1. Seminar on National Competition Policy: Second Wave of Reforms in India “Need and Importance of National Competition Policy for India” Pradeep S Mehta, CUTS International

2. Outline 2  Tools of Effective Competition  Is Competition Law sufficient?  Present scenario in India  Need for NCP for India  Principles of Competition Policy  Absence of NCP: Competition issues in economic sectors  NCP: Work done so far  Issues for discussions……

3. Tools of Effective Competition (Policy & Law) FDI PolicyTrade PolicyIndustrial PolicyDisinvestment PolicyFiscal PolicyIPR PolicyLabour PolicyProcurement Policy… others …

4. Is Competition Law Sufficient? 4  No, because…  Cannot curb market distortions emanating from policies and practices of government (central as well as states) Examples: government procurement policy and rules, anti-dumping measures, public sector policy, etc  Cannot facilitate ex-ante assessment of government policies to check market-distortionary elements  Competition Policy: To address the policy-induced competition distortions

5. Present Scenario in India: Policy Vacuum 5  Market-oriented economic reforms undertaken to stimulate competition and efficiency  But, government policies continue to be framed and implemented without acknowledging the market process => Achievement of policy objectives thwarted  Guiding principles to formulate policies and practices in a liberalised regime - - missing => There is a lack of coherence in government policies  Therefore…policy vacuum exists

6. Need for National Competition Policy for India 6  Provide a declared intent to the government’s resolve of promoting competition in the market;  Rationalise the role of the government, so that it’s intervention facilitates functioning of markets;  Provide guiding principles to different branches of the Government for an effective competition assessment of policies and practices.

7. Principles of Competition Policy 7 Foster competitive neutrality Purchase preference policy favouring Central PSEs Procedural delays affecting competitiveness of public sector airlines Ensure access to essential facilities Interconnection in telecom – still unresolved End of CONCOR monopoly – but what about access to railway tracks and engines? Free movement of goods, services, and capital Value-Added Tax: big step towards a single market for the country as a whole

8. Principles of Competition Policy 8 Separate policy-making, regulation and operation functions (to avoid conflict of interests) Intervention in regulatory functioning (telecom, power) 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 Balance Competition and IPRs Patent (Amendment) Act: inadequate in dealing with abuse of IPRs

9. Principles of Competition Policy 9 Ensure transparent, predictable and participatory regulatory environment Involve stakeholders, make decisions public, etc. Practice followed by TRAI (open house discussions, consultation papers, all decisions made public) Respect for international obligations

10. Absence of NCP: Competition issues in Economic Sectors 10 SECTORSISSUES Healthcare o Regulatory entry barriers with respect to medical education, domestic manufacture of medical devices; health insurance; and public health procurement o Prescription practice of physicians in brand name o Collusive practices between physicians and path labs and between hospitals and medical goods suppliers Road transport o Discretionary licensing o Cartelisation being facilitated by truckers union around major production sites and factories o Preferential treatment of government towards its own undertaking Higher education o Multiple regulatory system and overregulation (UGC, AICTE) o Government control over private education

11. Absence of NCP: Competition issues in Economic Sectors 11 SECTORSISSUES Electricity  Monopolistic and dysfunctional structure of state utilities which create a façade of autonomous utilities, but are largely controlled by state governments  Legislation restricts entry and confers exclusive rights by statutorily limiting the production of coal to government company  As per private players, the Ultra Mega Power Projects (UMPP) are not being truly successful as bids are made based on the domestic price of coal. CIL has fulfilled only 50% of its obligation as mentioned in the 12 th Five Year Plan  Natural monopoly nature of transmission hinders private entry Pharmaceuti cal Consumption patterns not affected by prices; Doctors and pharmacists – decision makers Collusive behaviour of pharmacies Central Government making efforts to curb trade margins Regulatory regime - hard on manufacturers but soft on doctors and pharmacists

12. Absence of NCP: Competition issues in Economic Sectors 12 SECTORSISSUES Agriculture  Distortions in marketing of agriculture produce  Procurement of agriculture commodities at MSP by government agencies with monopoly status  Restrictions on storage and movement of goods, as well as inter-state trading.  Huge gap between prices consumers pay and prices farmers actually receive  Intermediaries do not always behave in a competitive manner

13. NCP: Work done so far!!! 13  C-NCP under MoCA  Draft NCP 2011 http://www.mca.gov.in/Ministry/pdf/Draft_National_Competiti on_Policy.pdf  Competition impact assessment studies for 13 sectors commissioned by IICA and CIRC http://www.iica.in/SectorStudies.aspx  Evidence of distortions in rules, regulations and policies revealed. Also documented in Quarterly CUTS Distortions Dossiers http://www.cuts-ccier.org/Competition_Distortions_India.htm http://www.cuts-ccier.org/Competition_Distortions_India.htm

14. ISSUES FOR DISCUSSIONS 14  What steps are required to ensure effective adoption of NCP in India?  What are the ways one can involve State level actors in the whole debate, so as to increase awareness on the need for NCP?  What role can be played by the industry players, policymakers, media, etc to ensure adoption of NCP?

15. 15 THANK YOU Let’s look at the Woods and adopt National Competition Policy to add to our economic growth