Need to revamp agriculture marketing system
They want to replace the existing system with one that takes care of at least five factors, which are essential part of the agriculture cycle.
These include stability of prices, which get depressed at a time of glut when farmers sell due to lack of holding capacity; distress selling by small farmers, who account for 93 per cent of total farms, because they have to meet their fiscal (consumption and investment) requirements; biological cycle in which production cannot be adjusted to ever changing prices; fragmented markets that are dominated by cartels (middlemen and industrialists) and production uncertainties due to the weather vagaries.
Substantiating their demand for revamping the existing marketing system, they claim that while the world prices of these markets fell by 10-15 per cent only, the domestic price crash of has been steeper. They are convinced that these cartels are making additional profits of 20-25 per cent at the cost of farmers.
The international price of rice (basmati) has fallen from $1,500 per ton last year to $1,350 per ton this year. But in Pakistan, they are down by almost 40 per cent. All official efforts to stabilise an indicative paddy price of Rs1,500 per 40kg have fallen apart due to nature of the marketing system.
Pakistan Agriculture Storage and Services Corporation (Passco) was to procure the marketable paddy surplus and keep prices stable; a target of one million tons of rice was set and Passco was given Rs30 billion for the purpose. If spent judicially and efficiently, this kind of money should have stabilised the market on the higher side. The Punjab Food Department entered wheat procurement drive with Rs30 billion last season and kept price stable during its 2.5 million wheat purchase drive.
But, it has not been the case because the Passco entered the market late by at least 15 days and has so far been able to procure 200,000 tons when over 90 per cent of crop has already changed hands. Now the rest of Passco procurement would most probably come from the middlemen, thus benefiting them at the cost of growers.
The crisis worsens during Kharif when three major cash crops (cotton, rice and sugarcane) hit the market. The growers of rice and cotton are normally caught in distress sales because both commodities have to be treated before storing: rice has to be de-moisturised and cotton rid of oil seed, which being a living organism, gets heat up and spoils the crop.
Farmers lack the treatment capacity and sell their crop in hurry, routinely causing a price crash. For all practical purpose, the government does not play any role in trade of these crops. Paddy and cotton suffer regular price crash and cane growers chase sugar millers for years for recovery of their dues.
Though any attempt to improve agriculture marketing system should be made at three levels – policy, management and farms – but it must begin with improving the credit system, which, in its current formulation, holds over 90 per cent farmers hostage to middlemen, along with their crops.
Out of total credit requirement of Rs800 billion, formal sector hardly provides Rs200 billion, with the rest, around 80 per cent money (Rs600 billion) coming from informal sector (middlemen). Farmers get these loans on as and when required basis round the year.
The utility of these loans, apart from money, lies in their mode of operation: farmers sustain their lives on the basis of these loans as they meet their entire social, fiscal and investment needs out of these loans. But farmers have to pledge their crop as collateral for these loans.
Over 90 per cent small farmers have their crops pledged with middlemen by the time they harvest them. So, it is the middleman who makes the decision about crop prices when he purchases them from farmers and when he sells it to the next buyer. The market is ruled by middlemen rather than farmers.
All official attempts to limit the role of middlemen have been wreaked because their financial hold on the market. The only way to reverse the trend is to take the banking sector to the union council level and stuff it with the required money. Passbooks of farmers have been a money-making source for revenue officers. They should be duty-bound to issue passbooks to all farmers falling in their area of jurisdiction and convert these books into a guarantee for loans.
Unless formal credit reaches farmers, specially smaller ones, with required money, the stranglehold of middlemen cannot be broken and no meaningful marketing reforms can be undertaken.
Farmers, not getting a fair deal, have long been demanding an alternative route – something like an Agriculture Commodities Marketing Division (ACMD) at the federal and provincial levels, comprising representatives of growers, ministries of food and agriculture, commerce and finance and planning and development (P&D).
The ACMD should have subsidiaries in all the provinces and should replace the existing provincial agriculture marketing departments, which have miserably failed to stem the rot, leave alone improving it. It must play a pro-active role by conducting commodity-specific surveys, based on acreage, production and market intelligence, grading commodities for domestic consumption and export purposes, arranging finance for, and set timing of, procurement of all commodities and ensuring judicious return on farmers’ investment by recommending appropriate support price.
The farmers have also long been making noises about such division and its provincial arms and for setting up farm service centres at the Union Council level, which should serve farmers by providing basic services like storage, credit, setting up of small processing units, inputs like fertilisers, pesticides, diesel and repair of machinery.
Concept of cooperative sales could be developed through these centres and help empower farmers in decision-making about sale of their commodities. But this sale should be based on efficient marketing information system, so that the farmers could send their produce to the most profitable markets.
Fragmented and de-linked markets have only added to farmers’ misfortunes.
The provincial marketing departments undertook a massive exercise to link the market through satellite technology but the initiative lost momentum mid-stream.
Such a system would not only add to the national kitty by helping farmers produce more and ensuring food and cash security but also alleviate poverty in rural areas, where it is more threatening both in reach and wretchedness.