Rounding off prices: Small change, big turnover!

It's a long list of products and services that are charged in decimals, despite small change having been phased out in the country.

Electricity is priced at Rs 2.45 per unit in Delhi for up to 200 units, Rs 1.30 per unit for up to 100 units in Mumbai in the case of Tata Power and Rs 1.72 per unit when the service provider is Reliance Infrastructure.

Petrol costs Rs 63.39 per litre and CNG is priced at Rs 29.80 a litre (Delhi circle prices).

. . .

Then there is tomato at Rs 25.90 a kg, cauliflower at Rs 44.90 per kg, and bottle gourd at Rs 9.90 a kg, to name a few.

Many medicines you buy off the shelf are also priced in decimals, as are your taxi and auto-rickshaw charges.

As coins below 50 paise are not in use, consumers and shopkeepers are rounding off prices of products and services all the time.

. . .

It would add up to a huge amount but there is no official (or unofficial) estimate of how much that could be. The latest small coin to go out of circulation was 25 paise last month.

In the absence of an alternative pricing mechanism, the consumer usually ends up paying the upper round-off cost of the product.

Millions of such transactions take place every day all over the country. The finance ministry had recommended that pricing of products/services/taxes should be rounded-off to 50 paise or a whole rupee, but that is yet to be achieved.

. . .

Anand Ramanathan, manager, KPMG Advisor Services, said the effect of the round-off in pricing is different in various segments.

"The rounding-off in petrol/diesel is different from that in medicines. Often people ask for petrol worth Rs 100 or so but not in litre terms, so decimal pricing here is not a problem," he said.

According to him, in medicines, the consumer always ends up paying the upper cut.

. . .

Kumar Dasgupta, partner at PriceWaterhouseCoopers, said, "There's both rounding up and down, so it is difficult to know exactly the impact on the system as a whole."

According to Dasgupta, what we have is anecdotal evidence. "The rounding off difference in financial institutions can easily add up to a huge amount if we lose sight of the controls and may result in deceit," he added.

When asked how the untaxed round-off difference affects the country's revenue, economist Sriram Srirangam says tax liability should be adjusted to the rounded-off figure if the difference is sizeable.

. . .

"The way inflation is rising, product prices are changing almost on a daily basis and so the rounding-off works both ways, higher and lower."

The sellers should be more benign to the consumers in these days of overheating of prices, added Sriram.