Policy Options for Reforming Agricultural Marketing System in Punjab (Pakistan)

Nature of Agricultural Marketing System 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 besides their heavy involvement in the marketing of input system. 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.

Institutional and Legal Arrangements Agricultural marketing is a provincial subject in Pakistan. Some of the institutes related to agricultural marketing however also operate at federal level. Federal Institutions Agricultural Policy Institute (API) Previously known as APCOM - formulates agricultural policies including those on agricultural prices and marketing. Dept. of Agricultural and Livestock Product Marketing & Grading (DALPMG) working under the Ministry of Food, Agriculture and Livestock (MINFAL). - Quality and grading assurance in the domestic markets - Advises the Federal Government on all matters relating to agricultural marketing in the country. - Provides guidance to the provinces on marketing and coordinates provincial activities at the national level. Pakistan Horticultural Development and Export Board (PHDEB) - Advises on issues related to the horticultural exports

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

In Punjab, agricultural marketing is managed under two Acts. Punjab Agricultural Produce Market Act 2006 under which market committees control the working and management of wholesale markets. Grading and quality certification in the domestic markets is legally controlled under Pakistan Agricultural Produce Grading and Marking Act 1972.

Major Problems in Agricultural Marketing 1. Production oriented and Small marketable surplus - Majority of the farmers are small and traditionally production oriented. - Meagre marketable surplus makes their staying power weak and results in lower returns 2. Inefficient produce preparation - Due to small marketable surplus and lack of awareness, inefficient marketing practices employed by the small farmers - Results in higher post harvest losses, marketing costs and lower returns. - 20-40 % fruits and vegetables are lost by the time these reach market. 3. Insufficient Storage capacity - Storage capacity at all levels is quite low in Pakistan

4. Fraudulent practices 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, Willful adulteration and mixture of foreign matter 5. Ineffective rural assembly markets Rural assembly markets are ineffective and fail to bring proper returns to the farming community 6. Inadequate communication and transportation facilities Lack of proper communication and transportation facilities- create delays and physical and market losses of produce. 7. Lack of marketing extension services In Pakistan, Emphasis on crop production extension services , marketing extension service totally missing

8. Lack of group action For obtaining benefits of economies of scale, group actions is a critical factor. Unfortunately, in Pakistan, the group / cooperative effort has not been successful due to mistrust among farmers, lack of managerial skill and technical know- how of marketing 9. Lack of vertical coordination of marketing channel Lack of coordination among all the channel members does not transmit forward and backward marketing signals resulting lower marketing returns.

Policy Options Promotion of Agricultural Markets in the Private/Cooperative Sector Amendment in Act - Laws and role of private sector in market development Allocation of suitable and sufficient land with approval to set up markets Provision of land for Farmer’s Association Collection Centres Fast approval of services like electricity, water, sewage, telephone etc. Long term capital for initial capital investment.

Direct Marketing Encourages farmers to undertake grading of produce at farm gate –Delivery at regulated markets for sale. Economizes on transportation costs and improves price realization In South Korea, consumer prices declined by 20-30 % due to direct marketing. Producer received prices rose by 10-20 percent. Direct Marketing experiment in Indian Punjab- A Success as “Apni Mandi”. Markets be run at the state exchequer, as a promotional measure to encourage marketing of small and marginal producers of fruits and vegetables without the help of middlemen Amendment in relevant Acts for this purpose-Induction of private/cooperative sector in the business.

Contract Farming National and multinationals enter into contracts for marketing the horticultural produce by providing technologies and capital to contract farmers. Provision of inputs / technological guidance by companies. Risks borne by companies Small farmers capital starved – Unable to make investments in land improvements and modern inputs To be a success – Provision of adequate infrastructure facilities of roads, public transport, telephones, stable power, water supplies, cold storage etc. by Govt. Interactive role of private and public research in developing appropriate crop varieties, cropping pattern based on agro-climatic considerations Conducive environment for encouraging national and international companies to promote contract farming by creating legal, political and administrative system and necessary infrastructure.

Rationalisation of Market Fee Levy of fees at different slabs in consonance with the type of scale of services / facilities provided to all market users Pledge Financing and Marketing Credit Farming community mostly small and marginal farmers Small farm holdings contribute about 55 % of marketable surplus Farmers often sell their produce to square off their debts soon after harvesting Solution lies is providing access to safe and scientific storage and easy marketing credit.

Minimum Price Support (MPS) Served the country very well in the past decades but has started encountering problems because of surpluses/ shortages of agricultural commodities Private trade, not fully able to play its role, particularly in respect of wheat and rice Under the MPS scheme price exogenously determined and defended by Government/ procurement agencies. Adverse effects lay hidden as the country operated in a situation of shortages in a relatively closed economy. In the changing environment need to think an alternative policy, particularly if the private trade is to be restored its significant role in the market place.

Information Technology in Agricultural Marketing Existence and dissemination of complete and accurate market information - a key to achieving both operational and pricing efficiency in the marketing system. IT has an important role to play in the process. Need to familiarize farmers in the national and international acceptable standards of grading and standardization, packaging and labeling, storage and warehousing, and phyto-sanitary measures and quality certification in the farm sector

Marketing Extension Major changes owing to liberalization and Globalization of markets. Agriculture has to be market driven, more cost effective, competitive, innovative and responsive to the high tech. and IT applications. Training and Extension systems - need to sensitize and orient the beneficiaries to respond to these challenges. Knowledge to be imparted at grassroots levels in areas such as market driven production programme, Post harvest management of Agricultural and horticultural crops, availability of marketing and finance, quality assurance and standards, grading, packaging, storage, transportation, contract farming, direct marketing, alternative markets including forward and future markets and market information systems. Need to prepare training and education modules in these areas in Vernacular languages

Market Infrastructure Development Need for high investment and entrepreneurial skills for creation and management of Agricultural marketing infrastructure Encouraging greater participation of private sector in the development of marketing infrastructure and supporting services. Storage Infrastructure Need to formulate National storage policy for harnessing the resources of public and private sectors for augmentation of infrastructure to handle food grains including construction of bulk storage facilities and conventional Godowns.

Cold Storage Infrastructure Need to encourage private sector to make investments and in this regard measure may be taken to: Reduce the regulatory control and simplify procedures. Providing subsidy to enable the private sector initiative to attain economic viability. Allocation of suitable land to set up markets, fast approval of foreign technical assistance import of equipment and services like water, sewage and telephone etc.

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