Fixing farm economics — without breaking it first

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Fixing farm economics — without breaking it first​

BR Research
April 17, 2025

Over the past year, the Punjab government has made two decisive moves in the wheat market: first, by withdrawing from public procurement without warning; and second, yesterday, by announcing an ambitious pivot toward an Electronic Warehouse Receipt (EWR)-based model for structured wheat marketing. Both moves signal a dramatic shift in how the state envisions its role in the farm economy. But one uncomfortable truth remains: this transition is being engineered with almost no regard for the informal ecosystem that has kept Punjab’s agricultural wheels turning for decades.

Let’s start with what is rarely admitted: the typical small landholder in Punjab does not operate as an independent producer in any meaningful economic sense. On paper, he may own 10–20 acres. In practice, he lacks the liquidity to buy seed, fertilizer, or diesel on his own. He is, for all intents and purposes, a wage worker—one who tills land held in his name, but under the financial thumb of a much larger actor: the aarthi.

The aarthi is not just a “middleman” as the sanitized English translations suggest. He is the de facto sponsor-shareholder of the informal farm economy. He sells inputs at inflated prices, buys grain at below-market rates, and charges an implicit markup that would make a microfinance institution blush. Is he exploitative? Absolutely. But he exists because every other stakeholder—banks, multinationals, bureaucrats—has historically lacked the willingness or capacity to deal directly with thousands of fragmented farmers. The aarthi became the state’s convenient workaround; a one-window operation into the farm economy.


This is why agrochemical firms hand out Fortuners to dealers, not farmers. The aarthi is the aggregator, financier, distributor, buyer, and shock absorber of the entire rural supply chain. He keeps farmers from rioting during tough seasons by supplying just enough cash to keep the kitchen running —and in exchange, the state quietly looks away from his price markups, pesticide adulteration, black marketing of fertilizer, and tax evasion. Because in Pakistan’s rural economy, he does what the formal sector won’t: get its hands dirty.

So, when the Punjab government abruptly pulled the plug on wheat procurement in 2023–24, without warning, without consultation, and without a replacement system in place, it was not just ending a subsidy. It was delivering economic shock therapy to a system held together by fragile, informal contracts. The result? Market prices collapsed, liquidity vanished, and the very farmers policymakers claim to protect were left holding the bag.

Yes, Aarthis lost money too. But like any investor under duress, they passed the pain downstream—to the haari, the sharecropper, the smallholder. It was equivalent to a media house cutting staff salaries to protect shareholder returns. The urban consumer got cheaper flour; the farmer got punished.

Now, in April 2025, the government has returned with what appears to be a fix: the launch of an EWR-backed pilot for wheat storage and credit. It is a step in the right direction. But let’s not kid ourselves: this is not market-based reform. It is a heavily state-directed pilot, implemented days after peak harvest, without cross-provincial consultation, through a state-owned bank, with GoPb underwriting the risk and GoPb warehouses doing the heavy lifting.

There is no intelligent design at work here—just a scramble for a political win, a desperate need for policy redemption packaged in the form of a high-visibility horse-and-pony show. The optics are grand, the slogans catchy, but the institutional depth is still missing. Relief packages are rolled out not as part of a coherent economic transition, but as if royalty is distributing alms to subjects. It is economic performance theatre masquerading as structural reform.

And even in its most charitable interpretation, ensuring that the package benefits the average farmer in the current season will require a scale of state mobilization—technical, administrative, and communicative—that rivals pandemic response or disaster relief. Because now, government officials must convince the average cash-strapped farmer to delay selling his crop, place it in a government-managed warehouse, take a bank loan against it at a steep 30 percent loan-to-value, and bet on a market rebound engineered by the very state that broke the price in the first place.

What’s worse, the state wishes to pretend that aarthis are irrelevant to this new model—as if small farmers will suddenly start storing grain, negotiating with banks, and taking positions on future prices like traders on a modern commodity exchange. Which multinational will build and operate warehouses across rural Punjab? Which fintech startup will absorb agri price risk in Chakwal or Mailsi?

The truth is: only the aarthi can do it. He has the presence, the trust network, the logistics, and the incentive. Instead of trying to displace him, formalize and incentivize him to become part of the EWR value chain, as a warehouse operator, grain investor, or credit proxy. Let him settle farmers at harvest and take the grain price risk. He has been doing it informally for decades anyway. He understands the market in ways no city-based analyst or donor consultant ever can.

This is not about justifying rent-seeking. It is about recognizing trade-offs. Policymakers are not gods dispensing moral justice. Their job is not to punish one year’s profit by withholding support the next. That’s not equity—that’s incompetence. The job of the state is not to moralize economic outcomes, but to steward transitions with an understanding of bargaining power, liquidity, and social contracts.

And in this case, the smartest path forward is not to abolish the aarthi— it is to deputize him.

Because real reform is not about cutting old ties. It is about tying old actors into new systems.