New Delhi (India), October 20, 2014
“Identifying beneficiaries and quantifying welfare gain or losses (through evidence) from pro/anti-competitive policies forms a crucial component of advocacy for effective national competition reforms” remarked Rijit Sengupta, Director, CUTS at a third meeting of national stakeholders organised under the CREW Project in Delhi on 20th October, 14.
He explained further that to diagnose implication of such policies (and practice), it is important to link them with market impacts and then assess influence on producers and/or end consumers. The said approach has been used under the CREW project to identify key issues in the wheat market in two states in India (Bihar and Rajasthan) and for bus transport in two others (Gujarat and Madhya Pradesh). The objective of the said meeting was to share the research findings highlighting the evidence of the link between pro/anti-competitive policies and impact on beneficiaries under the CREW project, and obtain suggestions from the NRG members for designing the advocacy strategy.
In the wheat sector, Dripto Mukhopadhyay, Indicus Analytics highlighted how pro-competitive reforms in the seed sector in Bihar has helped in improving access to good quality seeds for small and medium famers in the state. He also highlighted some of the contrasting features in implementation of the Agriculture Produce Marketing Committee (APMC) Act in Rajasthan as compared to Bihar – and its implications on farmers. It was evident from the analysis whatever little benefits were being accrued from the APMC was mainly being enjoyed by the medium/large farmers. He added that the good intentions of the Primary Agriculture Society (PACS) in Bihar, were being reduced due to institutional weaknesses and political interference. This has been recognised by the state government of Bihar and an institutional review of the PACS is being considered. PACS have an in-built pro-competitive element as they are equally accessible (given their strong, decentralised network) by all producers within a certain geographical boundary (panchayat or the village council). The CREW project considers reforming the PACS institutional setting as an important advocacy message for the project in Bihar.
With the introduction of the Agriculture Roadmap in 2006 in Bihar, emphasis was brought towards self-sufficiency in seed production and providing an enabling environment for increased private participation. Consequently, the seed production increased by seven folds from 2005-6 to 2009-10. While the number of private players increased from one to over ten in this period. Furthermore, 9 out of 10 respondent farmers reported they had witnessed an increase in access; while 7 out of 10 mentioned affordability of good quality seeds had improved since the launch of the roadmap. The story made a strong case to assess the positive impact of a pro-competitive reform. However, it was admitted that quantification of the benefits would require a more pointed survey in a few micro-locations (villages/districts) in Bihar – something that would be considered going forward in the next phase of the project.
Similarly, in the markets in Rajasthan (under amended APMC) and the markets in Bihar (abolishment of the APMC) were analysed to evaluate the subsequent impact on the farmers. It was found that mere withdrawal of the government would not prima facie attract private investment. There is a need for innovative programmes by the state government to facilitate private participation in the APMC regime.
In the bus sector, the key issues were presented by Abhijit Sarkar, Indicus Analytics. The issues enlisted were the impact of GSRTC monopoly in ‘stage carriage in the state of Gujarat; implications of AMTS’ monopoly in Ahmedabad city (capital of Gujarat state) and abolishment of MPSRTC in the state of Madhya Pradesh.
As the GSRTC has been unable to meet the market demand, private players have illegally entered the inter-city market in Gujarat. The 1994 policy of granting legal monopoly to GSRTC in this market, seem to have promoted considerable market malpractice and acted as an entry barriers for small private operators. This calls for a review of the 1994 decision, which has also been acknowledged by the state government of Gujarat. Large players dominate the market as they are able to extract the additional ‘rent’ from their customers.
Similarly, AMTS monopoly in Ahmedabad limits private entry as parallel operator, thus limiting competition. Additionally, this has led to burgeoning losses and faltering performance by the operator. Maintenance of monopoly seem to have cost the state dearly. Further, commuters have been left with no choice in terms of services.
The abolition of MPSRTC (Madhya Pradesh State Road Transport Corporation) led to an open entry of private players with freedom to choose the type of permit, route and schedule under weak regulatory supervision. The market now is fragmented with only private players operating in it. Passengers interviewed during the survey did indicate that there has been some improvements in the services over time, without any significant increase in fare. Experts agreed that such gains by consumers can be further improved, if a well-structured regulatory framework is put in place. Weak regulatory oversight can pose challenges such as operators not following the schedule, fare, etc. Transport expert Prof S Sriraman and veteran motor association President Chittaranjan Dass were of the opinion that the research findings provide a sound foundation for initiating the advocacy activities in the states. CUTS shared that they have also received assurance from the state governments in Gujarat and Madhya Pradesh for considering the findings in discussions related to reforming the transport sector. Suggestions for state level public transport regulatory framework have also been welcome in both the states.
Finally, Sarkar stressed on the importance of promoting competition in public procurement for obtaining transportation services by the state government/agencies. CUTS intends to start engaging with state governments to develop strategies for promoting competition in PPP schemes in transportation services.
Both Dass and Prof Sriraman also encouraged CUTS to review the Road Transport & Safety Bill, 2014 and provide comments based on the research findings. This Bill is likely to be introduced in the winter session of the parliament (starting Nov 24, 2014).
On the basis of the comments received from the NRG members, CUTS would develop its advocacy strategy for each of the two sectors (wheat and bus transport) and start engaging strategically with relevant stakeholders in the states.