Need for adaptive and flexible approaches to governing markets

New Delhi, India, March 21, 2013“There is a lot of confusion, when it comes to governance of markets that can lead to adequate competition and favourable outcomes in key sectors in the country”, observed Arun Maira, Member of the Planning Commission of India while speaking at the inaugural session of a National Seminar on ‘Measuring benefits of competition policy in India’ organised in New Delhi by CUTS.

He highlighted that these governance challenges emanate from intellectual challenges in approaching the subject of regulating markets, not only in the current India context but also in many other economies worldwide. Regulatory interventions in the markets have been undertaken using a couple of popular systems approaches, viz. (i) Chaotic Systems and (ii) Engineered Systems, he remarked. While the chaotic systems approach was applied mostly for pursuing the idea of free markets and trade, the engineered systems approach has been the mainstay in the arena of sciences and technology.

However, a third approach has emerged and is gradually attracting more and more attention. It is referred to as Self-adaptive Systems and proposes a broad set of certain common minimum principles, to be operationlised through context-specific rules/protocols. Such a new and more contemporary approach, Mr. Maira suggested, could help policymakers and governments find solutions to the challenges of governing markets of today. It is something that is being looked at closely. Finally, he mentioned that there is a need to look at the whole system and not only at its parts, when it comes to economic governance in India. Political factors have huge implications on economic governance in our country – and cannot be ignored. He cautioned that we often make mistakes of looking at the parts, and miss the big picture.

Speaking earlier, Pradeep S Mehta, Secretary General of CUTS gave an overview of a recent study that CUTS has undertaken to highlight issues that have implications for evolving a level-playing field in three key sectors of the economy: pharmaceuticals, electricity and agriculture product marketing. The study advocates for certain interventions that can help remove competition distortions that exist in some of these markets, thereby helping derive benefits from these markets for producers and consumers.

Mr. Mehta informed that the government has shown interest in developing a competition culture in the country, by kick-starting the development and adoption of a National Competition Policy (NCP). This current CUTS research is a sequel to a series of research studies that had been undertaken for the Ministry of Corporate Affairs (Government of India) in certain key sectors to assess policy impediments to competition in them.

In the Pharmaceutical sector, one of the key findings was that there was a need for advancing the doctrine of ‘essential facilities’. Further, one has to also be careful while advocating for price controls in this sector in order to disperse any anti-competitive outcomes. Open access remains a key challenge in the electricity market, which affects a third party to provide access to a fourth party. Further, a regular and well-thought out process of tariff review is critical in this sector. In agriculture markets, the segment of middlemen traders is extremely strong and politically safeguarded. One of the main challenges for promoting competition herein, is to find a way to deal with these traders.

Andrew Jackson representing British High Commission, New Delhi, which has supported this study indicated that their interest in this project and specifically in the competition reforms agenda stems from their interest on trade and investment issues as part of the larger economic reforms agenda. He added that UK firms are increasingly interested in India from a trade and investment perspective, and hence it was necessary for British High Commission to get a better understanding of the prevailing business environment in some of these key sectors.

TCA Anant, Chief Statistician of India spoke about the challenges of competition enforcement in sectors, where evidence/data is weak. It should be a priority for the government to gather data in these sectors to help regulatory interventions.

Pronab Sen, Country Director, IGC India-Central also participated in the meeting. There were over 80 participants in this seminar, drawn from the government, academia, regulatory agency, business and civil society. The purpose of this seminar was also to gather comments/feedback from key participants on the findings from the three sectors. These studies would be finalised over the next couple of months and would be used as evidence to undertake advocacy to disseminate the findings to the policy and practice community in these sectors both at the Central and State level during the second phase of the project.

For more information, please contact:

Udai S Mehta, +91-98292-85926,