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Malpractices of Middlemen .docx

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International Business
INTB 2200
Luming Wang

Malpractices of Middlemen Due to improper market structure traders or middlemen have become all powerful. They have bent the rules in such a way that it is possible for them to cheat and get away. Moreover the unorganized producers and the market machinery are no match to the powerful trader legally. Even in regulated government markets middlemen resort to malpractices. Some of the malpractices commonly resorted to by middlemen are as follows: a. Scales and weights are manipulated against the seller. This practice is rendered easier by the fact that there are no standardised weights and measures nor any provision for regular inspection. b. There are all kinds of arbitrary deductions for religious and charitable purposes and for other objects. The burden falls entirely on the seller and he has no effective means of protest against such practice. c. Large quantities are taken away from the produce of the cultivator as bangi or sample. d. Bargains between the agent who acts for the seller and the one who negotiates on behalf of the buyers are made secretly under a cloth so that the seller remains ignorant of what actually takes place. e. The broker whom the cultivator employs is more likely to favour the purchaser with whom he comes into contact almost daily than the seller whom he only sees very occasionally. This tendency becomes all the more pronounced when, as it frequently happens, the same works for both parties. f. When disputes arise the cultivator has no means of safeguarding his interest. g. Differential prices for the same grade of produce h. Levying unfair charges for basic services i. Restrictive trade practices j. Arbitrary deductions on account of alleged adulteration and inferior quality Some of the practices obtaining in the market amount to nothing less than common theft Absence of Grading and Standardization: Although the agricultural produce (grading and marketing) act was passed in 1937 even today in most unregulated markets the practice of grading is unheard of. Whatever limited grading is accomplished is technical in character i.e., commercial grading, which can be understood by the lay farmer, is almost completely absent. If sales of agricultural produce at a higher price are to be augmented without personal physical inspection of every lot by open auction in the regulated markets, commercial standardization and grading are essential. Also if lots are to bulked through cheap and efficient warehousing and transport, standardization and grading becomes imperative. Absence of grading and standardising agricultural produce is another defect. The reputation of Indian agricultural producers in the world’s market is low. There are no standard grades commonly accepted throughout India even for such important commodities as rice and wheat. In the absence of certain standard grades accepted by the whole trade as the basis for commercial transaction, attempt of individual producers merely secures the ordinary market rate. In fact the present practice of dara sales, wherein heaps of both good and bad produce are sold together as one lot common in most markets, gives a premium to the inefficient producer as the good produce is made to carry along with it the poor stuff also. The practice of selling un-graded products of mixed quality has naturally reduced the reputation of Indian agricultural produce in the world markets. Inadequate storage facilities: In most of the villages ryots store their produce in pits or receptacles variously known as kudurus, kallis or thekkas. In the upcountry markets produce is stored in kothis or kuthalas (earthen cylinders) and khattis (pits in ground lined with mud and straw) and in a few centres in pakka khattis made of concrete. But that there is a general inadequacy of good storage facilities both in rural and urban areas can hardly be denied. The indigenous methods of storage adopted in the villages as well as in most of the upcountry markets do not adequately protect the produce from dampness, weevils and other vermin’s. The losses due to inadequate storage have been estimated to range from 1.5% (Food grains Investigation Committee) to 2% to 2.5% (The Prices Sub-Committee) to 5% (as estimated by Dr. Baljeet Singh). A recent estimate puts the loss at from 5 to 15% by weight of the production and it is due to defective stage. This in turn is due to moisture absorption, excessive heat, insects, mites, rodents and birds. Even at 5% the loss of cereals, millets, spices, oilseeds, jute, cotton, tobacco would come to over Rs. 4,000 million every year in India. With the change of temperature, grains loose weight. When wheat is harvested, it contains some moisture, which evaporates in summer and is regained during the monsoon month. Dampness raises the moisture content of the grain thereby making it soft and therefore susceptible to insects. The damage is greater when the grain is stored in kachacha underground pits where the sub-soil water table ranges from 8 to 10 feet below the surface. It is quite obvious that the food grains stocks held by co-operative societies, grain merchants and even by farmers are not kept in proper conditions. Therefore, the losses are substantially larger. In addition there are crops like jawar, pulses and maize, which are infested by stored grain pests even before harvest. The insects form inside the kernel and are visible until the threshed grains are put in storage. By the time the infection is detected, internal damage to grain becomes very great. Losses due to rodents are also very great. The rats start damaging the grain right from the field to the time it is consumed. According to Dr. P. J. Deoras, there are approximately 2400 million rats in India. He has estimated that about 20 rats could consume the quantity of food sufficient for one person. On a gross estimate this would mean that rats are spoiling at least one fifth of the grain produced. Calculating on this basis of a tonne of grain being consumed by 100 rats per year, the total consumption by the rat population of 2,400 rnillions would amount to about 24 in. tons. In terms of money this would come to about Rs. 18,000 million when calculated at the rate of Rs. 750 per tonne. The nature of damage studied by Dr. Deoras is as follows:- (i) It has been noticed that apart from damaging crops and food grains in storage, rats carry food grains to their nests in burrows. As much as 15 kgs. of grain have been recovered while digging out nests from about 30 rats burrows. (ii) The rats damage 10 times the quantity of food material they eat. They would execrate about 86 faecal pellets in 24 hours, which would get mixed up with foodgrains. (iii) They void 1½ gallons of urine during the year, and further contaminate grain by shedding thousands of hair from their bodies. (iv) In Bombay as many as 9,000 bags of foodgrains are auctioned as they are unfit for human consumption because they are damaged by rats in yards and godowns. (v) The small mice in the paddy fields have been found to climb up to the paddy plant and eat every grain while the big field rat usually cuts the whole plant. Besides rats, “Insects, beetles and moths are prolific and each couple lay anywhere between 100 to 400 eggs and their lifecycle is completed in 4 to 6 months. It has been estimated that weevilled grain in the case of wheat varies from 1 to 2% or more, peas one to 5% or more and arhar upto 2%.” 8. Underdeveloped Transport System: Transport plays a very important role in the marketing of the agricultural produce. A smooth and efficient system of transport from the farmer’s village to the consumer door goes a long way in not only helping the agriculturalist to bring his produce to the market without much difficulty but also
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