The first thing that a person looks at while buying a product—the MRP— may not exist for too long.
Tucked in the back or bottom of a packaged product are these three words—Maximum Retail Price or MRP—which are among the most common acronyms known to the Indian public. However, this last remaining vestige of trade control could soon be a thing of the past.
The Centre, reports suggest, is considering doing away with mandatory declaration of MRP, instead letting the market forces decide the pricing mechanism—something that would align the pricing practices with global standards.
Genesis
Though the idea looks straight from the now-derided Socialist era of control and nationalisation, the move to make MRP declaration mandatory came much later, in 1990.
Till then, the packaged good contained either the MRP, or the retail price in which traders added the local tax component.
The second option led to frequent complaints from consumers of arbitrary charging and fleecing by traders even as people had little or no option to buy the products elsewhere. There were also complaints from taxmen that this led to widespread tax evasion.
That is when the Central government amended the Standards of Weights and Measures Act (Packaged Commodities’ Rules) (1976) to make MRP mandatory.
Criticisms against MRP
A. The MRP fixed is the maximum possible price that could be charged for the product, i.e. the price of a product at the shop right outside the factory and in a remote corner of the country are the same, which effectively means a large number of people are paying more than what they ideally should.
B. MRP is often given a go-by at several facilities like airports, star hotels, theatres, tourist spots and even inaccessible places where these products are not easily available. It is not easy to implement, and often degenerates into extortion by officials.
C. These are packaged goods and do not include any of the 34 commodities listed as “essential”. This indicates there is no great public interest in controlling the price of packaged products, say, a packet of biscuits or a bottle of cola.
Arguments in favour of MRP
A. The system was introduced because traders manipulated prices at the retail level depending on demand and availability. In remote places, where there might be a dearth of traders or products, the price of the product varied by huge margins. In such instances, fixing a price cap and possibility of a punitive action against violation helps stabilise price and protect consumer interest.
B. There are several instances of products being charged above MRP; but an illegality, however widespread and accepted, may not be the best legal argument against removing the legislation.
C. If left for the market to decide, the retail price would certainly reach equilibrium, but defining it as a demand-supply equation is over-simplification. The things that need to be factored-in are profitability and its ratio with scale.
When action was taken
Although getting charged over the MRP for a product is as routine an affair as going to work in the country, there are examples where the authorities took action against such practices
The Indian Railway Catering and Tourism Corporation (IRCTC) was charged with a penalty of Rs 10 lakh—Rs5 lakh each to two customers—by the New Delhi District Consumer Disputes Redressal Forum forum for selling soft drinks to customers at a price over the MRP along with a compensation of Rs10,000 each to the two customers
A penalty of Rs one lakh was imposed on the Godrej and Boyce Manufacturing Company Ltd for selling its goods above the MRP based on a complaint by a Pune resident
The Delhi government recently initiated actions against 12 multiplexes which were selling food items, bottled water and aerated drinks at a price above the MRP
FAQs
What is Maximum Retail Price?
Maximum Retail Price (MRP) is the highest price that could be charged for a product. Retailers can choose to sell something at a price lesser than this cap but selling at a price over the MRP can attract fine.
Places where MRP becomes redundant
Remote areas which have a supply-demand mismatch often find a distortion in the pricing of products. Multiplexes also reportedly charge customers much more than the MRP for food and drinks
MRP versus free market pricing
Critics of MRP come from the free market stable, who argue that fixing a maximum retail price for any product is cumbersome, restrictive and thus against the principle of free and fair trade. Such a regulatory measure, they add, has no relevance in the post-Liberalisation era where the market is considered to be a more effective stabiliser than any official mechanism.
Recent developments
Consumer affairs minister Ram Vilas Paswan has refused to bring in a separate legislation to stop the sale of packaged water and soft drinks above the Maximum Retail Price arguing that the existing law has provisions to regulate this unfair practise.