Retailers in the UAE have expressed doubt the new maximum retail price (MRP) policy introduced to combat hoarding and the black market trade in goods will work.
Traders said the federal government was right to intervene to control prices, but felt more groundwork should have been carried out before the scheme was introduced in the country.
And they warned that the system could lead to some food items vanishing from the shelves.
The system has been introduced by the Ministry of Economy and is seen as a move to crack down on price manipulation by supermarkets and hypermarkets.
The ministry issued a circular to retailers instructing them to sell certain products within MRP limits. The circular sets maximum retail prices for basics such as eggs, basmati rice, chicken and drinking water. Businesses found setting prices above the limits will be fined Dh10,000 and hoarding will result in a Dh20,000 fine.
Bejoy Thomas, Marketing Manager of Abu Dhabi Co-operative Society, said he was sceptical about the move. He said: “State intervention was definitely needed and the MRP system has been introduced to get rid of undesirable trading practices. But we cannot have a blanket MRP across all categories. A listing should be in place, which would take into account the brand value, the source and the unique selling point of a product.”
The retailers said they did not control prices. And Ashraf Ali MA, Executive Director of the Lulu Hypermarkets group, warned the system could lead to shortages of basic items.
“We support the government in tackling inflation, but price increases come from our suppliers,” he said.
“They are not willing to sell basic commodities at the revised prices and we may see a shortfall of products under the MRP scheme. We should get together the government, retailers and suppliers and look for a solution.
Thomas added: “The big retailers are not increasing prices it is the distributors, suppliers and brand representatives who set prices. I expect to see a 30 per cent increase in the next six months from them.”
One retailer, who did not wish to be named, said: “How can I sell basmati rice at the set price of Dh3.70 a kilogram?
I cannot afford to sell the Tilda or Mumtaz brands at these rates. It is not possible to sell an A grade basmati brand at the same price as a B grade one.
“American apples will always be more expensive than Iraqi ones. The list we have is not at all specific. I will have to drop the products, that I cannot sell at the specified rates to avoid a fine.”
Smaller stores are likely to suffer most from the MRP regulations. The marketing manager of a Dubai-based retail chain, said: “Real manipulation is happening at the groceries and B-grade stores. They are selling goods for 30 to 35 per cent more than prices one might find at the big hypermarkets.
“But under the MRP system they will be forced to stick to the specified prices. They cannot compete with our rates because of the volumes. Some may be forced to shut up shop.”
And the retailers said there were other issues that had to be addressed.
Thomas said: “If the MRP system is to be effective we need proper labelling. We get goods from more than 82 countries, so this is one area of concern and there could be supply chain problems as well. Inflation has been eating into everybody’s pocket. We should get rid of the dollar peg to increase the buying power of the dirham. At the same time the government needs to support local retailers. Right from hiring people to rents and raw materials, virtually everything has gone up.”
The reaction to the new regulations from customers has been mixed. One shopper at the Lulu Hypermarket in Dubai, said: “Food is a very personal choice. I like to eat one particular brand of rice and I don’t want that be taken out of the market.”
And Viji Jacobs, an Indian working in a publishing house at Dubai Media City, feels consumers will be hit.
“The government and the retailers should come to the table and try to find a solution,” he said.
“We can’t have soaring prices but at the same time we cannot do without essential commodities. It’s a real dilemma for lower-income and middle-class people. The government needs to address this.”
Some shoppers feel the market should be left to the basic law of supply and demand. Julie Al Baho, a Lebanese working as office manager in Dubai, said: “If people want to buy certain products why stop them? If I can afford to buy expensive rice then let me, but there should be cheaper options for the benefit of all.”
Dh10,000: Businesses found setting prices above the limits set by the Ministry of Economy will be fined this amount
Dh20,000: Businesses found hoarding goods will be fined this amount
Doubt over UAE retail price system