Why is Maximum Retail Price never adhered to?

A fierce turf war has broken out in Mumbai between consumers and vendors in general and milk vendors in particular about the non-adherence to the statutory requirements of Maximum Retail Price (MRP) printed on milk pouches, soft drinks and bottled water. Both sides are holding onto their respective viewpoints and government agencies have had to intervene to bring out some semblance of order in the scenario.

The MRP is a typically Indian concept where the price at which a commodity is sold is mentioned on the product itself, ostensibly to prevent the consumer from being taken for a ride by unscrupulous retailers.

The term gets sanctity and statutory backing because the Packaging and Commodities Rules specifically say that the MRP of all ‘packaged’ goods must be mentioned on the packaging. Two things are a corollary of this mandate: one, that goods sold loose are not covered under these rules, the price mentioned is the maximum, and selling below such price is not an offence.

As in most problems confronting all Indian consumers, the problem is not with the law but its implementation. Traders and retailers find multiple excuses for selling goods above the marked price on the pretext of ‘transportation costs’, ‘storage charges’ ‘delivery fees’ and the like. The current confrontation between consumers and retailers is on the question of milk in Mumbai being sold at a premium of Rs 2 or 3 per litre on the pretext of ‘cooling charges’. The same phenomenon is seen almost all over the country in summer, when retailers sell cold drinks at a small premium on the same pretext.

The nodal authority for enforcing the diktats of the Packaging and Commodities Rules is the State Department of Legal Metrology, constituted under the Legal Metrology Act 2009, which mandates the department to strictly enforce the terms and conditions mentioned on the package of a commodity.

With a widespread, endemic problem like this one, the department finds its hands full in tackling complaints pouring in from aggrieved consumers.

Raiding small and big shops and outlets across a city or district, taking a panchnama and then seizing stocks and filing a case are both time-consuming and tedious. Cases filed in courts take years to reach completion and with appeals and poor quality public prosecutors, the inspectors from the department have every reason to look like a harried lot. Paucity of staff, multiple levels of reporting and inadequate infrastructure in the Legal Metrology Department further add to their woes.

Indian ingenuity and deviousness

Indian ingenuity and deviousness adds to these problems. In many cities across the country, soft drinks and bottled water sold in malls, airports, theatres and public places are marked at a price which is much higher than the price at which it is old at your local stall or grocer’s.

The department officers and even the consumer are hamstrung, since technically the product is being sold at the price marked on it, and there is no control on the price at which it can be sold. A District Consumer Dispute Forum has upheld a Law Students’ Union petition that this amounts to `unfair trade practice’ but with an appeal already in place, the jury is out on the outcome of this litigation.

The pitch is further queered by an order of the Delhi High Court and another by the Supreme Court. On a petition filed by a clutch of five star hotels and restaurants which had challenged raids and action under the Packaging and Commodities Rules, arising out of violation of rules by the sale of soft drinks at prices far above their marked prices, these service providers had contended that they were offering not just the drink but services like serving it in a container, in an air conditioned ambience and the like.

Accepting their contention, the courts have held that when the product is sold in a bundle along with a service, the relevant sections of the Packaging and Commodities Rules do not apply, and the retailer has the right to sell the product with an add-on to the original price.

In the Mumbai milk sale case, the main grievance of the retailers is that most manufacturers and distributors do not give them sufficient margin to cover up their business expenses and they hence have no other option but to jack up the prices. It is stated that milk, being a perishable product, has to be stored in a cool place at a cost, spillages due to tears in the plastic pouches have to be provided for and sometimes, if the consumer returns a packet of curdled milk, the retailer has to bear the brunt of the same.

These points have thrown up a whole set of questions on how the milk trade in the city is run, the margins (and their adequacy) given to the retailers and the multiple links in the distribution chain, which lead to eroding margins.

Consumer unity and economic blockade of those violating the mandate of the Packaging and Commodities Rules would have been the ideal solution to the imbroglio – but that philosophy applies to all consumer problems. Free economy or controlled economy? The jury is out on that one too – and this test case will give an idea of which way the wind is blowing.

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