• This forum contains old posts that have been closed. New threads and replies may not be made here. Please navigate to the relevant forum to create a new thread or post a reply.
  • Welcome to Tamil Brahmins forums.

    You are currently viewing our boards as a guest which gives you limited access to view most discussions and access our other features. By joining our Free Brahmin Community you will have access to post topics, communicate privately with other members (PM), respond to polls, upload content and access many other special features. Registration is fast, simple and absolutely free so please, join our community today!

    If you have any problems with the registration process or your account login, please contact contact us.

Time to abolish the MRP

Status
Not open for further replies.

prasad1

Gold Member
Gold Member
[h=2]The fixed maximum retail price is an archaic and dysfunctional mechanism that hurts both retailers and the consumers it seeks to protect.[/h]
The maximum retail price (MRP) that is printed on all packaged commodities that consumers purchase was introduced in 1990 by the Ministry of Civil Supplies, Department of Legal Metrology, by making an amendment to the Standards of Weights and Measures Act (Packaged Commodities’ Rules) (1976). It was meant to prevent tax evasion and protect consumers from profiteering by retailers. Before the amendment, manufacturers could print either the maximum retail price (inclusive of all taxes) or the retail price (local taxes extra). When producers opted for the latter method, it was found that retailers often charged more than the locally applicable taxes. Thus, the amendment was made to introduce the compulsory printing of MRP on all packaged commodities.
While the intention to protect consumers in a pre-liberalised India can be lauded, continuing the system today does not make any sense. The practice of MRP in India is unique, archaic and dysfunctional. India is perhaps the only country in the world to have such a system, where it is punishable by law to charge a price higher than the printed maximum retail price. In most countries, the system of having a universally enforceable printed price is viewed as being akin to price fixing and is thus prohibited as being anti-competitive.

The MRP system has existed in India without being questioned for too long now. It is time to give free markets a chance.
http://www.thehindu.com/opinion/op-...al-mechanism/article7452745.ece?homepage=true
 

tbs

Well-known member
hi

in India....MRP is a protection to the consumers.....becoz black marketing is very common in india.....the sellers can create

a sudden demand for product.....so MRP and rationing the items are important for indian consumers....
 
OP
OP
prasad1

prasad1

Gold Member
Gold Member
You might be right in rural areas it might be true. In urban areas the MRP is waste as some of the internet sites you can but the product for less than 50% of MRP.
 

auh

New member
MRP indicates the level beyond which a retailer cannot sell. It does not bar a person from selling below. That does not make it any less important.

As shri tbs has indicated MRP is indeed relevant.
 
OP
OP
prasad1

prasad1

Gold Member
Gold Member
OECD raised some very valid concerns in the same report about Indian retail industry's future because of anti-competitive MRP policy. Competition Theory states that optimal prices are reached only when no one market participant is large enough to influence prices. In this case prices are directly set by the manufacturer and the manufacturer has to adhere to a set policy in setting those prices. Consider a manufacturer Acme Inc. that wants to sell Coyote Food in India. Delhi charges a tax rate of 10 % on it, UP charges a tax rate of 30 %.

  1. Economic intuition is that people of Delhi will pay less for it while people of UP will pay more. But they don't because the manufacturer has set an MRP based on UP's tax rate of 30 %. The price is not optimal for Delhi, they are paying 20 % extra.

    Conclusion 1: MRP distorts supply demand mechanism of price discovery.
  2. Intuitively, we might feel that retailers in Delhi will charge less because the tax rate in Delhi is less. But they don't because they have an informal price ceiling to refer to using which they collude and sell it at MRP. [2]

    Conclusion 2: MRP promotes collusion, an anti-competitive practice.
  3. Lastly, another company that produces Coyote Food will not fiercely compete with Acme Inc. because at the end, it has to determine an MRP for its products using the highest tax range.

    Conclusion 3: MRP discourages competition among producers as well.
This brings us to why resale price maintenance is anti-competitive practice. It leaves out the market completely in determining prices because of the reference level provided by the price ceiling. Because colluding implicitly is really easy with MRP's, Indian small scale retails sector has developed a vertical hierarchy where a smaller retailer colludes with a bigger one who colludes with labor union of the manufacturer to make sure that prices are kept near MRP and market forces are weakened. FDI in Retail Sector, India.

Most countries recognize any practice that gives undue influence to one player in the market as anti-competitive. Resale price maintenance is one of them and is hence banned in most countries. In most countries, prices change rapidly and are decided by the prevalent market conditions, by competition between small and big retailers.
Belgium, Germany and many other countries in Europe did away with resale price maintenance and adopted comprehensive competition law to restrict price manipulation. I see no reason why India cannot do the same. I blame a complacent bureaucracy

http://www.quora.com/What-are-the-pitfalls-of-following-the-max-retail-price-MRP-system-in-India
 
Last edited:
OP
OP
prasad1

prasad1

Gold Member
Gold Member
[h=2]What are the pros and cons of price control?[/h]Maximum Prices - Price can't rise above a certain level. This can reduce prices below the market equilibrium price.

  • The advantage is that it may lead to lower prices for consumers. ex. price of a biscuit or chocolate.
  • Disadvantages include shortage, demand will exceed supply, leading to waiting lists and the emergence of black markets as people try to overcome the shortage of the good and pay well above market price.

Minimum prices - Price can't fall below a certain level. This is used to give producers a higher income.

  • They are used to increase the income of farmers producing goods. ex. Min. support price for farmers.
  • Disadvantages include higher prices for consumers, higher tariffs necessary on imports. may encourage oversupply and inefficient.

