Wednesday, May 7, 2014

End of the airport overcharging (hopefully…)

IMG_20140321_141422Not very long ago, I was at the Ahmedabad airport, waiting to board a flight to Calcutta. With time to kill before boarding and faced with the prospect of a two hour long flight without any onboard meal, I wandered about the airport looking for some nice snack. Not only were all the fastfood outlets serving the same fare at almost twice the usual price, even a can of softdrink cost Rs. 100. I had to reluctantly pay Rs. 40 for a packaged ice-cream with printed Maximum Retail Price (MRP) of just Rs. 25.


Daylight robbery by exploiting the restaurant exemption

As per the law, nobody is allowed to sell packaged goods for a price which is more than the printed Maximum Retail Price. However, hotels and restaurants are exempt from this rule as the courts have ruled that when hotels or restaurants serve a packaged item, it does not constitute a ‘sale’ of the product per se because the hotel / restaurant combines it with a service and the amount charged to the customer includes the charge for service as well as any modification made to the product. Though some courts have passed differing orders in some individual cases, the SC judgement in State of Punjab v. Associated Hotels of India (AIR 1972 SC 1131) largely holds the ground.

It is very clear that when no service is bundled with the products, the products cannot be sold for more than the MRP and thus stalls at the airport which merely handover chocolates or soft drink cans to the customers should not be allowed to charge beyond the MRP.  To explain their behaviour, the airport stall owners cite the fact that they pay exorbitant rents to the airport authorities and they also claim to have been authorised by them to overcharge.

On the face of it, this model of our airports being developed by companies who in turn recoup their costs from rents paid by food stall owners, actually sounds good. However, that is not how they operate. Private companies such as GVK and others who have modernised the airports charge every single passenger, a "User Development Fee". So, the attempt to overcharge has nothing to do with raising funds to recoup airport development costs but is simply an unethical deal through which both, the airport management and the stall operators make supernormal profits by overcharging the airport passengers.


DK Chopra v. Snack Bar

There is no good reason why stalls at the airports should be exempt from the MRP regulations and the National Consumer Disputes Redressal Commission (NCDRC) has recognised this. On 4th March 2014, the National Consumer Disputes Redressal Commission (NCDRC) has ruled that an airport stall which is not a restaurant cannot charge a customer more than the MRP in what I think is a landmark judgement. The stall had to pay a massive fine of Rs. 5 lakhs for overcharging the complainant by Rs.75 for a can of RedBull.

In its judgement NCDRC has accurately pointed out that Airport Authority of India or any other airport developer has no right to permit stall owners to violate the law regarding MRP. In what is sure to annoy the owners of pretentiously named ‘snack bar’, the NCDRC has compared the airport stalls to paan-beedi shops. The judgement states- A Snack Bar, just like a Tea Stall or a Pan/Beedi Stall, hardly provides any service to its customers.

 Full text here. News article here.


The Way Forward

Knowing that this is India and that respect for rule of law is scant, I am sure that the practice of overcharging shall continue despite the NCDRC ruling. I regret not having protested the overcharging at the Ahmedabad airport the other day. However, I have now vowed to be vigilant about the prices charged at the airports. It is crucial to note that the complainant failed at the district and state forums, amongst other things by the reason of not being able to prove the receipt. Thus, one must remember to insist on and preserve the receipt from the airport stalls in order to be able to successfully pursue the matter.



Though it is not the focus of this post, the concept of MRP in itself is controversial for two reasons -

  1. It amounts to what many may categorise as unwanted government interference in pricing mechanism. It can be argued that the market forces of demand and supply should be setting the prices of all the goods. However, I believe that in many places in India, some vendors hold such a position in the market that they can influence the price singlehandedly and the MRP system is necessary to protect the consumers.
  2. The rule that customers cannot be charged more than the MRP is found in The Legal Metrology (Packaged Commodities) Rules, 2011 rather than in the act itself. Though the courts have not struck down these rules, it maybe possible to argue in future that the Central Government, while making these rules has exceeded its authority under the Parent Act, making the rules ultra-vires. (Nowhere in the Act is it said that selling at a price above the MRP is illegal or punishable)


I believe that regardless of whether it is a prudent system or not, as of now, it is the law of the land and nobody should be allowed to violate it.


  1. Sagar a good post which properly examines the legal position...but I fear the last point you made wouldn't really hold up. If the parent act empowers the government to make rules, the same cannot be said to be ultra vires. The very principle of delegated legislation allows for that.

    1. Yes, it is delegated legislation but whether an offence can be created by delegated legislation when the parent act does not make something an offence, is still debatable...

      I am sure most people would be wary of allowing the govt (without parliamentary oversight) to create delegated legislation which has penal provisions...

      It might not be clear but the part within the () is a link which goes to a blogpost which argues this. I personally havent read up much to form an opinion regarding whether it may be ultra vires or not...


Feel free to blurt out whatever it is that you think about this post ...