Facilitating Efficient Agricultural Markets in India An Assessment of Competition and Regulatory Reform Requirements Funded by the Australian Centre for International Agricultural Research (ACIAR) Scott Davenport CUTS International Workshop Presentation CREW Project, March 2013, Jaipur

Aim, Motivations & Principles Aim To ensure that the gains from international and domestic market reforms translate into real income gains to Indian farmers by facilitating the development of pro-competition policies. Premise India’s trade policy needs to be complemented by ‘behind-the-border’ domestic reforms if government policy objectives of improved productivity, higher rural employment and incomes and enhanced food security are to be met. A Fundamental Principle Within supply chains, regulatory reform enables farm level price signals to be more directly linked to market demand - this drives productivity, growth and employment. The Contemporary Public Policy Approach (i) Policy objectives clearly linked to accepted forms of market failure. (ii) Regulation to address the objective should be that which least restricts competition.

Project Components The BRICs Report R. Chadha & S. Davenport The Food Corporation of India S. McCorriston & D. MacLaren Food Supply Chain Case Studies R. Chadha & A. Tandon S. Jayasuriya & S. Davenport Negotiable Warehouse Receipts J. Gujral The Application of Competition Law to Agriculture J. Gujral & P. Joshi & Anuradha R.V. Price and Competition Issues in the Indian Onion Market S. Jayasuriya R. Chadha, J. Gujral, S. McCorriston, D. MacLaren, S. Davenport Competition and Commodity Price Volatility OECD Global Competition Forum S. Davenport Is There a Role for Carbon Offsets in Indian Agriculture? New ACIAR Project Original Project Elements Additional Project Elements New Projects

A Strategic Approach to Competition Policy Reviews of Regulation Step 1 - Assess whether the stated objectives of regulation align with accepted forms of market failure - i.e. public goods, externalities, information asymmetry, anti-competitive behaviour. Step 2 – Assess whether the current regulatory approach is the most efficient means of achieving the objective. Step 3 – Assess on prima facie grounds whether the regulatory restriction on competition is likely to be a source of significant resource - use distortion i.e.: – are there significant concerns at Steps1 and 2?; - is the competition restriction likely to have a significant sectoral effect? Step 4 - If “yes” to Step 3, undertake quantitative social BCA. If “no” to Step 3, undertake qualitative social BCA.

Price and Competition Issues in the Indian Onion Market  NCAER & IDFC Supply Chain Participant Surveys Identification of impediments to supply chain competition & efficiency.  EXETER & MONASH UNIVERSITY Onion Market Model to assess the effects of the export ban on the level and variability of consumer and farm gate prices.

Price and Competition Issues in the Indian Onion Market Reform of supply chain regulation which enables certain intermediaries to earn above normal margins would not only have lowered consumer prices and negated the need for the export ban, but would have done so in a manner that avoided lower prices being imposed on the farm sector with consequent impacts on the sectors long term international competitive advantage. A more competitive onion supply chain with more participants would reduce consumer prices by percent and increase the farm gate price by percent.

What are the key ‘methodology’ lessons relevant to the CREW Project? Define ‘methodology’ broadly in the first instance.

 1. Case study ‘balance’ - look at both regulatory reform & competition law issues.  2. Frame the problem in a market failure public policy context - we are not promoting just another form of regulation, but a different approach to the overall regulatory framework.  3. Strategically pick case studies relevant to government - pre-empt and target current and prospective problems confronting government.

 4. What benefits do we measure? Promote consistent understanding of key concepts -societal welfare -consumer surplus benefits -producer surplus benefits These are what need to be measured.

Price 0 D S2 Q2 Quantity P2 The Benefits From Addressing Anti-Competitive Market Behaviour or Reforming Regulation S1 P1 Q1 A B C D E F Consumer surplus (benefits) increase from ADP1 to ABP2 Societal welfare benefits increase from ADE to ABC Efficiency benefits = DBF Producer surplus (benefits) increase from P1DE to P2BC

 5. Lift the ‘conversation’ about benefits above vested interests - reform is sensitive - it involves rent redistribution. At the same time as you are focussing on a specific reform issue or case study, promote a complimentary broader public conversation about sectoral productivity, growth and innovation (or lack thereof)?

 The BRICS Report :  The FCI:  APMC Markets: Regulation.doc  Warehouse Receipts:  Onions:  OECD Global Forum: Competition and Commodity Price Volatility uage=En