Seminar on National Competition Policy: Second Wave of Reforms in - PowerPoint Presentation

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

2. Outline2Tools of Effective CompetitionIs Competition Law sufficient?Present scenario in IndiaNeed for NCP for IndiaPrinciples of Competition PolicyAbsence of NCP: Competition issues in economic sectorsNCP: Work done so farIssues for discussions……

3. Tools of Effective Competition(Policy & Law)

4. Is Competition Law Sufficient?4No, 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, etcCannot facilitate ex-ante assessment of government policies to check market-distortionary elementsCompetition Policy: To address the policy-induced competition distortions

5. Present Scenario in India: Policy Vacuum5Market-oriented economic reforms undertaken to stimulate competition and efficiencyBut, government policies continue to be framed and implemented without acknowledging the market process => Achievement of policy objectives thwartedGuiding principles to formulate policies and practices in a liberalised regime - - missing => There is a lack of coherence in government policiesTherefore…policy vacuum exists

6. Need for National Competition Policy for India6Provide 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 Policy7Foster competitive neutralityPurchase preference policy favouring Central PSEsProcedural delays affecting competitiveness of public sector airlines Ensure access to essential facilitiesInterconnection in telecom – still unresolvedEnd of CONCOR monopoly – but what about access to railway tracks and engines?Free movement of goods, services, and capitalValue-Added Tax: big step towards a single market for the country as a whole

8. Principles of Competition Policy8Separate 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 competitorsProcedural formalities affecting the climate for doing businessBalance Competition and IPRsPatent (Amendment) Act: inadequate in dealing with abuse of IPRs

9. Principles of Competition Policy9Ensure transparent, predictable and participatory regulatory environmentInvolve 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 Sectors10SECTORSISSUESHealthcareRegulatory entry barriers with respect to medical education, domestic manufacture of medical devices; health insurance; and public health procurementPrescription practice of physicians in brand nameCollusive practices between physicians and path labs and between hospitals and medical goods suppliersRoad transportDiscretionary licensing Cartelisation being facilitated by truckers union around major production sites and factoriesPreferential treatment of government towards its own undertakingHigher educationMultiple regulatory system and overregulation (UGC, AICTE)Government control over private education

11. Absence of NCP: Competition issues in Economic Sectors11SECTORSISSUESElectricityMonopolistic and dysfunctional structure of state utilities which create a façade of autonomous utilities, but are largely controlled by state governmentsLegislation restricts entry and confers exclusive rights by statutorily limiting the production of coal to government companyAs 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 12th Five Year Plan Natural monopoly nature of transmission hinders private entry PharmaceuticalConsumption patterns not affected by prices; Doctors and pharmacists – decision makersCollusive behaviour of pharmaciesCentral Government making efforts to curb trade marginsRegulatory regime - hard on manufacturers but soft on doctors and pharmacists

12. Absence of NCP: Competition issues in Economic Sectors12SECTORSISSUESAgricultureDistortions in marketing of agriculture produce Procurement of agriculture commodities at MSP by government agencies with monopoly statusRestrictions on storage and movement of goods, as well as inter-state trading.Huge gap between prices consumers pay and prices farmers actually receiveIntermediaries do not always behave in a competitive manner

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

14. ISSUES FOR DISCUSSIONS14What 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. 15THANK YOULet’s look at the Woods and adopt National Competition Policy to add to our economic growth