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MRP – Advantages and Disadvantages

IntroductionMRP stands for Maximum Retail Price and it is the highest price that can be charged for a product which is sold in India. India is the only country in the world to operate an MRP system. 

MRP is printed on all the packed commodities that are purchased by the consumers. It was introduced in 1990 by the Ministry of Civil Supplies Department of Legal Metrology. It was an amendment made to the Standards of Weights and Measures Act (Packaged Commodities’ Rules) (1976). 

MRP has certain merits as well as demerits, which are enjoyed and borne by the manufacturers as well as consumers. Let’s take a look!

Advantages of MRP

No over charging – Today, all the manufacturers print a tax inclusive price on all the packaged goods. Thus, there are less number of complaints by the customers on the issue of over-charging by the retailers. 

Single rate – Because of a fixed MRP, the manufacturers produce a product with a fixed rate and it is applicable all over the country. It is considered to be a legal rate within all the states, gram panchayats and municipalities. MRP aims to create a uniform price throughout the country. 

Purchasing power – MRP helps to create an awareness about the purchasing power among the consumers. Purchasing power is the financial ability of the consumer to buy a product or service. If the MRP rate of a product is not fixed, then the purchasing power is not certain till the product is bought. 

Less loss – The main merit of MRP is that the occurrence of tax loss is very less. In most of the online shopping websites, you might have noticed that the MRP is high but the selling price is highly discounted. 

Protects the rights of consumer – MRP is essential to protect the rights of the consumers in the remote or rural areas. In such areas, the consumers do not have the choice to go to various stores in search of the right price. 

Disadvantages of MRP

Cost of transportation – Retailers in remote areas have to bear a high transportation cost and they cannot pass it on to the end customer. As they cannot charge a higher price than MRP, they end up making loss. MRP is calculated after the calculation of average cost which is required for the transportation of the products. 

Old stock – At times, the manufacturers increase the MRP and sell the old stock on new price rates. When an explanation is demanded by the customers, the manufacturer tells that the price has increased due to the changes in duties or increase in cost of production. 

Complicity – MRP provides a focal point to the retailers. It becomes a genuine uniform price and thus, creates retail price complicity. At the end, MRP turns out to be hurting the customers. 

Consideration of other states – Before fixing the MRP rate of a product, the manufacturer, takes into account the highest tax rate which is charged on the product by any state in India. Even though the tax rates in your state may be low, you might pay a higher price because the tax rates in other states may be high. 

Conclusion

Maximum Retail Price is the highest price that is charged on a product. The concept of MRP is existing in India since a long time. Now, the time has come to give the free markets an opportunity. 

If MRP exists in the Indian market, it would allow a uniform price for the same product in different states. 

But today, the rule of MRP is being violated rather than being recognized and manufacturers feel that it is time to abolish the concept of MRP from hereon.

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