Is it time to Mend the concept of MRP in India?
“Kitne paise hue?”
“40 rupees.”
“But MRP toh 36 hai, 4 zyada kyun?”
“Thanda karne ke liye 4 rupees extra toh lagega na bhai!”
Perhaps, printed in the bottom of any product, these three words - MRP or Maximum Retail Price – are the most common acronym known to the Indian folks. And while purchasing any packaged stuff, we tend to first look at it to assure the price of the product. If charged extra than that, we may even argue of being overcharged, just like the above instance.
But, there’s a fundamental flaw in this MRP system being followed in our country. It’s applicable only on packaged commodities and not on various essential commodities, such as groceries and vegetables, unless they are sold in packaged form. In fact, a bottle of water which has an MRP of ₹20 cannot be sold above that price, legally. However, if one were to break the seal and open that bottle, a person can even sell a capful of the same water for ₹50, and hey that would also be totally legal.
Sounds confusing and bemusing at the same time, right?
And this is why there has been a long-standing debate in our nation about the efficacy of MRP and its hindrance on ease of doing business. The premise of argument being that the end purpose of any business is to make profit and setting up of maximum selling price by the manufacturer doesn’t do justice in taking all the variable costs incurred by the retailers which are subject to change by location, local policy and quality of service, amongst other factors. For example, a movie-theatre or a 5-star hotel has to spend a lot more in upkeeping and staff salaries compared to a local food outlet.
In fact, several multinational companies including IKEA, Hennes & Mauritz AB and Decathlon, had pushed for an exemption from marking MRPs on their products because the practice hinders their free trade policies. So, they along with other single-brand retailers such as Nike and Adidas, are exempt from printing the MRP of every product. Hence, the organized big players are safe from this MRP system, but at the end who is suffering? None other than our MSMEs who contribute to 29% of our GDP and contribute to 48% of our exports.
Justifies the famous aphorism, “Taxes mein middle class aur dhandhe mein MSME, har baar maat khata hai.”
So, doesn’t it make sense that Indian Government comes with a solution to this problem if it is hurting our businesses. Our very good friend USA even chose not to have an MRP because of thinking it to be restraining fair trade practices and putting too much power in the hands of the manufacturers.
Hence the biggest question which lies ahead of us is what should be done in India? Copy our democratic friend from the West and assume that retailers would benefit and consumers won’t suffer if we remove this concept of MRP OR can there be a middle ground with a customized solution for our country?
A common ready – made answer to this dilemma would be that India is a varied country and one size wouldn’t fit all, so choose the middle ground only. That’s pretty much right in this case also and we too believe that an optimum solution lies in introducing customized concepts like Suggested Retail Price (SRP) or Recommended Retail Price (RRP). This would allow the retailers to have an option to charge above SRP or RRP where the operational cost is high along with letting the consumers know why the premium is being levied. Also, the consumer would be able to choose any vendor which s’he feels is pricing right for the additional services being provided. Additionally, in case of staple goods, a price monitoring mechanism can be set by Central Government to publish the fair price of commodities.
But the crux is, it’s high time India takes a fresh perspective on the MRP system and devise a solution that caters to the needs of both – the retailers and the consumers.
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Till then happy weekend and happy shopping…
By: Anmol Gupta | Isha Garg