Generally price controls distort the working of the market and lead to over supply or shortage. They can exacerbate problems rather than solve them. Nevertheless there may be occasions when price controls can help for example, with highly volatile agricultural prices.

Let the market decide the price.
In small and rural areas the store charges MRP and sometimes more than MRP, and pockets a large portion as profits. In India they do not have mechanism to monitor the Tax collected as it is never paid to the government. There is no enforcement of MRP to actual sale price. So MRP is the bloated price as the manufacturer has to take into account the highest possible tax, even though this tax is never paid.
 
OP
OP
prasad1

prasad1

Gold Member
Gold Member
MRP made sense when government was involved in controlling the market. In a free market MRP has no meaning.
In a poll question asked by IndiaRetailing – 'Should MRP be withdrawn from product categories to allow headroom pricing?' – 83.29 per cent of the respondents said “No”, while only 16.36 per cent said “Yes”. The remaining 0.35 per cent, however, opted for “Can't Say”.
Siddharthan Sundaram, director - retailer services, The Nielsen Company, however, does not agree with Dutta or Laliwala. He says, “If the government withdraws the MRP, it will create competition among suppliers and manufacturers and this will ultimately help consumers to buy goods at a competitive price.”
Supporting the withdrawal of the MRP, Sundaram says, “I strongly believe it will help all stakeholders, particularly consumers.”
T S Ashwin, MD, Odyssey India Ltd, is of the opinion that the MRP makes it difficult for retailers to manage margins, “as they can't charge anything beyond the maximum retail price printed on the product”.
Explaining his stand, he says, “When we take up outlets in airports or five-star hotels, the cost of operation is much higher and internationally it is an accepted practice to charge more in such outlets. But in India, we cannot do so due to the MRP. This again impacts our margins.”
Giving the example of Odyssey, he says, “We are a category where over 80 per cent of products are with an MRP. Though there is VAT, the rates are different in each state for the same product. This makes it very difficult to manage margins, as we cannot charge anything beyond the MRP. Not always can we get the vendors to bear the additional cost due to differential tax rates. Also transferring stocks from one state to another becomes a problem due to the same issue. We lose on margins as well as the vendors don't reimburse.”
He further says, “With VAT coming in, the concept of MRP should be done away with and retailers be allowed to fix their prices based on the market demand, etc [and other factors].”
http://www.thirdeyesight.in/articles/mrp_time_up.htm
 
OP
OP
prasad1

prasad1

Gold Member
Gold Member
Government should get out of pricing in the market. The market is very nimble, and cost varies every second. A bureaucratic machinery is too sluggish to respond to the market. We are killing our industry by these practice. Relience petroleum was forced to close their service centers as Government wanted them to sell gas below cost. Government was subsidizing the Government owned oil companies to sell gas below cost. Now Modi government is reaping the benefit of low international oil price. Petrol in India cost same whether the barrel of crude is priced at $50.00 or $200.00. This is an indirect source of revenue for the government.
 

tbs

Well-known member
Government should get out of pricing in the market. The market is very nimble, and cost varies every second. A bureaucratic machinery is too sluggish to respond to the market. We are killing our industry by these practice. Relience petroleum was forced to close their service centers as Government wanted them to sell gas below cost. Government was subsidizing the Government owned oil companies to sell gas below cost. Now Modi government is reaping the benefit of low international oil price. Petrol in India cost same whether the barrel of crude is priced at $50.00 or $200.00. This is an indirect source of revenue for the government.
hi

india is not like USA....here in USA....free market economy working good...just example.....gas (PETROL)prices are changing everyday

here in USA....different company are selling gas different prices in the same area.....it never happen in india...its unimaginable

in india.....we are more socialism than free market capital economy....in india more social economu and govt controlled pricing

neccessary...........otherwise middle men in the market enjoy a lot of power than consumers/sellers....
 
OP
OP
prasad1

prasad1

Gold Member
Gold Member
Government should police the price, and not set it. Because governments are too slow to react to the market.
 

sarang

Well-known member
Government should police the price, and not set it. Because governments are too slow to react to the market.

Govt does not set the price. It is the price declared by the supplier, and the govt collects tax on MRP minus profit, handling, dealer commission etc. Earlier the manufacturers were declaring a very low ex factory price to the excise authorities for reducing tax. Especially in pharma sector, companies declared ex factory price as 25 and counter price was 100. Now if nrp is hundred ex factory price will be treated as 60 or 70 and taxed on this amount.

MRP is necessary for the buyer to get some idea of the price of the product, and he can still compare and choose from different vendors. My neighbourhood medical shop always gives a discount of 6 to 10% on medicines. Some items, hardware, bath accessories, lamps are sold with huge discounts (taps 180/300, led/cfl lamps 150/250 - sell/mrp). Online sales is a different category - there are tens of suppliers for the same product with different pricing.

MRP is a must and is in the interests of the buyer.
 
Status
Not open for further replies.
Top
Thank you for visiting TamilBrahmins.com

You seem to have an Ad Blocker on.

We depend on advertising to keep our content free for you. Please consider whitelisting us in your ad blocker so that we can continue to provide the content you have come here to enjoy.

Alternatively, consider upgrading your account to enjoy an ad-free experience along with numerous other benefits. To upgrade your account, please visit the account upgrades page

You can also donate financially if you can. Please Click Here on how you can do that.

I've Disabled AdBlock    No Thanks