Impact of Middlemen on Pakistan's Agriculture

Agriculture stands as the backbone of Pakistan’s economy, contributing 22.7% to GDP and providing employment to 37.4% of the labor force (Economic Survey of Pakistan, 2023). Yet, the sector remains burdened by systemic inefficiencies, foremost among them, the dominance of middlemen. These intermediaries, primarily commission agents (arthis), wholesalers, and informal lenders, act as gatekeepers to markets. They control the flow of goods, set prices, and provide informal credit, often trapping smallholder farmers in cycles of debt and dependency. As a result, farmers typically receive only 20–30% of the final retail price of their produce (World Bank, 2023), a figure that starkly illustrates the inequity within the supply chain.

The core of the problem lies in Pakistan’s largely informal and poorly regulated agricultural marketing system. A lack of cold storage, inefficient transportation, and minimal direct linkages between farmers and consumers severely limit market efficiency. Most farmers, particularly smallholders, are forced to rely on middlemen for pre-harvest loans and market access. Consequently, they have little bargaining power and are often compelled to sell at prices far below market value.

Previous reform efforts, including farmer markets (Kissan Mandis), government procurement programs, and contract farming, have largely failed to bring systemic change. These initiatives suffered from weak regulatory oversight, institutional inertia, and political interference (IFPRI, 2022). The effects are deeply felt post-harvest losses exceed 30–40% for perishables (FAO, 2023), farmer incomes remain stagnant, and consumers face frequent price hikes fueled by artificial scarcity and speculation.

This article investigates the structural role of middlemen in distorting Pakistan’s agricultural markets, exposes the resulting disparities in farm-to-fork pricing, and explores policy innovations aimed at restructuring supply chains to ensure fairer, more transparent agricultural trade that empowers farmers and benefits consumers alike.

Middlemen in Pakistan’s Agricultural Supply Chain

Middlemen play a dominant role in Pakistan’s agricultural supply chain, particularly within the mandi (wholesale market) system, where they serve as gatekeepers between farmers and consumers. These intermediaries, commonly known as arthis or commission agents, facilitate transactions but often exploit their position. Although the officially sanctioned commission is 3–5% for grains and 5–8% for fruits and vegetables, actual profits are much higher due to hidden charges, under-weighing practices, and delayed payments, which reduce farmers’ actual earnings while boosting middlemen's margins (PARC, 2023).

Farmers’ reliance on middlemen is driven by a combination of financial, infrastructural, and systemic constraints. Informal credit is a critical factor, over 70% of smallholder farmers borrow from arthis at exorbitant interest rates ranging from 24% to 36%, with loan agreements often requiring farmers to sell their produce exclusively to the lender at pre-agreed, below-market prices (State Bank of Pakistan, 2023). This not only limits market competition but traps farmers in cycles of debt and dependency.

Market access remains another critical barrier. Only about 15% of farmers have direct linkages with retailers, food processors, or consumers. The vast majority rely on intermediaries due to a lack of awareness, contacts, or resources to navigate direct sales (USAID, 2023). Additionally, weak infrastructure compounds the issue. Poor rural roads, inadequate cold storage facilities, and fragmented logistics prevent farmers from preserving and transporting perishable goods efficiently. These conditions force many to accept distress sale prices, further reinforcing the control of middlemen over agricultural trade and reducing farmers' ability to benefit from their own produce.

Breaking the Monopoly: Enhancing Farmers’ Share in Agricultural Markets

In Pakistan’s agricultural economy, a striking imbalance persists between what farmers earn and what consumers pay. Data from the Punjab Agriculture Department (2024) highlights that for staple vegetables like tomatoes, onions, and potatoes, farmers receive only 20–30% of the final retail price. For example, tomatoes sell at Rs. 15/kg at the farm gate but reach consumers at Rs. 60–80/kg. The situation is even worse for perishable crops such as mangoes and chilies, where farmers’ share drops to as low as 15% due to high spoilage risks and dependency on intermediaries (FAO, 2023).

This disparity is largely the result of middlemen dominating the supply chain. Around 60% of farmers are caught in debt cycles with these intermediaries, borrowing at exorbitant interest rates that bind them to sell produce at unfair prices (SBP, 2023). As a result, only 12% of smallholders can reinvest in improved input like certified seeds and quality fertilizers (IFPRI, 2023). On the consumer end, price manipulation by middlemen, especially during supply shocks, drives up costs by 30–50%, contributing to national food insecurity that affects 38% of the population (WFP, 2023). Moreover, poor infrastructure results in 40% post-harvest losses in fruits and vegetables (FAO, 2023), exacerbating inefficiencies.

While government initiatives like Punjab’s Digital Mandis and Sindh’s urban farmer markets show promise, their impact has been minimal due to middlemen resistance and inadequate enforcement. In contrast, international examples such as India’s e-Choupal and Kenya’s M-Farm offer scalable, tech-driven alternatives for bypassing intermediaries and ensuring transparent pricing (World Bank, 2023).

To address this systemic issue, several policy interventions are essential. Direct farmer-to-consumer markets should be expanded, with examples like Lahore’s Sunday Bazaar already demonstrating 20% cost reductions (Govt. of Punjab, 2023). Digital platforms, such as a proposed “Kisan Dost” app, could provide real-time price updates and facilitate direct transactions. Blockchain technology may further ensure traceability and fairness in pricing (UNDP, 2023). Strengthening farmer cooperatives, like the Amul model in India, which boosted member incomes by 35%, alongside enforcing the Sindh Cooperatives Act, could shift bargaining power toward producers. Improving cold storage and logistics through public-private partnerships and offering formal credit through ZTBL and microfinance institutions like Karandaaz will help reduce dependency on informal lending networks and enhance market access for smallholders. These reforms are not only essential for improving farm incomes but also for ensuring fair, stable food prices for consumers.

Conclusion

The entrenched role of middlemen in Pakistan’s agricultural markets has long undermined both farmer welfare and consumer affordability. Farmers, particularly smallholders, receive a disproportionately low share of consumer prices, often just 20–30%, due to exploitative intermediary practices, informal credit traps, and inadequate infrastructure. This structural imbalance stifles farmers’ ability to invest in improved technologies, perpetuates rural poverty, and contributes to food insecurity across the country. Meanwhile, consumers face inflated prices caused by artificial shortages and price manipulation, especially during supply disruptions.

Despite well-intentioned government interventions, such as Digital Mandis and urban farmer markets, implementation gaps and resistance from entrenched intermediaries have limited their success. However, global innovations like India’s e-Choupal and Kenya’s M-Farm show that inclusive, technology-driven solutions can effectively bypass middlemen and empower farmers. Pakistan must now adopt similar approaches by scaling direct-to-consumer marketing channels, investing in digital platforms like the proposed “Kisan Dost” app, and enforcing cooperative legislation to enhance farmer bargaining power.

Complementing these reforms with targeted investments in cold storage, transportation, and formal agricultural credit will help dismantle the exploitative stronghold of middlemen. A more equitable and efficient agricultural marketing system is essential, not only to uplift farmer incomes but also to ensure price stability, food security, and inclusive rural development.

References: FAO; IFPRI; World Bank; Punjab Agriculture Department; State Bank of Pakistan; Economic Survey of Pakistan; PARC; USAID; WFP; Govt. of Punjab; UNDP

Please note that the views expressed in this article are of the author and do not necessarily reflect the views or policies of any organization.

The writer is affiliated with the Department of Agricultural Economics, Sindh Agriculture University, Tandojam, Sindh, Pakistan and can be reached at zameerchachar223@gmail.com

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