Centre considers dramatic MRP overhaul to limit ‘irrational pricing'. What it'd mean for buyers, sellers

The Print

3 days ago

Remember rushing to the grocery store and checking the MRP labels before adding items to your cart? Consumers often refuse to pay the street vendors extra charges such as the 'cooling fee', considering that printed MRP is a government-mandated, fixed price that sellers must respect. Yet, rarely examined is how this price is determined. More importantly, why do identical products across brands carry varying MRPs? These questions have led New Delhi policy circles to rethink whether the MRP system is the best choice for consumers and retailers.
Not a bureaucratic change, the overhaul will be addressing the chronic complaints of excess pricing, as well as misleading discounts, leaving consumers short-changed.
New Delhi: From a package of biscuits to a bottle of shampoo in crowded shopping aisles—all bear that ubiquitous MRP tag, but change is in the offing. The Narendra Modi-led government is considering a dramatic overhaul of the Maximum Retail Price (MRP) regime, which has been a bulwark of consumer protection since the 1990s.
At its core, the maximum retail price is the highest price at which a seller can sell a packaged product to consumers in India. It is not a suggestion; it is a legal cap, inclusive of all taxes; printed, right on the packaging. It is illegal for retailers to undercut the cap in a competitive market and illegal to charge even an additional Re 1. The MRP system avoided arbitrariness, ensuring transparency in prices where bargaining is not always doable, such as new retail environments.
The root of this pricing system goes back to 1990, when amendments to the Standards of Weights and Measures Act, 1976, introduced the MRP. India, then poised for economic liberalisation, still had spotty consumer protections.
The intention behind MRP was to protect consumers against exploitative tactics, such as retailers raising prices of a commodity during shortages. It developed from previous attempts in the 1970s to prevent tax evasions and extortionate local charges.
By 2011, the Legal Metrology (Packaged Commodities) Rules legalised MRP, making it compulsory on all pre-packaged products, thereby eliminating dual pricing or preventing sellers from printing different prices on them.
Legally, MRP, which falls under the Legal Metrology Act, 2009, is administered by the Department of Consumer Affairs. Violations result in fines or penalties imposed by organisations, such as the Central Consumer Protection Authority.
The MRP system—a one-of-a-kind pricing system adopted by India, Bangladesh, and Sri Lanka, among other countries—is different from the recommended retail prices prevalent in the United States and Europe, among other nations, where market forces allow greater freedom.
Jump to 2025, the Union Ministry of Consumer Affairs is leading what may become the most far-reaching MRP overhaul ever. In a crucial meeting with trade bodies, including the Confederation of Indian Industry, consumer associations, and tax authorities, earlier this year, in May, the Centre mulled over new frameworks.
The new proposal? Tie MRP closer to real production and marketing expenditure, particularly in the case of essentials and daily items, and that may require fixing 'standard costs' after consultations with stakeholders, and possibly, amending the Legal Metrology Act, or the new GST regulations.
The government is currently attempting to introduce a formula that will limit 'irrational pricing' to create the illusion among customers that they are saving money.
The revamp may include transparency interventions, such as compulsory cost segregation, or maybe product QR codes that enable consumers to scan the code to confirm pricing rationale. Talks on adopting a Suggested Retail Price (SRP) model, as in Western economies, are also ongoing. Under the SRP, retailers may have room to negotiate local costs, such as transport in hinterlands.
These contemplations are not occurring in a vacuum but are part of a larger consumer protection push, including anti-profiteering under GST and attempts to rationalise prices with digital platforms. Up to July 2025, however, no announcement of any final decision had been made.
But why this shift, now?
The consumer retail business has been booming in India. Online titans and hypermarkets are driving this boom while causing price distortions. Manufacturers tend to overprice MRPs to allow flashy discounts, tricking consumers into believing they are snagging a bargain.
Consider a plain juice sachet, say one priced at Rs 50 and another at Rs 150, without any apparent logic, though the contents are the same. This lack of transparency kills trust and stokes perceptions of profiteering, particularly in the backdrop of post-pandemic inflation.
Another example of exorbitant pricing is overpricing in tourist spots or rural areas with limited competition.
Wider economic changes are at play there. Considering the growth rate (six to seven percent) in India, the government is looking to create a more equitable market, enhancing consumption without suppressing any invention.
Along with the worldwide trend of nations, such as the US, depending on antitrust regulations to cap cartels, India is also viewing the reforms in MRP as a means to modernise and safeguard poor consumers in an economy that remains uneven.
The crossroads: Pros and cons
If implemented successfully, the overhaul of MRP could be a game-changer.
Tying the maximum retail price of a product to its expenses could potentially lead to a decrease in the effective rates of necessities and lower household bills. A consumer could easily identify pricing scams on a soap packet if they could scan a QR code and see the cost breakdown. For instance, MRP may be production costs (40%), taxes (20%), and profit margin (40%).
It would prevent tax evasions, as well as harmonise the MRP with GST, and prevent the concealment of profits in inflated MRPs.
For companies, more defined norms may lead to honest pricing, increased competition, and more innovations.
It will be a move in the direction of fairness, particularly in rural India, where MRP is the sole price reference in the absence of bargaining power, Consumer lobbies say. On the whole, it could also increase economic efficiency; research has indicated equivalent reforms in fuel subsidies insulated business growth from external shocks.
But not all are smiling. Industry group voices, such as manufacturers and retailers, caution that inflexible cost-based MRPs could freeze out adaptability in a heterogeneous market. India extends from metropolitan malls to isolated villages, but requiring standard prices overlooks differential costs, such as higher transportation costs in hill stations. A move to SRP may result in price instability or cartels in low-competition areas, harming the very people it is supposed to protect.
Speaking to ThePrint, Abhishek Rana, an advocate at the Supreme Court of India, said that the proposed law might take away the right of business owners to practise their kind of business.
'India, being a price-sensitive market, with hidden charges levied almost everywhere, a proposal aimed at regulating the method of calculating MRP or linking it to inherent production value, may be a welcome change. However, a challenge that the government may face will be to balance it with the right to business,' Rana added.
Rana further pointed out the intangible factor of quality.
One excuse that companies tend to use in their favour is the idea of brand quality and trust. Companies tend to promote their products as better compared to their rivals' by stating that the quality of the raw material used is superior. There may be some truth in it; it does allow a lot of 'puffery'.
Throwing light on the same, Rana said, 'An argument of costs incurred due to the intangible parameter of an item'squality, production method, or even method of sourcing its raw materials can be difficult to regulate with guidelines, more so for luxury goods. How the government overcomes these probable issues remains to be seen. A suggested or recommended retail price, as adopted by various countries, might be a consideration.'
While the revamp may seem ambitious, it may be of interest to small firms that remain concerned over compliance costs. Estimating and rationalising each MRP may increase administrative expenses, which the firms could transfer to consumers.
Critics highlight that the MRP's dysfunction stems from weak enforcement, not the system itself; overhauling it risks unintended hikes if guidelines are too prescriptive. There is also the risk of dampening e-commerce dynamism, where personalised pricing drives sales.
In a price-conscious country, any perceived hike can trigger anger, reminiscent of earlier milk street vendor boycotts over MRP issues. Transparency is commendable, but over-regulation, as in other reforming economies, may stifle India's free-market ambitions.
(Edited by Madhurita Goswami)
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