Do consumers need price control on goods?

The Indian Railways recently announced that it would be following a ‘dynamic pricing policy’ in select trains wherein the price of tickets would rise gradually as the consumer purchased the ticket on dates closer to the day of travel.

While no one can deny that the Railways are in dire need of funds and consumers may willingly pay the charges as they escalate over weeks and days, the concept throws up more questions than solutions for the common man.

The paradox of the situation is easy to comprehend: airlines charge on a dynamic fare basis and tickets to and from metros are known to touch astronomical heights whenever a festival is round the corner or a long weekend leads to a sudden rise in the number of travelling passengers. Distraught passengers faced with a sudden emergency often pay through their nose for such flight tickets. There is no control by any mechanism of the fares the airline can ask for, because of the ‘free economy’ in which we work.

However, immediately on landing at the airport, a ‘controlled economy’ takes over to help the beleaguered consumer. Almost all airports in the country have a pre-paid taxi scheme in which the traveller is offered a ride in a cab at a ‘fixed price’ decided by the local traffic department and the airport authority. The reason? Taxi drivers are unreliable and may fleece the consumer by charging him an astronomical sum of money for travelling from the airport to his destination in the city. What happens if a morcha in the city has suddenly led to drying up of cab supplies or the cabbie is working on a festival day leaving the joys and festivities at home to ply his trade? Why is the not permitted to use the dynamic pricing formula?

Women going to vegetable markets may often be wondering why the prices of tomatoes and onions fluctuate along with the season (often at the mercy of middlemen who make a killing) whereas items like biscuits and packaged food seem to be stable and unaffected by the demand and supply in the market.

Examples like these are many, but none so stark as in the world of medical treatment. The government agonises with several formulae and committees to determine and keep the prices of various drugs under control, but there is no control at all on the hospitals, nursing homes and clinics which charge on dynamic pricing basis to consumers across the board. A patient who comes with his employer or medical insurance paying for his bill will be charged anything between three to five times for the same treatment which is given to a patient without the luxury of such reimbursements.

Medical implants, devices and equipment have no ‘maximum retail price inclusive of all taxes’ which is offered to the consumer at controlled prices. It is strongly believed that one of the major causes of high rural debt is the large medical bills shoved down the throat of poor people in rural areas who have the misfortune of contracting a serious disease requiring hospitalisation or prolonged medical care.

The moot question for the consumer is: what is price control all about and why is it applied to select fields? Protagonists of the free economy may ask whether price control has any role at all in an open economy. The pessimists may wonder at the chaos that could ensue if price control regimes are removed and the vulnerable consumer is left to fend for himself in a market flooded with cheats and conmen.

Mixed economy
The real problem in the system of the mixed economy which we follow is that self-regulatory mechanisms are either not in place or too ineffective to control the situation. Consumers are taken for a ride even where prices are clearly marked on certain goods – mineral water, packed milk  or aerated drinks – where the retailer will charge an extra rupee or two on the product in the guise of ‘cooling charges’.

A bottle of packaged water or popcorn can be twice as costly in a multiplex or airport than in a restaurant close to its premises, because the printed maximum retail price is pushed up for the situation. A ‘fair price’ it seems, is the one that the consumer is willing to pay and not what is just and equitable. The thin line between profit-making and profiteering is obliterated in these circumstances.

What then would consumers like in this mixed economy situation? Where the government and the appropriate authority is not in a position to control prices because of free market compulsions, the least it could do would be to decide the price range for which certain goods and services would be available to the consumer. Airline companies could per force be asked to submit their minimum and maximum rates for air tickets with a caveat that the maximum should not exceed double of the minimum price.

Hospitals could be forced to describe the contents and cost of various packages and treatment procedures, with a minimum general class and maximum deluxe class rate for both categories. The latter, for example, should not be more than three times that of the former.

e market saying, “Consumers love certainty and but are jittery when faced with ambiguity.”

(The writer is Secretary, Consumer Guidance Society of India, Mumbai)