Expediting National Competition Policy

Written by Pradeep S Mehta | Updated: Jan 27 2014, 10:11am hrs
Investment and competition are the two sides of a coin. The government is promoting investment seriously and is also addressing bottlenecks through the Cabinet Committee on Investment and a Project Monitoring Group. Many of the investment bottlenecks are due to entry barriers and thus promoting competition reforms can enable investment flows and immersion better and easier. Fortunately, the government is also considering competition reforms seriously and to oversee it by establishing a Cabinet Committee on Competition to be headed by the Prime Minister.

PM Manmohan Singh, speaking at the 3rd BRICS Competition Conference at New Delhi on November 21 last year, said: Growth, development and poverty reduction are the most important challenges that our governments have to face. To meet these challenges, governments look for a sound architecture of policy in which beneficial effects of markets can be maximised by action to prevent market failure. The development of a sound Competition Policy is an essential element of such an architecture.

The PM went on to say that state-owned or public sector enterprises (PSEs) are another challenge, because they have been sheltered from competition. Several possible distortions can arise because of the advantages some PSEs have due to their government ownership. Competitive neutrality requires that the government does not use its legislative and fiscal powers to give undue advantage to its own business over the private sector.

Alas, the huge bailout to Air India is an example of how the government engages in doublespeak. Not only that, but all travels on government account have to be done only on Air India, otherwise one has to wait for settlement of the travel bills for long if one has travelled at a lower cost by a private airline. I am a victim of that, as some of my travel claims, from Jaipur to Delhi or elsewhere, on work with the ministry of road transport & highways, have been pending for over two years. Not only that, a set of babus in the civil aviation ministry process applications from other government offices to give special leave for clearing the bills and the requesting government offices waste resources in making such applications and they, including my assistant, waste their time and money in following up for approvals and payment.

I wonder what the finance ministry is doing to cut down all this unnecessary expense, knowing that the approval will always be given. Paradoxically, whenever I have travelled for finance ministrys meetings, they do not bother whether I flew by Air India or a private airline, and settled the bills across the table.

In order to address both the issues of competitive neutrality and unnecessary red tape, the ministry of corporate affairs has drafted a National Competition Policy (NCP), which, after a gap of some time, is now gaining traction. The Planning Commission has been advocating a competition policy since the 9th Five Year Plan was adopted in 1998. No wonder, India has slipped from 131 to 134 in 2013 ranking of the Ease of Doing Business and we continue to talk gibberish about economic growth, policy paralysis and what not.

The good news is that the young and dynamic corporate affairs minister, Sachin Pilot, has not given up hope. On the annual day function of the Competition Commission of India last year May 20, he called upon the government to adopt the NCP. At the BRICS event on November 19, close on the heels of the PM, he spoke about the same again: The government of India has also been pursuing the idea of an NCP in order to promote economic democracy, entrepreneurship, employment, higher standards of living and an all-round development of the economy, benefiting both consumers and businesses. The Competition Policy focuses on ensuring competitive neutrality, cooperation in competition advocacy and enforcement as well as establishing a complementary relationship between the Competition Commission of India (CCI) and other sector regulators. The NCP also proposes a competition assessment of all the government laws, policies and regulations. This is expected to instil a competition culture in all sectors.

The issue about resolving complementary relations between sector regulators and CCI is another important dimension of the Competition Policy and related laws. Let me give you an example of the same. In January 2011, Reliance brought forward a complaint against the PSU oil companies for cartelisation in the aviation fuel sector before the CCI. The Delhi High Court injuncted the proceedings at CCI stating that oil sector issues have to be taken up before the Petroleum & Natural Gas Regulatory Board, which is empowered to promote competition in the sector. In another similar case of oil PSUs cartelising in fuel retail, the same High Court once again stayed the proceedings on exactly the same ground, without even a detailed speaking order. Both these stays are temporary and yet to be resolved finally. What the High Court could not appreciate is that the PNGRB Act requires the board to promote competition, as the whole economic governance system should do, but it does not empower them to check anticompetitive practices. Only the CCI is empowered to check anticompetitive practices in Indian economy.

The problem has been addressed by a proposed amendment in the Competition Act, 2002, asking for mandatory consultations between the CCI and all sector regulators. Such a provision will enable smoother resolution of overlap conflicts and avoid forum shopping. The Bill is pending before Parliament.

Addressing red tape is another major measure in the NCP. The finance ministry, among others such as the Planning Commission, is seriously engaged in making it easier to do business in India, which is affecting growth adversely. In expressing the mind of the finance ministry, on November 18, Arvind Mayaram, secretary, Economic Affairs, while addressing the opening session of the CUTS-CIRC 3rd Biennial Conference on Competition Challenges for the Developing Countries, said: We are looking at several non-legislative measures such as National Competition Policy to bring in the second wave of economic reforms in the country.

Indeed, adoptionand implementationof the NCP can bring in a second wave of economic reforms in the country, and fortunately this matter enjoys a national consensus. So whichever government comes in after the summer, the growth process will take a leap through better competition in the economy.

The author is secretary general of CUTS International.

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