Will the fruit ban bear fruits?

The Facebook brigade and Whatsapp evangelists are at it again. This time they are proposing a ban on purchasing fruits. Their argument? That fruit prices have increased sharply in Ramadan, and that fruit sellers need to be punished for “profiteering.” Does that view stand on solid grounds?

Unlike the popular perception which maintains that prices increase across the board in Ramadan, a dated 2010-study by the central bank’s economists could not find any evidence of systematic acceleration in overall CPI, food and non-food price levels in the month of Ramadan in Pakistan (For more details, best read the SBP’s working paper number 32).

One reason why Ramadan doesn’t usually witness price hike is because prices start rising in the preceding Islamic month, Sha’aban. A working paper number 50 by SBP’s Riaz Riazuddin informs that highest average monthly change in prices occurs in Sha’aban (for Hijri series). The “emergence of Sha’aban with the highest price change is in accordance with the common experience of Pakistanis with the special onslaught of inflation prior to the holy month of Ramadan every year. Significant increase in Ramadan is not observed because prices are already largely adjusted upwards in Sha’aban,” wrote Riaz.

Anyway, coming back to the fruit ban. The findings of working paper number 32 echoed the experience of consumers that the Ramadan effect is “significant and positive” in the case of fruits. It is another thing that since fruits have a low weight of 1.86 percent in the inflation basket, the increase in fruit price does not have a significant effect on overall CPI or its food group.

While there is no denying that fruit prices rise in Ramadan, the question is will the fruit ban bear fruits, and whether consumer action against fruit price hike should continue in the manner being proposed right now. The answer to former is ‘likely no,’ and the answer to the latter is ‘certainly no.’

First off, consumers are not organized in this country, and if anyone expects consumer to organize via social media in a matter of days over something as crucial as Iftari, then they are living in la land.

Pakistanis from Khyber to Mehran openly break signals, block roads, jump queues, and act like hooligans hours before Iftari. And Facebook revolutionaries expect them to be all civil and organized, hold vigils and peaceful protests against fruit sellers? Consumer organization efforts must begin in this country; there is no doubt about that. But to expect that movement to begin in Ramadan is a bit too optimistic. So best try to look for some other solution.

Second, fruit consumption becomes relatively price inelastic in Ramadan, especially when the fasting month coincides with scorching summer – a time when doctors catering to all socioeconomic segments advise having fruits to be well-nourished, and avoid dehydration and its consequences in this month.

Vox populi suggests that those who can stretch their budgets do so for the sake of eating fruits; and those who cannot afford eventually get to eat more fruits than usual, thanks to charity Iftars offered by all those who can afford or otherwise Ramadan salary bonuses offered by employees. Either way, both segments of the population get to eat fruits and leave the matter of fruit price increase to the judgment hereafter.

Corresponding to this increase in demand is the long pending supply chain issue. As it appears, trees and plants do not grow extra fruits in anticipation of Ramadan. Their masters or owners could make them grow extra fruits by systematic investment to increase yield or coverage area, but it is not certain that those would solve the Ramadan effect. Besides, those investments require a nudge and facilitation by the government, which in turn requires a push by the society. Ergo, those are long-term solutions.

In the short term, the matter boils down to the evil axis of demand supply. There is more demand, and weak supply chain to meet that demand, and as a consequence prices rise. Bankers raise the cost of borrowing when demand for money pushes Kibor north; egg prices increase when consumers demand more eggs in winters. This is how things work.

It may be so that there are certain fruit farmers, middlemen, and retailers who are capitalising on the opportunity created by excess demand. But there hasn’t been any study to suggest that X percent increase in prices is natural due to demand and supply, and the rest is due to fleecing of customers by either of the players in the fruit value chain.

In the absence of any sound basis, can the fruit ban on retailers be justified, knowing well that in most cases retailers are price takers, whereas the middleman has enough deep pockets to withstand a decrease in demand for a few days? After all, commonsense economics suggest the price inelasticity of fruit consumption relatively increases in Ramadan; the middleman knows that consumers will eventually come back to fruits stalls.

Instead of campaigning for a ban on fruit retailers, the civil society should first demand the government to come up with estimates of Ramadan consumption basket. The government already does a Household Integrated Economic Survey to assess income and expenditure data; a similar survey for the Islamic months before and after the two Eids would provide a good picture of the people’s consumption basket.

Second, the Facebook warriors should also demand provincial governments to develop the food supply chain, with proper cold storage, warehousing, and chilled/frozen packaging to lower fruit wastage and increase the life of fruits. It is understandable that prices of fruits and vegetable rise as a result of this, but it would help bring stability.

Third, nobody, including this column, has real evidence of who or what is responsible for the fruit price hike; is it demand-supply factors or is it the fleecing factor by either of the players in the fruit value chain? Most of the pro-ban conversation is based on fluff and emotions. Surely, a think tank or two or academicians at universities should be nudged to pick up on this research idea. Failure to take these three steps will ensure that citizens will be bemoaning Ramadan rise in fruit prices each year without actually knowing what or who is hitting them.