From vegetables to stents, has overcharging become part and parcel of Indian business model?

Mumbai: It would appear that Indian business models are based on a system of conning the clientele. Right from the short weighing of vegetables at the grocer who has cut his capital asset costs by encroaching on a footpath, to hospitals who do not make profits but profiteer.

Rising costs. AFP

Rising costs. AFP

The ease of doing business in India is because the consumer does not protest, and if he does, not loud enough and well-organised enough. The fight against the autorickshaw drivers in any city is a lost cause. Tampered meters to refusal to accept fares is part of their business models.

It is common knowledge that a bottle of water in a mall or a theatre or outside the Mumbai airport costs more than the MRP. It is a rip off which the consumer has had to bear. They just charged more and when the consumers started griping, the manufacturers started marking different MRPs.

Even twice the ‘normal’ MRP. That was conniving with the retailer because to the manufacturers, it didn’t matter. We don’t know if it was a kind of ‘protect’ to the retailers because the wholesale price could be – I am guessing – the normal one. This is unconscionable and authorities have said it is disallowed.

There are many ways a consumer suffers. One recent disclosure by the authorities that the service charge levied by the restaurants was optional. The industry is divided – one section agreeing with that, another saying that those who don’t want to pay needn’t patronise restaurants.

As the media have reported, many food outlets collect the staff costs from the clientele via the service charge when the pricing of the items on the menu includes every item’s cost – staff included. If service charges are to finance salaries, then the employees are being paid lower than the minimum wages; the consumer is subsidising the shortfall.

Those who travel on trains know that the tea served is barely a thimbleful, even literally so, and charged beyond Rs 6 or more, while the IRCTC – its online reservations and catering arm – stipulates serving 150 ml tea in 170 ml containers. I had written about on-board scams here. The onboard staff are either ignorant, careless, or conniving.

There are the middlemen who cause worse crisis, it is not limited to farm produce. It does not matter farmer may dump or onions or tomatoes because it fetches no price enough to even cart them to the wholesale markets. And yet, the prices at the retail end hardly dip significantly enough.

Everyone wants to grab and it is now seen in the prices of the stents which are used in cardiac surgeries. A bulk of it is due to the margins paid to the several hands through which it passes before the patient is billed in the hospital. And the biggest rake off is in the hospitals. The mark-ups by hospitals is scary enough to give one a heart attack.

The National Pharmaceutical Pricing Authority lifted the lid off the practices where the end-user price is pulled up high by chagrining margins at every stage. It is said to go up by between 270 percent to 1,000 percent. This was estimated on the basis of data supplied by the stent companies. It is now pushing for lowering prices.

The Times of India has reported that “with most companies claiming to follow ethical codes of marketing, the illegal marketing practices of kickbacks to doctors and hefty cuts to hospitals are left to the dealers or distributors. Hence the margin allowed to dealers ranging from 13% to 196% is said to include the cost of these practices too.”

To top it, “the official billing prices of stents to hospitals often disguise bigger cuts through a system of distributors giving them a bill showing a higher price. The real price to hospitals is often lower.” Consequently, and it barely needs being told, the hospitals dip into the patients’ pockets.

It is not just over-prescription, excessive and needless laboratory tests that push the medicare costs up but also a peculiar pricing policies of hospitals which has remained unchallenged so far. It is of variable costs for the similar surgeries: the one in a room gets billed much higher than the one in a general ward.

Those who seek treatment seek it for cure, and those opting for improved in-patient facilities are paying for the rooms, its privacy included. But the costs in the operating theatre are the same but the billing for that particular service is discriminatory. If such higher bills are subsidising the general ward, then it has to be proven to be so.

Or else, it is like the dual MRP for bottled water. One at the ordinary store, another in the multiplex or outside the airport.


Updated Date: Jan 18, 2017 19:48 PM

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