Time for a National
Competition Policy for India
Presentation by:
Pradeep S Mehta
Secretary General, CUTS International
sg-cuts@cuts.org; c-cier@cuts.org
Presented on 11 November 2005 at
Yojana Bhavan, Planning Commission, New Delhi
Contents
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Background
Key Policy Objectives
Present Scenario: The Policy Vacuum
Need for National Competition Policy for India
The Nine Principles of Competition Policy
Key Elements of Competition Policy
Competition Policy vis-à-vis Competition Law
Countries with Competition Policy
What Next?
2
Background
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Article 39(c) of the Constitution of India (part of the
Directive Principles of State Policy) states that:
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“the operation of the economic system does not result in the
concentration of wealth and means of production to the common
detriment”
Mid-term appraisal of 9th Five Year Plan (1997-02),
Para 66 of Ch. 32 "Direction for Reforms" reads:
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“there is an urgent need for articulating a National Competition
Policy (NCP) in India…… to bring about a spirit and culture of
competition among enterprises and economic entities to maximise
economic efficiency and to protect and promote consumers’ interest
and society’s welfare and improve our international competitiveness”
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Background
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Contd…
National Common Minimum Programme states:
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Privatisation should increase competition, not decrease
it…will not support the emergence of any monopoly that only
restricts competition
Indian industry will be given every support to become
productive and competitive
All regulatory institutions will be strengthened to ensure that
competition is free and fair.
Devolve full managerial and commercial autonomy to
successful, profit—making companies operating in a
competitive environment
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Key Policy Objectives &
requirements
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Sustained economic growth of 7-8%
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Employment generation
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Enabling environment required to unleash creative energies of
entrepreneurs, and productive forces of society
Poverty eradication
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Competition, contestability intrinsic to ensuring efficiency,
productivity and thereby sustained high growth
Well-functioning markets required to expand opportunities for the
poor, and to provide value for money
Inflation control
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Competitive pressure key to checking inflationary elements
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Present Scenario: The Policy
Vacuum
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Market-oriented economic reforms undertaken to
stimulate competition and efficiency
But, government policies continue to be framed
and implemented without acknowledging the
market process (please refer Dossier)
=> Achievement of policy objectives thwarted
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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
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Need for National Competition
Policy for India
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To complete the process of liberalisation and
deregulation by having a competition policy;
To provide a declared intent to the government’s
resolve of promoting competition in the market;
To rationalise the role of the government, so that
it’s intervention facilitates functioning of markets;
To provide guiding principles to different branches
of the Government for an effective competition
assessment of policies and practices.
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The Nine Principles of
Competition Policy
1. Foster competitive neutrality
Purchase preference policy favouring Central PSEs
Procedural delays affecting competitiveness of public sector airlines
2. Ensure access to essential facilities
Interconnection in telecom – still unresolved
End of CONCOR monopoly – but what about access to railway
tracks and engines?
3. 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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The Nine Principles of
Competition Policy
Contd…
4. Separate policy-making, regulation and operation
functions (to avoid conflict of interests)
Intervention in regulatory functioning (telecom, power)
5. 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
6. Balance Competition and IPRs
Patent (Amendment) Act: inadequate in dealing with abuse of IPRs
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The Nine Principles of
Competition Policy
Contd…
7. Notification and Public justification for deviation
from competition principles
‘Free Power’ policy to farmers
Access Deficit Charge (ADC) to BSNL
8. Ensure transparent, predictable and participatory
regulatory environment
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Involve stakeholders, make decisions public, etc.
