervention. Innovative solutions for fulfilling social obligation can also be worked out like government community fund. The fund can be created jointly by the government and small farming community and should have the mandate to fulfil the non-farms needs of farmers.
To conclude, I would say that if the government wants to eliminate middleman, it will have to consider these options or devise better instruments. Otherwise, the dream of elimination of middleman will remain just that.
The writer is Director, Asia Study Center SDPI