In Pakistan, the biggest flaw in the agricultural marketing system is the limited number of marketing channels available for farmers to sell their produce. This constraint adversely affects the farmers’ market power (pricing power/bargaining power) and, in turn, their profitability, often making farming itself unsustainable. As a result, farmers often seek subsidies and support prices for survival.
Historically, Pakistan inherited the Agricultural Produce Markets Act of 1939 from the British era and continued to rely on it for several decades with only minor amendments. Although Punjab and Sindh later enacted the Punjab Agriculture Marketing Regulatory Authority Act 2018 and the Sindh Wholesale Agriculture Produce Markets (Development & Regulations) Act 2010, respectively, these legislations have brought little meaningful change. They merely facilitated the establishment of some private sector-led markets alongside existing public sector markets.
Wattoo Khalid Saeed said that the farmers always compared their options at the start and took into account the cost structure, aiming for lucrative options, adding that the low market prices would result in farmers switching crops for the next years.
In essence, the outdated framework set forth by the Agriculture Produce Markets Act of 1939 continues to govern our operations. The overarching goals, structure, scheme, and prescriptive regime have remained largely unchanged in the new legislations. Consequently, the core challenges and inefficiencies of the marketing system persist, leaving key issues unaddressed.
Historically, wholesale grain markets (ghalla mandi) and fruit and vegetable markets have been the primary, and often the sole, channels for most farmers, particularly small and medium-sized ones. Unfortunately, these markets are widely perceived — based on experience to date — as centres of exploitation, where farmers are subjected to unfair practices and systematically fleeced.
The current exploitative channels assume total price control often leaving farmers with less than 25pc of consumer prices
Arthis (middlemen) charge exorbitant commissions as high as three to five per cent of the sales value for grains and 5-8pc for fruits and vegetables. These rates rise further when farmers take short-term advances from them. Over the past two decades, these commission rates have steadily increased, even as the absolute amount of commissions has grown due to rising crop prices. Arthis effectively pocket almost 15-25pc of farmers’ profits in lieu of a few hours of service.
The system is especially exploitative in the fruits and vegetables sector, where farmers often earn less than 25pc of consumer prices, as they have no control over the pricing of their produce.
Additionally, malpractices such as under-weighing, secretive auctions (open bidding is not practiced in some markets), and poor physical infrastructure further worsen farmers’ challenges. In recent years, deferred payments to farmers have become increasingly common in several grain markets, effectively, allowing arthis to use farmers’ money as their working capital.
Despite these challenges, the government has failed to modernise the agricultural marketing system to align with societal changes in rural areas, transformation in the agriculture sector, and evolving local and global trade dynamics.
Though the Punjab Agriculture Marketing Regulatory Authority Act emphasises promoting alternative marketing channels, such as virtual markets, farmer markets, specialised markets, and collection centres, no tangible progress has been made. The legislation is a classic example of being “quick in legislation, lax in implementation”, which is a common trait of Pakistan’s governance system.
However, the private sector is making efforts to introduce non-traditional marketing channels. Notably, two models are gaining traction in the country. They have built-in mechanisms for providing agricultural credit (in-kind or cash) that help mitigate the pressure on farmers to sell their produce immediately after harvest to repay outstanding loans and fund the next crop.
Furthermore, the warehouse receipt system (WRS), successfully adopted in many countries, has been introduced in Pakistan in recent years. Farmers can currently store their maize, rice, and paddy in licensed/authorised warehouse facilities, get bank loans against the stored crops, and later sell to individuals directly or via the Pakistan Mercantile Exchange.
WRS helps manage oversupply during the harvest season, improve farmers’ liquidity, and stabilise market prices. However, its widespread adoption by small and medium-sized farmers — 98pc of all farms — depends on factors such as loan interest rates, crop price volatility over the marketing season, and the ratio of warehouse rental charges to crop value.
In Pakistan, contract farming offers a viable solution to many challenges faced by farmers. Its core principle — a buy-back arrangement at pre-determined prices — helps mitigate market price volatility, particularly in the absence of minimum support prices in the country.
Farmers also gain access to high-yielding seeds, agricultural inputs, and advisory services from contracting buyers. Additionally, it accelerates investment and technology transfer in the country. However, to fully realise its potential, dedicated legal provisions and a binding arbitration mechanism must be incorporated into the outdated Contract Act of 1872 to ensure timely conflict resolution.
In conclusion, the government’s efforts to date have primarily focused on improving the physical infrastructure of the mandis — a traditional brick and mortar model — rather than bringing structural changes in the marketing system.
Pakistan’s agriculture sector is highly diverse, with a wide range of agronomic and horticultural crops, along with various buyers, including processors, exporters, stockists, and large wholesalers. Therefore, the traditional one-size-fits-all approach of conventional markets is increasingly misaligned with the evolving national and global agricultural landscape.
The country needs a range of non-traditional agricultural marketing channels that can boost farmers’ market power, reduce intermediaries, lower transaction costs, and eliminate exploitations. It is high time to draw lessons from other countries’ success stories while factoring in the peculiar dynamics of Pakistan’s agriculture sector.
Wattoo Khalid Saeed is a farmer and a development professional, and Dr Waqar Ahmad is a former Associate Professor at the University of Agriculture, Faisalabad
