1. Competition Policy Issues at Sub- National Level: Local Problems Need Local Solutions Pradeep S. Mehta CUTS International

2. Introduction State Government policies/practices that lead to anti-competitive outcomes Regulatory failures at local level Competition abuses at consumer level

3. Government Procurement Policy: Preference (price / purchase) given to local units Policy may be desirable in the context of, the overall development policy of the state BUT Undue protection breeds cartelisation (barbed wire association in Rajasthan) Incapacity of state government, results in anti- competitive outcomes (millers’ cartel in Orissa) State Government Policies

4. Bid Rigging in Construction/Works: During the last 5 years, all state governments have spent approx US$300bn on civil works Works awarded through competitive bidding BUT Contracts awarded in bigger packages; limiting competition Contractors collude to form a pool (flyover scam in Chennai; concrete sleepers in Railways) State Government Policies

5. State Excise Policy for Liquor: Various systems adopted for distribution and marketing of liquor (auction or licensing) Policy largely revenue oriented States where liquor groups are auctioned, results in monopolies (liquor mafia) Bids are suppressed and state revenues decline (Rajasthan) State Government Policies

6. Truck Operations: Truck operators at district level or around major production centres form a cartel Trucks that come in with goods are not allowed to carry freight from the production centre Political patronage or official backing (Angul Truck Owners’ Association, Orissa) Death knell for the business in the area (marble business in Makrana, Rajasthan) Regulatory Failure at Local Level

7. Competition Abuses at Consumer-level School Education:  Tied sales in books, uniform, and stationery Health Services:  Nexus between doctors, pharma companies, chemists, as well as diagnostic clinics Cable TV:  Monopoly at consumers’ end  Subscribers do not have choice in selection of channels and face frequent hike in tariffs

8. Competition Abuses at Consumer-level Service sectors e.g. barber shops, pan-biri shops etc. form unions and dictate selling prices No performance standards Catelisation among auto/taxi operators

9. Basic Problem Lack of Political will Non-compliance costs lower than compliance costs Lack of awareness about the impact of various government policies/regulatory failure Need to grease the pocket of enforcement agencies at local level

10. Good Practices e-Procurement, to check bid rigging Lucky draw system, to counter liquor mafia Involvement of local administration, to tackle truck operators’ cartel

11. Recommendations Establish State-level Competition and Regulatory Agencies Use local administration for better enforcement of regulatory practices Create awareness among all stakeholders, including state government officials Strengthen the capacity of consumer organisations Systemic Competition audit of all government policies

12. Recommendations State authorities to frame guidelines on selling of books, stationery, uniform by schools Establish a credible regulatory framework for diagnostic laboratories Carry out in-depth studies on other anti- competitive practices, and expand on the study of education, health, and cable TV sector.