‘Don’t fall for the MRP trap, ask for a rebate first’

A recent piece in this newspaper analyzing the absurdity in the vast difference between the factory gate price and the

Maximum Retail Price

(MRP) of fireworks got me thinking about the failure of the MRP system, despite it being an ideal measure to protect consumers from overcharging by retailers.

Price hike at the wholesaler, sub-dealer and retailer-levels plus ‘incidental expenditure’ often contribute to this humongous markup. While a consumer has the right to question or protest when sold a product at a price higher than the factory price, many don’t raise questions due to lack of awareness on the matter.

I remember the resistance producers and traders offered when they were asked to provide information on the labels of products under the Packaged Commodities Regulation Order 1975 ( under the Standards of Weights & Measures Act, 1975). The bill was passed despite the protests.

Although implementation of the order was a major step in providing information to the consumer, India has not as yet perfected the system to assure full protection to the consumer. The rationale for hefty markup in MRP is rarely explained nor understood by the common man.Visit any shop selling construction materials like ceramic tiles and you would be shocked by the MRPs of these well displayed products. When you want to make a hasty retreat, the dealer will pacify you and offer discounts of even up to 40 per cent on the products. Many aren’t aware that such discounts could be applicable on a vast range of products. All a consumer needs to do is visit a few shops and make a comparison of prices to get the desired product at a discounted rate. Sadly, most of us do not do this.

Medicines are one such essential product about which the consumer’s knowledge is limited. Yes, there is information on the labels today, but the vast listing of a large number of chemicals in various doses is Greek or Latin for consumers.

Also, under Indian corporate practices, growth in volumes has little meaning for reduction in prices. While one bought a simple band-aid strip for a few paise a couple of decades ago, today it is priced at `2.75 per piece. The consumer isn’t told about the hike in the cost of the ingredients used in the product that led to its huge price rise in a short time.

Corporate hospitals

make the most out of MRPs. In 1979, when P C Reddy — the pioneer of corporate hospitals in India — proposed the concept to the then prime minister Charan Singh, the latter reportedly tore off the report and chided Reddy by saying "You want to make money out of people’s sickness and misery?" It has been 37-years since, and corporate hospitals have surely offered quality health care, but their imperative to show continuous growth and profits, vindicates the fears of Charan Singh.

Pharmacies of these hospitals act as one of their more money-minting vehicles. While the hospitals buy medicines from manufacturers at heavily discounted price, these are not passed on to the consumer. In a situation when a patient is ailing or going under the knife, it is unlikely for their family to look at the prices of medicines. It behoves the hospitals to keep the prices reasonable. Many hospitals in Chennai, ruthlessly impose MRP on every item sold in their pharmacies despite having the discretion to provide discounts on drugs.

The lack of self-regulation on the part of leading hospitals in matters of consumer interest and absence of a regulatory body to monitor such practices have also contributed to healthcare costs hitting the roof. Weak consumer associations and government-controlled bodies also do not have the wherewithal to look at the havoc caused by the MRP system.

To make the MRP system effective, it is necessary that consumers start looking closely at MRPs of products they buy and the department of consumer affairs monitors anti-consumer activities by different sellers.

(The author is the editor of Industrial Economist)