Role of Aarthias in Agricultural Markets of Punjab and Haryana
The Agricultural market is regularized by Aarthias (commission agents) in the agricultural dominant areas of Punjab and Haryana. They work as an intermediary between the farmers and the market for selling their agricultural produce, which extends to influence most factors of the agricultural supply chain, from questions of pricing to logistics.
Aarthias provide three major services to farmers:
They advance credit to the farmers for the purchase of inputs like seeds, fertilizers, and pesticides. Indeed, this is critical financing that helps farmers to sustain their produce, particularly in early times of production.
The Aarthias are undoubtedly major contributors to stabilizing the prices in the markets. By aggregating produce from innumerable farmers, they have the bargaining power to get better prices for wholesalers and retailers. This collective bargaining helps keep prices stable, benefitting both farmers and consumers. Sometimes, Aarthias absorb market fluctuations so that less volatility is reflected to the farmers.
Infrastructure and logistical support to the agricultural supply chain are found through Aarthias. Storing capacity that, in a country like India, is vital, as most of the post-harvest losses take place due to insufficient storage facilities. According to a Food and Agriculture Organization report, India loses roughly 40% of its fruit and vegetable production annually because of an insufficient cold storage and transport infrastructure.
Aarthias also contribute towards financial inclusion in rural areas. Small-scale farmers are most of the time neglected by traditional banking systems due to high risks and lack of collateral. The Aarthias fill this vacuum through credit based on mutual trust and a long-term relationship. The farmer gets an average 1.5 lakh rupees per hectare of land as loans from banks, which is very less. In the views of the Indian Council for Research on International Economic Relations, about 85% of small and marginal farmers of Punjab and Haryana depend upon Aarthias for credit.
Though they play an integral role in all agriculture cycle, Aarthias are criticized for having driven farmers into a debt trap. The interest charged upon the loan provided at higher rates may leave them in debt and push them into the vicious cycle of debt. Sometimes, due to the lack of formal agreements, there is disagreement over the loan and the conditions prevalent on its repayment.
It is the reforms that will marry the best features of the Aarthias system with modern financial and logistical solutions that will enhance efficiency in the agricultural market. Digital platforms for access to markets, as well as improved regulatory frameworks and storage infrastructure, can help attenuate some of the challenges at both ends.
Aarthias are, therefore, an integral component of the agricultural markets in Punjab and Haryana. They provide financing, access to markets, and a properly laid-out logistical infrastructure that helps stabilize prices and sustain farmers. Their full potential will be harnessed only if the problems inbuilt within the system regarding debt and lack of formal credit systems are resolved.
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