PARADIGM IMPROVEMENTS IN AGRICULTURAL MARKETING SYSTEM

HAMMAD BADAR & DR. KHALID MUSTAFA
May 12 - 18, 2008

Agricultural marketing system in Pakistan is fairly diversified. Both the private and public sectors are involved in the marketing of farm produce. Private sector enterprises operate freely in buying and selling of many agricultural commodities. The farmers bring their produce in the markets themselves or through market intermediaries where buying and selling of these commodities take place on demand and supply equation. Government intervenes in the marketing system through fixation of floor prices, procurement quotas and prices, export quotas, regulation and control of markets etc.

The subject of agricultural marketing is entrusted to the provincial governments in Pakistan. Some of the institutes related to agricultural marketing however operate at federal level whereas others function at provincial level. At federal level, Agricultural Policy Institute (API) previously known as APCOM formulates agricultural policies including those on agricultural prices and marketing. Quality and grading assurance in the domestic markets is a concern of Department of Agricultural and Livestock Product Marketing and Grading (DALPMG) working under the Ministry of Food, Agriculture and Livestock (MINFAL). This department advises the Federal Government on all matters relating to agricultural marketing in the country. It also provides guidance to the provinces on marketing and coordinates provincial activities at the national level. Issues related to the export particularly for horticultural products, Pakistan Horticultural Development and Export Board (PHDEB) is the supreme institute.

At provincial level, especially in Punjab agricultural marketing is managed by Directorate of Agricultural Marketing working under Ministry of Agricultural Marketing. Pakistan Agricultural Storage and Services Corporation (PASSCO) and Food Departments are apex bodies and procure many agricultural commodities especially staple food stuff like wheat. In addition, Punjab Government has established Punjab Agri Marketing Company (PAMCO) which works on Public-Private joint initiative and is entrusted the task to enhance storage, processing and transportation facilities in Punjab. Punjab Institute of Agri Marketing (PIAM) has also been established for training the stakeholders and suggesting policy recommendations for improving agricultural marketing system in the province.

In Punjab, the existing scenario is managed under two legal documents. Punjab Agricultural Produce Market Act 2006 under which market committees control the working and management of wholesale markets, whereas grading and quality certification in the domestic markets is legally controlled under Punjab Agricultural Produce Grading and Marking Act 1972.

PROBLEMS IN AGRICULTURAL MARKETING SYSTEM

In Pakistan, agricultural markets handle a substantial volume of produce. But as production and incomes have increased and consumers demand high quality products, most of these markets do not cope with the emerging requirements and have come under increasing strain and need improvement.

Many marketing inefficiencies like lack of market intelligence, insufficient infrastructure, exaggerated role of middlemen, adulteration, hoarding and profiteering, excessive rates of various services, collusion amongst traders to suppress prices, and mismanagement of input and output markets are some of the main problems which leave a small amount of marketable surplus. Meager marketable surplus of small farmers together with their weak financial position makes it difficult for them to withhold the produce for better prices, while the remoteness from the organized markets generally influence farmer's decision to sell locally at comparatively low prices. It is estimated that producers of farm products in Pakistan get 65% of the consumer price for their non-perishable commodities and 25-55% for perishables.

The role of middlemen acting as a link between producers and consumers is very complex and needs an in depth analysis before concluding any results. Middleman is the person who provides many services to farmers and on the other hand, he is considered as one of the major "institutions" exploiting farmers. It is assumed that middlemen get very high margins but their share is generally justified by considering provision of additional services and risks, which they usually undertake at each stage of marketing system because the middlemen provide those services to the task entrusted with the government viz. provision of credit, over night stay in the mandis, settlement of social disputes etc.

