Power Asymmetry in Pakistan's Food Value Chains

The agricultural sector, as Pakistan's primary food provider, has long been the focal point for policymakers due to its substantial contribution to the economy, accounting for 24% of GDP and employing 37.4% of the workforce. This sector is crucial for food security, rural development, and the livelihoods of millions of smallholder farmers. However, in Pakistan and many developing economies, the majority of farmers operate on a subsistence level, owning limited land, resources, and market access. These small-scale farmers bear the brunt of multiple risks and uncertainties, from unpredictable weather conditions to market fluctuations, all while struggling with a power imbalance in the food value chain.

The Challenges of Smallholder Farmers

In Pakistan, the agricultural production process starts with smallholder farmers, who rely on limited resources and face obstacles at every stage. A critical challenge is the timely and affordable access to essential agricultural inputs like seeds and fertilizers. The majority of seeds used are uncertified, leading to uncertain productivity. Fertilizers are monopolized by large corporations, who control prices, often doubling them due to speculative practices by dealers. As a result, smallholder farmers face severe financial and operational pressures, further exacerbated by their limited bargaining power in the market.

Despite playing a pivotal role in the food value chain, small farmers in Pakistan have significantly less influence compared to large intermediaries and corporations. A typical food value chain includes several key actors: farmers, intermediaries (such as wholesalers), processors, distributors, and retailers. At each stage, control is passed along, with small farmers frequently at the mercy of middlemen who set prices and manage market access. Intermediaries not only connect farmers to markets but also hold the power to manipulate pricing, further reducing the farmers' share of the profit.

Structural Issues and Market Monopolies

The root of power asymmetry in Pakistan’s food value chains lies in the country’s structural issues. Unequal land distribution plays a significant role in perpetuating this imbalance. While large landowners control vast swathes of arable land, more than 85% of farms in Pakistan are smaller than five hectares. This disparity restricts smallholders from achieving economies of scale and limits their access to financial services. Larger landowners, on the other hand, benefit from increased bargaining power, better access to credit, and the ability to negotiate favorable terms with buyers. In contrast, smallholders struggle to access technology and resources necessary to enhance productivity.

A valuable model that Pakistan could explore is China's land consolidation approach, which aims to merge fragmented agricultural land to boost productivity. By consolidating small plots into larger, more manageable units, farmers can engage in mechanized farming and adopt sustainable practices, thereby reducing costs and increasing yields.

Another challenge comes from market monopolies, where large corporations dominate supply chains, pricing, and distribution networks. For example, sugar mill owners with political ties often delay payments to small farmers and set prices that reduce their share of profits. Protests and conflicts between farmers and mill owners are common as small farmers struggle to secure fair compensation for their crops.

Government Policies and Subsidies: A Double-Edged Sword

Government policies and subsidies, while designed to support the agricultural sector, often end up exacerbating inequalities. Smallholder farmers face higher borrowing costs due to their smaller land holdings and often turn to informal lenders with exorbitant interest rates. While initiatives such as crop and livestock insurance and the Kissan package aim to support small farmers, poor coordination between provincial and federal agricultural bodies, along with weak regulatory frameworks, leave farmers vulnerable.

Furthermore, subsidies are often directed toward staple crops like wheat and sugarcane, discouraging crop diversity and innovation. These subsidies disproportionately benefit large producers, perpetuating the imbalance. India’s recent farmer protests over market liberalization laws highlight similar concerns, where smallholders feared losing their bargaining power in the face of market reforms favoring large corporations.

Weak Regulatory Frameworks and Market Control

A lack of strong regulatory frameworks in Pakistan further exacerbates the power asymmetry in the food value chains. For instance, the Punjab Agricultural Marketing Regulatory Authority Act (PAMRA), designed to regulate market operations, is inadequately enforced. This lack of oversight allows intermediaries and traders to manipulate prices and control supply chains, further disadvantaging small farmers.

Without proper regulations to ensure transparency and fairness in the market, small farmers continue to face exploitation. The dominant players in the value chain set unfair prices, restrict market access, and influence policy decisions, leaving smallholders in a perpetual cycle of financial insecurity.

Conflict and the Rural Economy

The power imbalance in Pakistan’s food value chains has led to growing conflict between small farmers and larger corporations or intermediaries. These tensions arise from unfair pricing practices, exclusion from decision-making processes, and exploitation. Farmers in Punjab and Sindh have frequently protested against intermediaries who extract substantial profits while paying farmers minimal returns. These conflicts disrupt the agricultural supply chain, causing productivity and income losses and discouraging investment in the sector.

The instability created by these conflicts has ripple effects on food security. Small farmers, who are vital to the local food supply, struggle to compete, and their inability to access fair markets leads to inefficiencies that contribute to food shortages and price hikes. This dynamic exacerbates rural poverty, as smallholders often take out loans to cover production costs, only to find themselves trapped in a cycle of debt due to low returns.

Addressing Power Imbalances

Addressing the power imbalance in Pakistan’s food value chains requires systemic reforms. Policymakers must focus on creating equitable market access, ensuring fair pricing, and involving farmers in decision-making processes. Strengthening regulatory frameworks and enforcing laws, such as PAMRA, will help prevent exploitation by intermediaries and large corporations.

Moreover, promoting farmer cooperatives and organizations can help small farmers gain collective bargaining power and reduce their dependency on middlemen. Advancements in digital platforms can facilitate direct market access, allowing farmers to sell their produce at fair prices without relying on intermediaries. Supporting technological adoption through training programs and access to credit will enable small farmers to compete more effectively and improve their economic resilience.

The Gender Dimension

Power asymmetry in Pakistan’s agricultural value chains also has a gender dimension. Women in rural areas play a significant role in agricultural production, particularly in tasks such as harvesting, seed sowing, and livestock care. Despite their contributions, women often have little say in household financial decisions, reinforcing gender inequalities within rural communities. Empowering women by providing them with market access, financial literacy training, and decision-making authority is crucial to addressing these inequalities and improving overall agricultural productivity.

Conclusion

The power imbalance in Pakistan’s food value chains has far-reaching consequences for small farmers, rural communities, and national food security. Without systemic reforms that address the root causes of inequality, smallholder farmers will continue to face exploitation and financial insecurity, undermining their role in the agricultural sector.

To ensure a fairer and more sustainable future, policymakers must implement strategies that promote equitable market access, strengthen regulatory frameworks, and support smallholder farmers. By fostering cooperation among stakeholders and empowering small farmers, Pakistan can build a more resilient agricultural system that contributes to rural development, food security, and economic stability.

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.

Khadija Yasin is Lecturer and Abdul Ghafoor is an Associate professor at the Institute of Business Management Sciences, University of Agriculture, Faisalabad, Pakistan.

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