PRICE WAR BY MIDDLEMEN
GOVERNMENT MUST DO SOMETHING TO LIMIT THE EXCESSES OF INTERMEDIARIES
ATIF HASSAN (email@example.com)
Oct 19 - 25, 2009
Intermediaries are individuals/business organizations that perform various marketing functions concerned with the buying and selling of goods as they move from producers to consumers. They are classified as commission agents, brokers, wholesalers, and retailers, commonly known as the middlemen.
The intermediaries play the role of an institution between producers and consumers. But, in Pakistan it is perceived that the role of middlemen is a bit unfair and unfavorable to the interest of farmers, small business men, and consumers. Pakistani farmers sell their crops to intermediaries at cheaper rates mainly because they do not have direct access to markets because of the transportation limitations at far-flung areas. There is a huge difference in the price of the crop which the middlemen lift from the field and the price at which it is sold to the government or industry. Therefore, intermediaries actually control market prices.
The responsibility of intermediaries is very complex in the marketing chain. They are the most influential players and set the rules. Farmers and other players of the chain such as consumers and processors are dependent on them. Contractors/middlemen most of the times buy premature crops far below the market price. They decide the price themselves and the growers have no say in the determination of prices.
The profit margins of the middlemen sometimes are up to 50 per cent or even more. Growers cannot sell their crops directly to manufacturers, factories, and markets due to strong network of these middlemen.
There must be appropriate system to determine the role of each player in the chain. The government should fix the middlemen's margins justifying the services they provide. Growers have also emphasized the need for laws, which combine the contractors to harvest produce on time. There should be improvement in market access facilities specially construction and maintenance of roads and provision of efficient means of transportation to reduce time and cost.
It has also been observed that foreign, passport and land revenues offices, excise and taxation department, and the offices of city administration have become the focal point, where the middleman culture is deep rooted.
The details have revealed that the commoners at the said offices face sheer exploitation and harassment at the hands of the officials concerned.
It has been witnessed that commission agents at the foreign office's attestation branch demand Rs 200 to Rs 3000 for the attestation of documents. People waiting in long queues outside the attestation branch of ministry of foreign affairs said that they needed to get their documents attested from the attestation branch, which was a necessary requirement to fly out of the country. It takes two to three days, or even a week for the people to get their documents attested.
On the contrary, if bribe is paid to the agents, attestation is done within no time without any objection being raised. "We have to wait for two to three days for the documents' attestation. In the event of public holidays, we are made to wait even for a week or so. However, if commission is paid, they attest the documents immediately," a visitor observes.
The similar kind of abusive activity of the officials can be observed at passport office where the concerned officials reportedly harass people. This correspondent witnessed once that the passport officers were rejecting the requests of public pertaining to passport making and renewal after raising insignificant objections. However, once commission was paid, the passport requests were entertained and that too, within no time.
In Pakistan, the cost of distribution of various grocery products from producer to the consumer is very high, mainly due to high share of middlemen involved at various stages. The removal of unusual profit by middlemen reduces the profit of retailer and the manufacturers and discourages them to expand the production unit. The profit share of middlemen also needs to be reduced in order to lower prices at the retail level and to provide the immediate relief to the consumer as well. Living below the poverty line majority of people can not get relief without low prices of daily consumable items. Hence, profit of middlemen should be decreased.
Whether it is the crisis of sugar, scandal of wheat, rising prices of property, scam of dairy products or it is some national or international business activity, these commission agents, brokers, wholesalers and middlemen put the heavy loads of increasing prices on end consumers on one hand and reduce the profit margins of the growers and manufacturers on the other end.
Government must do something to limit the excesses of intermediaries.