Need to cut all-powerful arahti down to size

Monday, November 10, 2008

By Jawwad Rizvi
LAHORE: ARAHTIS (middlemen) and beoparis (traders) exploit both growers and consumers as they play a vital role in fixing the market price of agricultural produce.

The institution of arahti is very old and the arahtis have been playing a vital role in determining the prices of agricultural produce since the rule of Hindus in the subcontinent. For growers, arahtis play the role of a private money lender and usually provide agriculture inputs to growers and in return purchase produce at very lower rates. In some cases, they provide growers a little share from his own crop which is hardly enough to meet his requirements. The arahtis also deprive growers of the actual profit, which they could have earned by selling the produce themselves, develop cartels in small markets and manipulate prices. They have the capacity to hoard produce and sell it in off-season and mint huge profits.

The role of arahti in the grain, fruit and vegetable markets has strengthened with the time. He cannot be removed from the scene but his role can be minimised by amending laws.

The main reason for strengthening of arahti in these markets is unavailability of easy liquidity to growers. Lack of information about market prices of grains, fruits and vegetables is another reason. Growers also feel embarrassed about selling their products themselves so arahtis ‘arrange’ it for growers.

In order to diminish the role of arahtis in markets, the government would have to act with sincerity. For credit availability, the central bank must develop a farmer-friendly lending policy.

Unfortunately, in Pakistan, the central bank issues instructions to commercial banks, asking them to ensure issuance of a certain amount of money as agri loans out of total liquidity. In many cases, commercial banks merely reschedule their old agri loans and do not issue fresh loans.

On the other hand, it is an uphill task for growers to get agri loans from commercial banks. Most of the time, growers fail to submit required documents to commercial banks due to their limited knowledge. Farmers do not approach banks as they shy away from getting into lengthy paperwork and complicated procedures. That is why they prefer borrowing money from private money lenders at much higher interest rate.

Another way to rescue growers from the clutches of arahtis is to provide growers with agri inputs rather than loan.

The role of arahti varies in grain, fruit and vegetable markets. In wheat trading, he plays a key role in determining wheat market price. Millers, however, exploit growers when it comes to kharif crops such as rice, cotton and sugarcane. In fruit and vegetable markets, beoparis play a key role while arahti’s share is much less.

In wheat trading, the nexus of government employees responsible for wheat procurement and arahti is behind exploitation of growers. Availability of bardana (jute bags) during wheat selling season is another serious issue growers face. Arahtis usually buy jute bags and cash-strapped growers are left at their mercy. There is a need to end this practice in order to protect growers from arahtis.

The role of arahtis can also be minimised if the government constructs more warehouses for storage of grains. Once the government sets up storage facilities, then it can rent them out to those who need it. Most of the time, small growers have the capacity to store wheat that is enough only for their yearly requirement. They are forced to sell excess produce for whatever price they get as storage of produce out in the open is fraught with risks.

In the case of kharif crops such as rice, sugarcane and cotton, commission agents (part-time arahtis) exploit growers. In Punjab, majority of rice mills, cotton ginning factories and sugar mills are owned by political heavyweights. Mills delay the payment and buy produce from commission agents who purchase produce from growers. Thus commission agents purchase produce at relatively low price and sell it to mills at prevalent rates.

In fruit and vegetable markets, beoparis are the players who determine prices. They operate in almost every village and fruit and vegetable producing areas. Farmers do not want to bring their produce into markets themselves.

They also lack information about the real market price of their produce. Beoparis thus purchase fruit and vegetable below market price and sell it in city markets at much higher rates. This way, they pocket the margin and the grower and the consumer remains at the receiving end.

In fruit and vegetable markets, pharias play a vital role in pushing prices upwards. Pharias usually do nothing but facilitate the process of the produce changing hands. Beoparis bring fruit and vegetable to the market from producing areas and sell it to arahtis. Later, arahtis sell it to pharias in the first bidding. An ordinary bidder can not become a part of the chain of beoparis, arahtis and pharias.

The role of beoparis is crucial in a situation in which farmers are not willing to bring their produce to the market themselves.

Similarly, arahtis arrange biddings and provide credit to beoparis to bring growers produce to the market. Wealthy beoparis, however, are not dependent on credit and purchase produce from growers on their own. It is vital is to eliminate the role of pharias in order to minimise the difference between consumer and grower prices.

There is a need to improve market infrastructure in order to expel pharias from fruit and vegetable markets. In Punjab, market committees face staff shortage whereas in the Indian Punjab, market committees have huge staff to monitor biddings process and handle other issues.

The Punjab government has allowed the private sector to establish fruits and vegetables markets and also evolved modalities. This move may promote competition among public and private sectors fruit and vegetable markets. But steps are needed to improve the market infrastructure and revamp the role of arahtis and beoparis.