National Competition Policy
and 10 Competition Principles
Presentation by
Pradeep S Mehta,
Secretary General, CUTS International,
Chairman, Planning Commission Task Force on National
Competition Policy, and
Member, Committee on National Competition Policy and
related matters, Government of India, September, 2011
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JOURNEY THROUGH THE TEN
PRINCIPLES OF COMPETITION POLICY
FEW TREES IN THE DENSE
WOODS OF COMPETITION
IMPEDIMENTS
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Backdrop: National Competition Policy in India
• After a long process, Government initiates a National
Competition Policy in June, 2011 likely to be adopted in Dec,
2011
• Inspired by the experience in Australia, where competition
reforms resulted in 5.5% growth
• This experience now guiding many countries to sequence
competition policy followed by a competition law
• In addition to Competition Act, which covers market failures,
while the NCP will attack competition distortions and
impediments arising due to government policies
• Testing and correcting all policies, laws, regulations and praxis
through the lenses of competition principles
1. Competitive neutrality
Impediments: Lack of level playing field: public sector enjoys
special privileges, procurement preferences, subsidies etc,
though reverse examples also.
Result: inefficiency, discourages investment and dampens
economic growth and innovation

-Bank deposits only in PSU banks, one percent subsidy on
agri loans available only to public sector banks
- Only PSU petroleum companies getting subsidies

Purchase preference policies in favour of central PSUs
extended for three more years in 2005 discriminated against
private players but finally dropped in 2008 in light of the
distortions
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2. Procedures should be rule bound,
transparent, fair and non-discriminatory
Impediments: Many procedures are opaque, arbitrary and
formulated without consultation.
Result: High transaction costs, corruption, cost to economy etc

Motor Vehicles Act empowers States to authorise long
distance bus transport, which grant the permits to SRTUs only,
even if private operators are equally capable

In Mithilesh Garg v. Union of India, Supreme Court ruled
“that restricted licensing of motor vehicles led to concentration
of business in few hands leading to a monopoly and hurting
public interest….More operators means healthy competition and
efficient transport system”.
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3.
Third party access to ‘essential facilities’
Impediments: Control over essential facilities in network
industries by dominant enterprises undermines competition by
denying access to new entrants. Eg. Interconnection and
infrastructure access in mobile telephony
Result: Consumer and producer welfare losses

- There are still no regulations on IUC
- BSNL not providing access to private players on mobile
telephony infrastructure

- Supreme Court in 2011 directed TRAI to evolve new set
of revenue-sharing norms and IUC regulations
- Private operators providing access to each other
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4.
Free and fair market process and
“FTA with India”
Impediments: Incoherent and inconsistent laws and
procedures
Result: Fragmented markets and losses in both producer
and consumer welfare


- Agriculture Produce and Marketing Committee
Act (state subject)
- Differential sales tax structure
- Committee of State Agriculture Ministers lead
by Maharastra in 2011 recommended a “barrier
free national market” including incentives for
reforms in states
- GST on its way, though contentious
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5.
Notification and Public Justification of
Deviations from Competition Principles
Impediments: Interventions in markets to achieve social,
environmental, security or strategic objectives can be entirely
appropriate. But should be justified and done transparently
Result: Fig leaf of public interest could promote rent seeking
 -Export restrictions on food and primary goods
-Price control is prima facie against free market but…

- Ensures affordability and availability of essential
commodities; manipulation possibility and political costs
- Cotton on OGL following Bombay High Court’s directions
- USO on telephone companies, airlines and banks
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6.
Fair pricing and inclusionary behaviour
Impediments: IPR related issues and exclusionary conduct
Result: Exploitative monopolies raise costs unreasonably

Monsanto Mahyco’s exploitative behaviour results in high
cost of Bt cotton seeds

- Actions under competition rules: MRTPA
- For 2010 sowing season, states of AP, Maharashtra and
Gujarat fixed an unchanged maximum retail price for Bt
cotton packets incorporating Monsanto Bollgard (BG-I
and BG-II) technologies and farmers benefited from
lower prices
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7.
Effective Competition Rules
Impediments: Weak MRTP Act, 1969, while new
competition law still finding its feet
Result: Anticompetitive practices continue to
prevail thus sapping both consumer and business
welfare


- Weak definitions, could only order cease
and desist
- Appeals went to Supreme Court
- CA, 2002 with clearer definitions, strong
deterrent powers (fines) e.g. abuse of
dominance cases, like DLF
- Exclusive appellate body, then apex court
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8.
Regulatory arrangements
Impediments: Conflicts between CCI and sector regulators
Result: Jurisdictional gridlocks, forum shopping and turf wars

PNGRB v. CCI on aviation fuel cartel, SEBI vs. IRDA on
ULIPs, FMC v. CERC on futures trading in electricity

Bombay High Court Judgment in FMC v. CERC case:
“Futures contracts in electricity cannot be exclusively dealt with by any one of
these regulators and courts cannot be the appropriate forum to resolve such
matters”. It went on to say that such matters should not come to courts but
be resolved by the Government amicably.
Planning Commission and Committee on NCP have proposed
mandatory consultations requiring legislative action
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9.
Institutional separation between policy
making, operations and regulation
Impediments: Policy v. Operations v. Regulation
Result: Lack of competitive neutrality and costly delays

- DoT/BSNL vs. TRAI: Government’s role as licenser,
policy-maker and service provider in the telecom sector
- IGNOU Act,1985 provides for Distance Education
Council to regulate the distance education sector, which
is headed by VC of IGNOU

- CAG recommendation to make DGH independent of
Ministry of Petroleum and Natural Gas
- Arms length relationship: e.g. Railway Safety under
Ministry of Civil Aviation
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10. International Obligations
• National policy needs to be framed in a way so as to
respect international obligations, such as UN
Conventions, TRIPs, WTO etc.
• Competition provisions in RTAs or RECs
• Bilateral or regional competition agreements
• Ensures a competitive environment for trade and
investment
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Relevant lessons
Australia: Launched competition reforms in 1995; regulatory
impact analyses (RIA) showed 1,800 impediments, removed
most of them; achieved 5.5 percent growth
UK: Mandatory Impact Analysis including competition
assessment of all policies and regulations launched
Mexico and Korea: RIA models incorporated in laws through
formal provisions and amendments
India: Over 10,000 impediments may exist, therefore RIA with
competition audits should be done at Centre and every state
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Thank you for your kind attention
National Competition Policy
for assisting our economic growth
psm@cuts.org
www.cuts-international.org
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