Can the role of middleman be eliminated?

Source : Dawn News

Date: July 19, 2010

THE role of middleman in the commodity trade is back in focus. The Sindh Assembly has enacted the Wholesale Agricultural Produce Marketing Development and Regulation which empowers the provincial government to eliminate the middleman’s role.

The act has come after Punjab’s continuous maligning of the middleman for more than a decade and repeated attempts to reduce his role. But Punjab has not been able to even reduce, leave alone to eliminate, the middleman’s role. Can Sindh succeed where Punjab has failed?

Punjab failed to throw the middleman out of the commodity trade (especially wheat) because it treated him as an ‘outsider,’ who jumps in at the time of trading, exploits farmers, makes money and gets out of market. The reality, however, is different. The middleman is very much part of the production process.

In rural economy, the farmer uses land and his labour power and the middleman provides money to facilitate production. Without middleman’s credit, over 80 per cent farmers would not be able to buy seed and fertiliser. They will not even be able to prepare their fields for sowing if the middleman does not provide money for the diesel. That is how ground realities define the role of the middleman and make him an essential part of the crop cycle.

The financial role of middleman can be gauged from the fact that of the total loan requirement of around Rs1,000 billion, the formal sector (banks) provides around Rs275 billion. The government banks hardly provide Rs80 billion.

Link: http://epaper.dawn.com/ArticleText.aspx?article=19_07_2010_603_002