Seminar on
National Competition Policy: Second Wave of Reforms in
India
“Need and Importance of National Competition
Policy for India”
Pradeep S Mehta, CUTS International
Outline
 Tools of Effective Competition
 Is Competition Law sufficient?
 Present scenario in India
 Need for NCP for India
 Principles of Competition Policy
 Absence of NCP: Competition issues in economic sectors
 NCP: Work done so far
 Issues for discussions……
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Tools of Effective Competition
(Policy & Law)
FDI Policy
Trade Policy
Industrial Policy
Disinvestment Policy
Fiscal Policy
IPR Policy
Labour Policy
Procurement Policy
… others …
Is Competition Law Sufficient?

No, because…
 Cannot curb market distortions emanating from policies and
practices of government (central as well as states)
 Examples: government procurement policy and rules, anti-dumping
measures, public sector policy, etc
 Cannot facilitate ex-ante assessment of government policies to
check market-distortionary elements

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Competition Policy: To address the policy-induced
competition distortions
Present Scenario in India: Policy Vacuum


Market-oriented economic reforms undertaken to
stimulate competition and efficiency
But, government policies continue to be framed
and implemented without acknowledging the
market process
=> Achievement of policy objectives thwarted

Guiding principles to formulate policies and
practices in a liberalised regime - - missing
=> There is a lack of coherence in government policies

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Therefore…policy vacuum exists
Need for National Competition Policy for
India



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Provide a declared intent to the government’s resolve
of promoting competition in the market;
Rationalise the role of the government, so that it’s
intervention facilitates functioning of markets;
Provide guiding principles to different branches of
the Government for an effective competition
assessment of policies and practices.
Principles of Competition Policy
Foster competitive neutrality
Purchase preference policy favouring Central PSEs
Procedural delays affecting competitiveness of public
sector airlines
Ensure access to essential facilities
Interconnection in telecom – still unresolved
End of CONCOR monopoly – but what about access to
railway tracks and engines?
Free movement of goods, services, and capital
Value-Added Tax: big step towards a single market for the
country as a whole
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Principles of Competition Policy
Separate policy-making, regulation and operation functions
(to avoid conflict of interests)
Intervention in regulatory functioning (telecom, power)
Ensure free and fair market process (to facilitate liberalisation
and deregulation)
Anti-dumping measures increasingly used to protect
competitors
Procedural formalities affecting the climate for doing
business
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Balance Competition and IPRs
Patent (Amendment) Act: inadequate in dealing with abuse
of IPRs
Principles of Competition Policy
Ensure transparent, predictable and participatory
regulatory environment
 Involve stakeholders, make decisions public,
etc.
Practice followed by TRAI (open house
discussions, consultation papers, all decisions
made public)
Respect for international obligations
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Absence of NCP: Competition issues in
Economic Sectors
SECTORS
ISSUES
Healthcare
o Regulatory entry barriers with respect to medical education, domestic
manufacture of medical devices; health insurance; and public health
procurement
o Prescription practice of physicians in brand name
o Collusive practices between physicians and path labs and between hospitals
and medical goods suppliers
Road
transport
o Discretionary licensing
o Cartelisation being facilitated by truckers union around major production
sites and factories
o Preferential treatment of government towards its own undertaking
Higher
education
o Multiple regulatory system and overregulation (UGC, AICTE)
o Government control over private education
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Absence of NCP: Competition issues in
Economic Sectors
SECTORS
Electricity




ISSUES
Monopolistic and dysfunctional structure of state utilities which
create a façade of autonomous utilities, but are largely controlled by
state governments
Legislation restricts entry and confers exclusive rights by statutorily
limiting the production of coal to government company
As per private players, the Ultra Mega Power Projects (UMPP) are
not being truly successful as bids are made based on the domestic
price of coal. CIL has fulfilled only 50% of its obligation as
mentioned in the 12th Five Year Plan
Natural monopoly nature of transmission hinders private entry
Pharmaceuti • Consumption patterns not affected by prices; Doctors and
pharmacists – decision makers
cal
• Collusive behaviour of pharmacies
• Central Government making efforts to curb trade margins
• Regulatory regime - hard on manufacturers but soft on doctors and
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pharmacists
Absence of NCP: Competition issues in
Economic Sectors
SECTORS
ISSUES
Agriculture  Distortions in marketing of agriculture produce
 Procurement of agriculture commodities at MSP by
government agencies with monopoly status
 Restrictions on storage and movement of goods, as
well as inter-state trading.
 Huge gap between prices consumers pay and prices
farmers actually receive
 Intermediaries do not always behave in a competitive
manner
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NCP: Work done so far!!!


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C-NCP under MoCA
Draft NCP 2011
http://www.mca.gov.in/Ministry/pdf/Draft_National_Competiti
on_Policy.pdf
Competition impact assessment studies
commissioned by IICA and CIRC
http://www.iica.in/SectorStudies.aspx
for
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sectors
Evidence of distortions in rules, regulations and policies revealed.
Also documented in Quarterly CUTS Distortions Dossiers
http://www.cuts-ccier.org/Competition_Distortions_India.htm
ISSUES FOR DISCUSSIONS
 What steps are required to ensure effective adoption of
NCP in India?
 What are the ways one can involve State level actors in
the whole debate, so as to increase awareness on the
need for NCP?
 What role can be played by the industry players,
policymakers, media, etc to ensure adoption of NCP?
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THANK YOU
Let’s look at the Woods and
adopt National Competition
Policy
to add to our economic
growth
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