Most of the wholesale markets in Pakistan are poorly designed. Many are too small and congested and are located in the center of towns. Traffic congestion and access are a major problem. Buildings are small and normally in a state of disrepair. Storage facilities are limited and the produce is usually stacked outdoors on the ground. Little or no mechanical equipment is used and unhygienic conditions often prevail. Imperfections of the markets have given rise to several unfair trade practices and these generally work against both the producer (seller) and the eventual consumer. Some of the unfair trade practices that have become part and parcel of agricultural marketing system include; short weighment of produce, misquotation of rates, exploitation of farmers in debt, collusion amongst traders to suppress prices, excessive rates of various services, unreasonable quality and weight deductions, hoarding and profiteering etc.

POLICY RECOMMENDATIONS

An efficient marketing system means availability of quality inputs and outputs at desired place, in right time and in the suitable form which is not possible without strong infrastructure support, efficient transportation (especially for perishables) processing, grading and storage facilities. Generally, these physical marketing facilities lack in our country. As such, agricultural products have to be handled for a considerable time by various marketing agencies before reaching to ultimate consumers. Even in the case of non-perishable commodities like food grains, it is estimated that the entire marketed surplus passes into the trade channel in two to three months, coupled with lack of suitable storage methods and on the principles of good storage management, which increase post harvest losses. In order to remove these bottlenecks, following policy recommendations are suggested.

Regulation of markets and strict enforcement of rules are possible answers to cut down on these malpractices. It may be necessary to frame new laws that can be easily enforced to put an end to these malpractices. The role of market committees should be completely changed and a new information system regarding the rates of agricultural produce in different markets be devised. The government should make certain that the market committees play a positive role to ensure farmers a higher return for their produce. Additional resources should be made available for infrastructural development in rural areas. The market committees should expand their resources and utilize them to provide farmers with better facilities.

The interests of small farmers should also be safeguarded by procuring their produce directly by the government, which will enable farmers to receive fair prices and safeguard them against advance purchases made by the commission agents.

Moreover, improved infrastructure, free access to markets and producers marketing cooperatives would contribute considerably to remove some of the imperfections. Organization of marketing cooperatives would be particularly beneficial for small producers having meager marketable surpluses which are burdensome to take their produce to the organized wholesale markets and are, therefore, sold to local merchants at relatively low prices.

Authentic market intelligence on regular basis is necessary for maintaining meaningful interaction between producers and consumers to ensure smooth and effective flow of agricultural products. Farmers and all other stakeholders in the market should be provided accurate information about demand, supply and market process for all agricultural commodities.

Marketing improvements in Punjab may be made distinctly at three levels (i) policy (ii) managerial, and (iii) grass root/farm levels. At the policy level, it is necessary to formulate an effective medium-term policy on agricultural marketing under which various components of marketing programs and activities can be integrated and coordinated. At managerial level, the management and technical capabilities of technical bodies, involved in the implementation of the marketing policies, should be improved to enable work to be carried out more efficiently and economically. While, fulfilling the socio-economic objectives of government policies at grass-root/farm level, the marketing policies and programs should assist farmers in selling their produce, purchasing their inputs and raising their incomes. At this level, the effectiveness of government policies and programs often loses its impact; especially for those farmers whose marketable surplus is too small and least-oriented to marketing requirements.

The private sector should be allowed to set up markets for agricultural produce and a new law formulated for this purpose. Permission to set up markets by the private sector for agricultural produce would eliminate monopolies and promote healthy competition in the marketing system.

A plan may be chalked out to ensure farmers a higher return. The plan amongst others should provide for storage, marketing of produce and infrastructure for the primary industry. The government must ensure timely supply of credit and information to lessen the extra burden otherwise imposed by middlemen upon farmers.

Measures should be undertaken to improve the processing of exports such as fruits, flowers, vegetables and other agricultural produce and in this regard export-processing Zones should be established to increase agricultural production and boost exports of perishables.

Hammad Badar

(Lecturer, Deptt. of Marketing & Agribusiness, University of Agriculture, Faisalabad)

Dr. Khalid Mustafa

(Professor & Chairman, Deptt. of Marketing & Agribusiness, University of Agriculture, Faisalabad)