A recent LinkedIn post by an Agtech sales professional Smit Rathod, recontextualized the role played by agricultural middlemen in the evolving marketplace. As per the post, middlemen are often vilified for negatively affecting the efficiency of the overall supply chain, but as per his assessment a thriving environment of middlemen is key to prevent monopolization of trade by a few large players. The prevalent multi-layered system is an asset that can be strengthened to achieve improve overall market framework.
Middlemen, a crucial link
As per the post, agritech platforms often promote the idea of cutting out the middleman to improve overall efficiency, but traditional middleman including traders and commission agents have historically extended crucial services such as providing microfinancing to farmers, offering informal advisory services and absorbing trade risk.
Ironically, many “disruptive” agritech startups that promise to cut out the middleman simply become another middleman in the chain — without necessarily improving service or reducing losses.
The post has issued caution that rapid disintermediation in India’s farm supply chains could unintentionally concentrate procurement and price management in the hands of a few large players. The number of active middlemen(traders, processors) has been declining over the past decade as margins have reduced substantially, raising concerns over reduced competition in direct purchase of agricultural produce. Smit Rathod has stated that the current system needs considerable upgradation, he is of the opinion that rather than dismantling the existing mandi network, measures should be taken to improve storage facilities, digital transaction systems, and better market intelligence in order to ensure a competitive and resilient agri trade ecosystem.
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Regulation as a balancing act
Agricultural market regulators, such as Agricultural Produce Market Committees (APMCs), were established to protect agricultural market from being overrun by large buyers, ensuring open auctions and limiting monopolistic control. Regulated mandis introduce transparent bidding and standardized fees, practices that actively prevent a small number of large stakeholders from dictating procurement and pricing. Through licensing and organizing auctions, a healthy competition among traders can be maintained, which will provide farmers with access to multiple buyers and promotes fair prices, key mechanisms to averting a oligopoly.
In 2006, complete abolition of the APMC system in the State of Bihar led to deterioration of market infrastructure, sharply reduceing procurement centers, resulting in farmer incomes falling well below MSP levels. The promised reform did not do much to increase farmer incomes, on the contrary in the absence of regulated markets, farmers were forced to sell produce to private procurers at throwaway prices.
Supporting trade through technology
In recent years, many fintech platforms have emerged as a crucial facilitator and protector for farmers in the marketplace. Platforms such as Samunnati supports both Farmer Producer Organisations (FPOs) and middlemen including traders and processors, by offering working capital, and long term loans aligned for various crop seasons.
Digital platforms such as Karnataka’s Unified Market Platform (UMP) and e-NAM have demonstrated how regulated mandis, supported with technology, can increase transparency and broaden competition. This initiative considerably increased farmer incomes and enabled middlemen participation from many regions.
