The MRP rule – Observed in the breach

One of the casualties of the rupee crunch has been the maximum retail price 

Commerce: MRP means maximum retail price.  Big deal!  But what does it really mean?

Most shops in the country do not follow the MRP rule.  Some sell goods above the MRP, while others do so below it.

An officer with the office of consumer protection said that there is nothing called MRP in the country.

One of the reasons for imposing a higher price on certain commodities in some of the retail shops in the country is due to the market forces of demand and supply, said Sonam Tenzin, executive director of the office of consumer protection.

The MRP rule was introduced in July 1995 to regulate sales, storage and distribution of packaged commodities in the country, and to ensure that goods are sold at pre-printed MRP.  The rules applied to all packaged commodities, produced and imported from India, Nepal and Bangladesh, and sold and distributed in Bhutan.  According to the rule, all wholesalers and retailers must sell packaged goods at pre-printed MRP.

However, since the rule was framed, based on the packaged commodities rules of the legal metrology act of India, it found no relevance in Bhutan.  So it was discontinued.  The concept of MRP is applicable only in India, said Sonam Tenzin.  Almost 70 percent of the country’s trade is with India.  All packaged goods from India, ranging from beverages to mobile phones to cosmetics, are stamped with a price from the manufacturer as the maximum cost a customer must bear for a particular good.

Passang Dema, a shopkeeper in Thimphu, said that, because there is no profit in selling goods at MRP, she always charges three to five ngultrums more than MRP.

“Even so, sometimes I don’t make enough to pay my house rent,” Passang Dema said.

However, Sonam Tenzin said that about five to 10 percent of the profit including transportation cost is already included in the MRP of the product for both wholesalers and retailers.

“The price will never cross the MRP, even if transportation costs are included,” Sonam Tenzin said.  Transportation cost might add to the price of goods only in far-flung place where there is no road.

The MRP on a kilogram of Everyday milk powder is Nu 342.  The Food Corporation of Bhutan sells it at Nu 318.  But the price varies in retail shops.  Some shops in Thimphu sell at MRP.  Others go lower than MRP.

In Phuentsholing a kilogram of Everyday milk powder costs Nu 330.  In Mongar, it is between Nu 340 and Nu 345.

The difference in prices of the same item in different places is because of the market force of demand and supply.

According to the Consumer Protection Act of Bhutan 2012, price tag on all the goods displayed for sale is mandatory.  But goods imported from countries other than India do not have MRP label on them.

The office of consumer protection is working on a new set of rules and regulations that will come into effect from March this year.  The office will conduct awareness campaigns about the new rules.

“Imposing fines will be our last option. We want to create awareness first,” Sonam Tenzin said.

Younten Tshedup

1 reply
  1. Development practitioner
    Development practitioner says:

    Is the office of consumer protection aware of the fact the Bhutanese consumers are subjected to double taxation, Indian and Bhutanese? The MRP includes Indian VAT of 14.5%/13.5% and then the goods are subjected Bhutan tax, 10% in the case of Everyday. Most of the Indian retailers have not heard of Indian tax Exemption Certificate (issued by the Department of Revenue & Customs), and do not accept it because they have no export permit. Leaving aside big manufacturers/dealers, retailers do not accept Exemption Certificates for many reasons. This is the real issue that needs urgent attention, not MRP.

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