Practice followed by TRAI (open house discussions, consultation
papers, all decisions made public)
9. Respect for international obligations
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Key Elements of Competition
Policy
 Competition Law (enacted but in limbo)
 Restructure & reform public monopolies (in progress)
 Conduct periodic ‘Competition Audit’ of all policies
and regulations
 Reform policies, legislations and regulations that
distort market process
 Establish effective and credible regulatory
framework
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Competition Policy vis-a-vis
Competition Law
Trade Policy
Competition Policy
Industrial Policy
Disinvestment Policy
FDI Policy
Fiscal Policy
IPR Policy
Labour Policy
… others …
All Government Policies
that affect the
functioning of markets
Competition
Law
Competition Policy – a broad
concept that seeks to harmonise
all government policies 12
Is Competition Law Sufficient?
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No, because …
 Cannot curb market distortions emanating from
policies and practices of government (central as
well as states)
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Examples: government procurement policy and rules, antidumping measures, reverse tariff escalation, public sector
policy, SSI reservation policy, state excise policy
Cannot facilitate ex-ante assessment of
government policies to check marketdistortionary elements
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National Policies and Related
Legislations: Sector-specific
Policy
National Telecom
Policy 1994
New Telecom Policy
1999
National Electricity
Policy 2005
Legislation
The Telecom Regulatory Authority of
India Act 1997, as amended by the
TRAI (Amendment) Act 2000
Electricity Act 2003
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National Policies and Related
Legislations: Cross-cutting
Policy
Legislation
National Environment
Policy 2004*
Environment Protection Act 1986; Water
(Prevention & Control of Pollution) Act
1974; Air (Prevention & Control of
Pollution) Act 1981; etc.
National Consumer
Policy**
Consumer Protection Act 1986; Prevention
of Food Adulteration Act 1954; Standards
of Weights & Measures Act 1976; Bureau
of Indian Standards Act 1986; etc.
National Competition Competition Act 2002; Sectoral Regulatory
Policy (?)
laws; Intellectual Property Rights laws, etc.
* Draft prepared; encompasses all existing national policies for environmental management
** under development
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Countries with Competition
Policy
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Australia
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National Competition Policy adopted in 1995 by federal and provincial
governments throughout Australia
Consists of a set of policy reforms ensuring that the same competition
principles and rules apply throughout the economy
Gain of 5.5% in the GDP estimated from effective implementation of
competition measures (Unctad, 1997)
Hong Kong
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Comprehensive Competition Policy Framework adopted in 1997
Government bureaus required to state competition implications of
major policy submissions; and review existing regulations
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Countries with Competition
Policy
Contd…
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Mexico
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Botswana
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National Programme for Economic Competition 2001-06
Cooperation mechanisms established to facilitate coordination of
competition policy with industrial, regulatory, trade, and consumer
protection policies
Draft Competition Policy presented to Parliament
Seeks to ensure coherence between Competition Policy and other
Government policies and laws
Fiji
Uzbekistan
India (?)
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Benefits of Competition Policy:
Excerpts from Select Studies
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“Competition Policy led to large price reductions,
innovations, and product development” - - The Benefits from
Competition: Some illustrative UK Cases, University of East Anglia, May 2004
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“Ensuring fair competition in the market is an essential
ingredient for enhancement and maintenance of
competitiveness in the economy” - - EU White Paper on
Competitiveness, 1994
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“Strong competition policy is not just a luxury to be
enjoyed by rich countries, but a real necessity for those
striving to create democratic market economies” - Joseph Stiglitz, Project Syndicate, August 2001
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What Next?
Action
Agency
Timeframe
(months from start)
Prepare a National
Competition Policy (draft
provided)
Planning
2 months
Commission /
Dept. of Eco Affairs
Adopt a National
Competition Policy
Statement
Union Cabinet
3 months
Conduct Competition
Audit (identify policies &
Planning
Commission
3 months
practices that distort
market process)
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What Next?
Action
Contd…
Agency
Timeframe
(months from start)
Draw a framework to
reform legislations &
regulations
Planning
6 months
Commission/ Dept.
of Economic Affairs
Establish National
Union Cabinet
Competition Policy Council
(to monitor implemen-
6 months
tation of the framework
and NCP Principles)
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