Firms should list products' manufacturing cost with MRP: RBI board member

Satish Marathe pitches for disclosure by companies on their margin of profit

In a unique suggestion, an RBI central board member said Friday a company should disclose the manufacturing cost of a product along with the maximum retail price so that a consumer gets to know the margins the company is pocketing.

Satish Marathe, appointed by the government to the central board of the RBI in August, said, "it is high time that apart from printing MRP on products, companies should also start giving the (manufacturing) cost of products. Only then, will we really know the margins of profit."  

Addressing an event of the Institute of Cost Accountants, he sought to drive the point of excess profits being made by companies, saying a piped gas company recently signed an agreement to supply gas to residential areas at a 16 percent margin.

Admitting that such a high margin could be justified in initial days, he wondered how can it be justified once volume picks up and also rued that consumer movement is only at a nascent stage in the country.

Marathe is closely associated with the co-operative banking sector and has served as the chairman and chief executive of United Western Cooperative Bank.

Wondering whether any country has benefited from free-trade pacts, he called for the need to take a relook at free trade agreements to better protect the interest of the domestic industry.

Marathe said the domestic banking sector has gone through a "rough patch" after the ongoing asset quality review by the RBI, but exuded confidence that the system will come out healthier. 

He also said the state-run banks under prompt corrective action will eventually come out of the restrictions imposed on them.

It may be noted that as many as 11 of the 21 state-run banks are under this regulatory curb since the past many quarters after their average bad loan ratios crossed high double-digit marks.

While gross NPA for IDBI Bank was a shade below 33 per cent for the September quarter, the lowest was 14 per cent. These 11 banks together control a tad over two-fifths of the banking system, making a section in the government to demand RBI relax the PCA on them citing falling credit off take by the MSME segment.