Administered price
Topic: Markets, Equilibrium and Government Intervention · NCERT: Beyond NCERT
Meaning
An administered price is a price fixed by the government or a regulator, not set by demand and supply. Governments use it for goods seen as essential or strategic, to keep them affordable or stable. The cost is that the fixed price may not match costs or demand. This can cause shortages, subsidy burdens or weak incentives to produce.
Example
In India, the MRP of urea (a fertiliser) is fixed by the government. Under the Drug Prices Control Order (DPCO) 2013, the National Pharmaceutical Pricing Authority (NPPA, set up in 1997) fixes ceiling prices for the 384 medicines on the National List of Essential Medicines (NLEM) 2022. Petrol prices used to be administered but were decontrolled in 2010, and diesel in 2014.
Don't confuse with
- Market price: set by the free play of demand and supply, with no official fixing.
- Price ceiling: a legal maximum, so the price can be lower. An administered price is often a set level, although drug ceiling prices are both at once.