Published: Business Line, August 11, 2006

By Pradeep S Mehta

The Government has acknowledged the recent fuel price hike to be the main reason for the spiralling prices of essential commodities. Alas, little has been done to address the root cause. For instance, taxes and levies form a chunky component of petro-product prices. So, the Government is actually fuelling inflation and stunting overall economic growth, by such imposts.

Now, the Government has realised the need to adopt a Competition Policy framework to rationalise its role vis-à-vis market forces (for a discussion on why India requires a Competition Policy, refer “How to enhance growth and competitiveness,” Business Line, April 12).

CCI advisory committee
On the Government’s advice, the Competition Commission of India (CCI) has constituted an Advisory Committee to prepare a consultation paper for a National Competition Policy. In addition, the Planning Commission recently set up a Working Group on Competition Policy.

The Working Group is required to recommend a set of comprehensive policy instruments and strategic interventions to effectively generate a culture of competition in the domestic market with all the stakeholders’ involvement. The Group would also recommend ways to enhance the role of competition in government policy making and suggest ways to harmonise relations between the competition authority and sectoral regulators.

Possible recommendations
In terms of policy instruments, the Working Group could recommend the Government to adopt a National Competition Policy statement to provide a declared intent to Government’s resolve of promoting competition in the market place. This would help introduce competition principles in government’s policies and practices (refer “Reforms need a competition policy framework,” Business Line, June 6). The Working Group could also recommend a periodic competition audit of all existing and proposed government policies and laws. This exercise would help identify policies and laws that distort the market process, and will form the basis for drawing up a reform framework.

Policy implementation
How will the policy be implemented and who will do it? Considering the CCI as the appropriate agency will not be the right approach. One, the CCI is primarily an enforcement agency and not a policy-vetting agency and this distinction should be clearly understood. Through its `competition advocacy’ function, the CCI can suggest precise measures, when a matter is referred to it, such as in the case of privatisation or concessions.

To carry out a regular ex-ante assessment of government policies and practices, this task should be performed at the highest level to ensure that the measures suggested are acceptable and binding. Accordingly, the Working Group could recommend the establishment of an apex National Competition Policy Council with the Prime Minister (or his nominee) as its chairperson, Chief Ministers or their nominees and representatives from business, consumers, media and academia so that competition issues receive highest consideration in every area of governance.

Premier policy think-tank
As the premier policy think-tank, the Planning Commission could be made the nodal agency and entrusted with the task of carrying out competition audit of policies and laws and competition assessment of markets. It should also assist the National Competition Policy Council in monitoring the implementation of competition principles across all government agencies. The proposed National Competition Policy Council can then consider the recommendations that emerge from these exercises.

The Planning Commission could consider formalising the Working Group and consult it in performing the assigned tasks. Government departments, on their part, should be asked to state competition implications of major policy submissions, which can be reviewed by the Competition Policy Council.

Enpowering State bodies
To guide the implementation of the National Competition Policy at the State-level, State governments should be empowered to establish State Competition Policy Councils with Chief Ministers as chairpersons, Chief Secretaries and business, consumer, media and academia representatives as members.

The Planning Commission could consider providing incentives to State governments in the form of competition payments linked to the extent of reforms that States take up in their policies and practices.

Clear working relationship
The Planning Commission should also deliberate on defining a clear working relationship between various agencies to ensure coherence and consistency in its functioning.

To strengthen the competition culture in the country, the Working Group could recommend the government to support public awareness and advocacy campaigns and training programmes on competition issues targeting all stakeholders. This would make the entire exercise an `inclusive’ process.

By nurturing a competitive environment, the Centre and State governments can ensure efficient spending, additional revenue generation and provide a boost to overall economic development. The road ahead is long and this requires a ‘can do’ approach, as the Prime Minister, Dr Manmohan Singh, has articulated on several occasions.

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