The government has acknowledged that market forces are the best way to ensure consumers get the cheapest price for their purchases.
A high-powered government committee has refused to set up additional restrictions on pricing rules for industry but has instead asked for giving additional powers to the Competition Commission of India (CCI) to make companies declare accurate prices of their products.
The committee was asked to explore if products should print the retail margins as first point price?FPP in addition to the retail price, but it has rejected the suggestion. Govinda Rao, director, National Institute of Public Finance and Policy heads the 13-member expert committee.
The ministry of consumer affairs had constituted the expert committee to review and suggest the best methods of declaration of retail sale price on pre-packed commodities. The committee, in its report, to the ministry in August has recommended that it is not feasible to declare the normative price for various consumer goods. That is because there are no universally acceptable methods to determine and monitor the normative prices. However there is scope to improve the retail price decalaration system.
The chairman and majority of members of the committee are of the view that FPP, the first sale price at which manufacturer sells a commodity and MRP can vary from one commodity to the other and from one region to the other.
This happens due to variations in the market structure like number of trade channels, transportation cost, local taxes and local factors impacting demand and supply. It also feels that until goods and services tax is rolled in, the problem would remain.
Amitabh Kumar, director general of the Competition Commission told FE, ?The Competition Act empowers the Competition Commission to intervene in cases of abuse of dominance which includes discriminatory and unfair prices including predatory pricing. Besides behavioural remedies, the commission may impose that it has punitive powers and can levy a penalty up to 10% of the turnover. In case, a structural remedy is required, the commission is empowered to order division of enterprise.?
In most market economies, the retail price is shown on the package of the commodity and that is done as a competitive market practice. In these economies, prices are determined in the market and the competition commissions monitor the markets to ensure that they do not adopt non-competitive practices, such as cartelisation and predatory competition.
According to the committee members, the solution to prevent exploitation of the consumer lies in activating competition in the markets. The examples of telecom and airlines sector show that how healthy competition has brought down the prices significantly.
The competition automatically forces the sellers to declare their retail prices to the consumers. This also motivates the sellers to publicise their prices to attract the consumers.
The government should take measures to promote competition by deepening the markets and institute an effective system to prevent anti-competitive practices and abuse of dominant position, including predatory behaviour by entrusting the task to the CCI and empowering it appropriately.