Competition Policy Issues at SubNational Level:
Local Problems Need Local Solutions
Pradeep S. Mehta
CUTS International
Introduction

State Government policies/practices that lead
to anti-competitive outcomes

Regulatory failures at local level

Competition abuses at consumer level
State Government Policies
Government Procurement Policy:

Preference (price / purchase) given to local units

Policy may be desirable in the context of, the
overall development policy of the state
BUT

Undue protection breeds cartelisation (barbed
wire association in Rajasthan)

Incapacity of state government, results in anticompetitive outcomes (millers’ cartel in Orissa)
State Government Policies
Bid Rigging in Construction/Works:

During the last 5 years, all state governments
have spent approx US$300bn on civil works

Works awarded through competitive bidding
BUT

Contracts awarded in bigger packages; limiting
competition

Contractors collude to form a pool (flyover scam
in Chennai; concrete sleepers in Railways)
State Government Policies
State Excise Policy for Liquor:

Various systems adopted for distribution and
marketing of liquor (auction or licensing)

Policy largely revenue oriented

States where liquor groups are auctioned, results
in monopolies (liquor mafia)

Bids are suppressed and state revenues decline
(Rajasthan)
Regulatory Failure at Local Level
Truck Operations:

Truck operators at district level or around major
production centres form a cartel

Trucks that come in with goods are not allowed to
carry freight from the production centre

Political patronage or official backing (Angul Truck
Owners’ Association, Orissa)

Death knell for the business in the area (marble
business in Makrana, Rajasthan)
Competition Abuses at Consumer-level

School Education:


Health Services:


Tied sales in books, uniform, and stationery
Nexus between doctors, pharma companies, chemists,
as well as diagnostic clinics
Cable TV:


Monopoly at consumers’ end
Subscribers do not have choice in selection of channels
and face frequent hike in tariffs
Competition Abuses at Consumer-level

Service sectors e.g. barber shops, pan-biri shops
etc. form unions and dictate selling prices

No performance standards

Catelisation among auto/taxi operators
Basic Problem

Lack of Political will

Non-compliance costs lower than compliance
costs

Lack of awareness about the impact of various
government policies/regulatory failure

Need to grease the pocket of enforcement
agencies at local level
Good Practices

e-Procurement, to check bid rigging

Lucky draw system, to counter liquor mafia

Involvement of local administration, to tackle
truck operators’ cartel
Recommendations

Establish State-level Competition and Regulatory
Agencies

Use local administration for better enforcement of
regulatory practices

Create awareness among all stakeholders,
including state government officials

Strengthen the capacity of consumer
organisations

Systemic Competition audit of all government
policies
Recommendations

State authorities to frame guidelines on selling of
books, stationery, uniform by schools

Establish a credible regulatory framework for
diagnostic laboratories

Carry out in-depth studies on other anticompetitive practices, and expand on the study of
education, health, and cable TV sector.