Aiming at high price for farmer, concession for consumer | Sunday Observer

Aiming at high price for farmer, concession for consumer

1 November, 2020

The biggest issue faced by farmers throughout the country today is to bring their produce to the market without the aid of middlemen. Almost all agricultural products go through several hands before reaching the actual consumer. Hence, costs of handling, transportation, and distribution increase resulting in a high price for the ultimate consumer, while the farmer’s profit becomes minimal. The ideal situation for the farmer and the consumer should be to do away with the middlemen who usually make the highest profit, and find ways and means to deal directly with each other.

This is the exact sentiment of President Gotabaya Rajapaksa who has emphasised it at a recent meeting with the ‘Cost of Living Cabinet Sub Committee’. The President said that he intends to create a market with a ‘high price for the farmer and concessionary price for the consumer.’ His opinion is that a system must be invented for farmers to bring their crops to the market without the involvement of intermediaries.

The general phenomenon is that while consumers constantly complain about the high price, farmers regularly protest about the low price they get from the intermediaries. Over the years, the authorities and other stakeholders have recognised this gap and tried to find answers, although a concrete solution has not been found as yet. Despite steps taken by consecutive governments by way of rules, regulations, warnings, and requests, the issue remains static to date impacting severely on farmers and consumers alike.

There has been a natural tendency for the price of agricultural commodities to be volatile, particularly, during the past several years; the unpredictability was higher than normal due to internal and external factors. The reason for this large variation in price created uncertainty among producers. Producers become more concerned about the prospect of low prices and often try to change their products to suit the prevailing market demand. It is no secret that Sri Lankan farmers cannot afford a crop failure which is invariably a disaster to their livelihood.

Involvement of middlemen

In the context of the involvement of middlemen, the marketing of vegetables and fresh fruits can be taken as an example. At present, the country witnesses a surge in vegetable production due to various government sponsored campaigns encouraging agriculture and farming. Except for a negligible quantity of exports, the rest are supplied to cater to the local demand. Due to their perishable nature, farmers are compelled to dispose of stocks faster. Frequently, intermediaries take advantage of this situation and dominate the pricing of agricultural produce.

Therefore, even though an effective market system must be in place to reduce the middlemen’s influence, up to now market activities are allegedly controlled by them in the absence of adequate government intervention. In addition, vegetable and fruit farmers face other challenges such as climatic conditions, lack of infrastructural facilities, inadequate supply of water, financial constraints, and so forth, resulting in price instability.

The influence of the mediators discourages farmers and reduces their participation in crop production activities, thereby encouraging the need to import such products to fill the gap. The irony is that Sri Lankan farmers have the know-how, experience, and especially the potential to produce them in the country. Nevertheless, a larger portion of food requirement is still produced in the country.

A hike in prices of commodities prevailed during the early days of the Covid-19 crisis. Responding to complaints by consumers, the Government took steps to arrest the matter. The Government imposed price controls despite heavy resistance from the traders and succeeded in applying breaks on the price surge. The Government has tried its best to offer farmers a reasonable price for their products while being strict on the traders.

Successive governments, from time to time, made mindful efforts to eliminate the exploitation of farmers by middlemen. The vast majority of Sri Lankan farmers are not market savvy and are at the mercy of a cartel of considerably powerful middlemen. Therefore, the attempts by governments either failed or were made redundant by these intermediaries. Dealing with too many intermediaries could be detrimental to farmers, leaving them with an unfair return for their produce.

Concessional prices

In relation to concessional prices to the end consumer, factors such as packaging, transport, storage, and periodical excess supply of commodities, particularly perishables such as vegetables and fruits also influence the final price. Past researches reveal that agriculture wastage is a national issue that causes harmful repercussions on the public. According to the figures, the annual wastage is calculated at a staggering 30 per cent of approximately 700,000 metric tons in vegetables and 40 per cent of approximately 550,000 metric tons in fruits, during transit from the farm-gate to the end-user.

This writer recalls that a senior Minister of the Mahinda Rajapaksa Government, in 2010 or so took a conscious effort to reduce the wastage of perishables by introducing various regulations. However, many stakeholders, probably influenced by the powerful middlemen, sabotaged the effort for personal gains and disrupted the process within a short period.

Also, the Minister made the mistake in attempting to introduce the system hastily without going through a proper pilot program. However, it must be mentioned that the effort was creditable and would have been a tremendous benefit had it been successful. A similar distribution system must be introduced to save billions of rupees wasted due to poor distribution process.

Farmers

Farmers must be provided a favourable environment that allows them to have authority over the pricing of their products in line with consumer demand. The farmers should be allowed to trade directly with the market and the supply chain should be shortened to bring the farmers as close as possible to the consumer. Too many intermediaries can be a deterrent to a farmer, leaving them with an unfairly small return on their produce.

Some people are of the opinion that middlemen should be eliminated. However, in fairness to the reasonable middlemen community and to strike a justifiable balance, it must be said that with the rapid development in business activities and increasing consumer demand, it may not be possible for the producers to have direct contacts with the consumer. Also, at times, they offer financial assistance to farmers when they are in need. Hence, the middlemen also can be productive to link producers to the market, if controls are imposed on them.

As President Rajapaksa emphasised, a system must be invented in favour of farmers to obtain the best possible price while providing reasonable retail prices to consumers. To make this a reality and curtail wastage, the Government must activate a mechanism to find short and long-term remedies. A system cannot be designed and implemented in a hurry on this issue as everyone needs time to adjust. Therefore, a well-researched system with foolproof methods is required in the long run.

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