September 26, 2011
New Delhi: Dr. M. Veerappa Moily, Minister for Corporate Affairs, said that the National Competition Policy will be the second big wave of reforms in Indian economic history, and something which all agree with.
The meeting which was held at FICCI, Federation House on 22nd September, was a part of a series of consultations being held in various cities to take on board the views of different stakeholders and incorporate them in the draft National Competition Policy. The earlier consultation was held at IMC, Mumbai on 12th September, where there was an unanimous support for the NCP.
The Delhi consultations were steered by many dignitaries including Dr. M.Veerappa Moily, Minister for Corporate Affairs, Mr Dhanendra Kumar, Chairman, Committee on National Competition Policy, Mr Pradeep S Mehta, Secretary General, CUTS, Mr Sidharth Birla, Chairman, FICCI Corporate Laws Committee and Ms Vijaya Sampath, Co-Chair, FICCI Corporate Laws Committee.
Dr. Moily highlighted the usefulness of the competition policy for promoting competitiveness and economic growth. He stressed that this policy will bring about a paradigm shift in the economic governance of the country and will constitute the second big bang wave of economic reforms in India after the reforms initiated in 1991.
Mr Dhanendra Kumar, made a presentation on the draft NCP. He delineated the distinction between competition policy and competition law and gave a historical overview of attempts made so far towards the evolution of a National Competition Policy. Mr. Kumar also highlighted the potential benefits of introducing the NCP and gave the example of Australia where the rate of economic growth surged by 5.5percent after putting in place of a policy framework for competition.
He threw light on the objectives of the NCP which include contribution to GDP growth, increasing efficiency in production, reducing inflation, maximising choice for consumers, checking anti-competitive practices and last but not the least removing barriers that exist in the creation of a single national market etc.
Mr Pradeep S Mehta, Secretary General, CUTS focused on the ten principles of Competition Policy along with good and bad illustrations of the implementation of those principles. He began with Competitive neutrality, the first principle of Competition policy and highlighted the impediments towards its achievement, such as inefficiency and dampening economic growth and innovation. He also presented good and bad examples of the implementation of this principle.
He then spoke about the impediments to the second principle of competition policy i.e. transparent, rule-bound, fair and non-discriminatory procedures and also highlighted the adverse effects of this impediment in the form of high transaction costs, costs to economy etc.
Mr Mehta gave the example of the Motor Vehicles Act 1988, under which the state transport authority grants permits to SRTUs only for long distance bus transport, even if private operators are equally capable. He also drew the attention of the audience to the other end of the spectrum where in a landmark judgment, Mithilesh Garg v. Union of India, Supreme Court ruled “that restricted licensing of motor vehicles led to concentration of business in few hands leading to a monopoly and hurting public interest. Thus, more operators means healthy competition and efficient transport system”.
In terms of promoting a barrier free internal market, Mr Mehta spoke about the recent recommendations made by a group of state agriculture ministers for scrapping the Agriculture Produce and Marketing Act, and providing incentives to States to reform the system. Mehta advocated for a free and fair market process and a “Free Trade Agreement with India”.
He similarly emphasized on the impediments to the remaining competition principles i.e. third party access to ‘essential facilities’, notification and public justification of deviations from competition principles, fair pricing and inclusionary behavior, effective competition rules, regulatory arrangements, institutional separation between policy making, operations and regulation, international obligations in this regard and at the same time also presented good and bad examples of the enforcement of these principles.
He concluded his presentation by drawing the audiences’ attention towards relevant lessons that can be drawn from international jurisdictions like Australia, U.K., Mexico and Korea which had adopted the competition policy before us and have gained from its adoption. He finally emphasised that in India over 10,000 impediments to competition may exist, therefore RIA (Regulatory Impact Assessment) with competition audits should be done at the Centre and in every state to facilitate competition.
Dr. Moily concluded the discussion by highlighting the importance of implementing the NCP in a time bound manner and focusing on the specific aspects of the policy’s implementation. He also allayed fears of the people about the NCPC assuming the role of a ‘super regulator’ and clarified that the purpose of the proposed body is to assist the government in competition advocacy. He also stated that the effectiveness of the NCP will also depend upon the acceptance of competition culture in the government. The minister assured the gathering that all efforts would be made to make the NCP a ‘state-of-the-art’ policy and incorporate international best practices into it.
P. S. A more detailed report of the meeting is available at:
http://www.cuts-ccier.org/pdf/Report-Consultation_Meeting_on_draft_NCP.pdf
For more information, please contact:
Navneet Sharma, +91 92127 23123, ns@circ.in
Saket Sharma, +91 90155 18114, ss@cuts.org
Pradeep S Mehta, +91 98290 13131, psm@cuts.org