Lessons from Jodia Bazar

The first lesson in most elementary business law or accounting classes is that the principles of “offer and acceptance” are the pre-requisites in fulfillment and delivery of any business contract.

But you don’t have to be a prep school lad to appreciate the basics of dhanda just as well as a bank manager. After all, chohtas learning tricks of trade from wholesalers at Jodia bazar, Shalmi or Raja bazaar understand it just as well.

For any sale-purchase contract to be binding, offer and acceptance at a “specified price and quantity” are necessary; whether on a signed & stamped commercial invoice alongside a bank LC, or verbally in a mid paan-break phone call in Jodia bazaar. As most chohtas would tell you, the Seth rarely deploys his own capital in procuring inventory, until he has a firm offer from buyer in place.

Yet, the farther away we travel from commercial centres, the more layers are added to what should otherwise be common sense principles. Take for example, the farming sector. From sowing to harvest, farmers engage in six to twelve-month long production cycles (or seasons), incurring costs of both labour and capital.

Sadly, most of Pakistan’s subsistence and small land-owning farmers have virtually no guarantee of contract; meaning that the fate of their produce depends on the spot rate of commodity on the date of delivery to market place.

Consider this: most cash crops, whether food or fibre, are seasonal. Meaning at the time of harvest, the market is usually flooded with a commodity of similar quality and characteristics around the same time every year. With no firm contract for their perishable produce, small scale farmers compete against each other for best price, as they are exposed to bargaining power of few medium to large-scale buyers.

Seeking to safeguard farmers’ economic interests, bureaucrats and agri-researchers alike run complex regression models to determine “optimal” floor prices for agricultural commodities, as they scheme to “protect farmers” to ensure “food security” in “national interest”.

Thus, we hear proposals for minimum indicative price, crop zoning; furious debates rage whether subsidy should be extended to farmer or exporter. Hue and cry is raised when plantation of one crop takes over the other. News channels run special reports on delayed payments to growers by mills. Ads are run by business associations, raising spectre of industries on verge of shutdown, due to high price of one factor, or shortage of the other.

Earnest agri-technocrats, with the noblest of intentions, seek to run a simulated experiment on farmers’ expense by controlling for a different variable each year; by either trying to control for area under cultivation, by setting a minimum price or by targeting subsidies on inputs. All the, while, hoping that one day output will reach desired levels.

Rather than poking its nose where it does not belong, government needs to first fulfill its own basic job: legislate. Make contracting of farming produce legally binding on buyers, whether whose-sale or industrial units, right at the beginning of cultivation/sowing season. This will ensure that farmers in rural Sindh and Punjab enjoy the same security of price and quantity for their products as do businessmen of Jodia and Raja bazaar.