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Facilitators or mere middlemen? Jury’s out

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Minna Zutshi

he Centre’s push for online payments to farmers has turned the spotlight on the arhtiya (commission agent) system, regarded as an integral part of the rural economy. According to Dr Sukhpal Singh, principal economist, Agricultural Marketing, Punjab Agricultural University (PAU), a commission agent is the most influential person in the current marketing system of farm produce in Punjab. “These agents, who act as middlemen for the marketing of the produce of farmers, are a source of credit. They also supply articles for domestic and farm needs on cash and credit basis,” he says.

In Punjab’s agricultural economy, commission agents are considered to be an accessible source of finance for farmers, particularly those with small landholdings. They advance non-collateral loans to farmers. However, the rate of interest is significantly higher than the institutional rate of interest.

“It is not in anyone’s interest to exclude the commission agents from the procurement process,” says Vijay Kalra, president of the Federation of Arhtiya Association of Punjab. “The day the arhtiyas are excluded from the procurement process, farmers would be exploited by corporate houses and companies. Thousands of families associated with the arhtiya system would be rendered unemployed. Accountants, labourers and workers are associated with this system. The state government has rightly decided to continue with it. This is for the good of the farmers and the economy of the state.”

Harmeet Singh Kadian, president, BKU (Kadian), says the Centre should not make direct benefit transfer mandatory. “It should be optional. For everyday needs, farmers are dependent on arhtiyas. In case arhtiyas are excluded from the procurement process, the farmers will lose their financial support,” he adds.

“It should be left to the farmers’ discretion. Many farmers cannot do without the arhtiyas’ financial assistance,” says Harinder Singh Lakhowal, general secretary, BKU (Lakhowal).

Findings of field study

Principal economist Dr Sukhpal Singh, and Shruti Bhogal conducted a survey focusing on the farmers’ perception regarding the direct payment scheme. The farm size-wise analysis of data revealed that about 85% of the farmers are in favour of a direct payment system.

Another finding from the survey revealed a direct relation between the farm size and preference for direct payment. According to the study, “all marginal farmers sampled felt that the direct payment system in agricultural produce will be beneficial and stimulate growth.” About 94% of the small farmers, 87.34% of semi-medium farmers, 81.37% of medium and 48% of large farmers were in favour of the direct payment system for agricultural produce. However, 12% farmers were satisfied with the existing system of payment through commission agents for their produce.

Singh and Bhogal say: “Education plays an important role in deriving a rational decision by an individual. It was found that more than 88% of the illiterate farmers and all of the postgraduate farmers were in favour of the direct payment system.”

The study concludes that “alternative marketing systems like the direct state procurement system and the cooperative marketing system should be developed. These systems will be beneficial for the producer, consumer and the state.”

Several provisions of the Punjab APMC (Agricultural Produce Market Committee) Act, 1961, favour commission agents, and the government, too, devised norms in a manner that benefited these agents. An expert committee that analysed the agricultural marketing system in the state suggested that intermediaries were superfluous if paddy and wheat were procured by the state agencies.

The study recommended reframing the commission agent system in Punjab’s agriculture set-up “in order to extricate farmers from the clutches of these (commission) agents.”

State govt’s stand

Reiterating Chief Minister Capt Amarinder Singh’s stand, Food and Civil Supplies Minister Bharat Bhushan Ashu has ruled out the exclusion of arhtiyas from the procurement process. He says the state government has assured the arhtiyas its total support in the implementation of the Public Financial Management System (PFMS) in Punjab. The implementation of the PFMS is mandated by the Union Government. “Initially, arhtiyas were not keen on the implementation of the PFMS. However, they will have to come on board. It will address the issue of bogus billing,” says Ashu.


Online payment

Direct Benefit Transfer (DBT) is the electronic transfer of subsidies directly to the farmers through their bank/post office account. Through the DBT system, the government intends to reduce delays in payments and ensure accurate targeting of beneficiaries, thereby curbing leakages and duplication. The Niti Aayog has recommended that all agricultural subsidies, including electricity, fertilisers, crop insurance and irrigation, be replaced by income transfer.

Public Financial Management System

The Public Financial Management System (PFMS), earlier known as Central Plan Schemes Monitoring System (CPSMS), is a web-based online software application

developed and implemented by the Office of Controller General of Accounts (CGA). PFMS was initially started during 2009 as a Central sector scheme of the Planning Commission with the objective of tracking funds released under all Plan schemes, and real-time reporting of expenditure at all levels of programme implementation. In 2013, the scope was enlarged to cover direct payment to beneficiaries under Plan and non-Plan schemes. In late 2014, it was envisaged that digitisation of accounts shall be achieved through PFMS and the additional functionalities would be built into PFMS in different stages.

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