Greetings folks! I apologise for my absence from the blog in the past few weeks. I've been too busy juggling exams, searching for a house for the summer and resisting the temptations of the wonderful english summer!
I have only been able to have a 'quick look' at the draft National Competition Policy (NCP) which the government has announced is in the final stages of adoption (click here for the press release). So I strongly suggest that readers also have a look at the actual draft NCP which can be accessed here.
First a few of the salient features of the draft NCP:
1) Purpose :According to the foreword the NCP is aimed at "laying down an overarching policy
framework for infusing competition principles in various statutes, regulations and policies of the
Government and promoting a competitive market structure in the economy..." The NCP is meant to be an overall policy aimed at infusing 'competition culture' into state regulations.
2) Relationship with competition law: As the draft succinctly puts it competition law is a sub-set of competition policy. Thus while competition policy includes all government measures aimed at promoting competitive markets, competition law is specifically aimed at checking anticompetitive behavior of enterprises.
3) Need for competition policy: The draft goes on to identify the link between a healthy competition culture and accelerated economic development particularly because of the links between competition policy and other policies like fiscal policy, trade policy etc.
4) Premise: The draft NCP notes in particular that very often state policies and laws are themselves responsible for distorting the market. The NCP aims to correct this situation and further aims to bring about transparency and accountability in governance (perhaps a much needed thing given the recent record of the government ;) ). Interestingly the NCP stresses here that the it is not meant about to bring about complete deregulation and laissez faire markets and recognizes the need for a balance between competition and other policy considerations like prudential supervision, social service commitments etc
5) Principles: The NCP then goes on identify the main principles of the NCP the most important ones being effective enforcement of the Competition Act, institutional separation between policy making and operations, fair behavior by public utilities (including access to essential facilities), competition friendly public policies and coordination between the CCI and sectoral regulators
6) Implementation: The policy is to be implemented through the following methods
a) Defined deviation: Any deviation from the competition principles must only be to meet other desirable national objectives and must be clearly spelt out.
b) Competition Impact Assessment (CIA): Existing government policies are to be subject to review from a competition perspective and any proposed policies will have to go through a competition impact assessment. Sectoral regulation must also take into account competition principles and must be diluted as and when the sector becomes more competitive. In-house cells will be set up within ministries/departments at the Central, State and local level to conduct the CIA. The in-house cells will be assisted in this task by the National Competition Policy Council (NCPC).
c)NCPC: The NCPC will also be the main body overseeing the implementation of the NCP and will encourage adoption of the competition principles and undertake sectoral reviews and studies.
d) Coordination between CCI and sectoral regulators: This has been an issue of much controversy in the past and the NCP seeks to address it by envisaging a framework which seeks to identify and address areas of concern while ensuring that all bodies stick to their area of expertise. The exact details of the framework are still unknown. A forum for exchange of ideas between the CCI and the sectoral regulators through mutual cooperation is also proposed.
Now for my thoughts. Lets start with the positives first
1) The NCP, if implemented well has the potential to completely transform the economic regulatory regime of the country and could possibly be the most important reforms since the 1991 liberalization process. The NCP has great potential to bring in competition principles into regulation of the economy thereby bringing in transparency and accountability in governance.
2) The NCP seeks to address in a coherent way of number of competition issues that arise with respect to state authorities which many other advanced competition jurisdictions still have trouble dealing with.
That being said there are some areas of concern which may need further clarification
1) Competition Policy and Competition law: While it may be simple enough to state in theory that while competition law applies to 'enterprises' the competition policy is aimed at state measures, distinguishing in practice between the two is bound to be a daunting task. Expect cases and controversies galore on the meaning of 'enterprise' under the Act. E.g The Railways Ministry is certainly a government department but the Indian Railways has been held to be an 'enterprise' subject to competition law. Can the Indian Railways claim that a certain measure has already been subject to CIA and hence not amenable to competition law?
2)NCPC and CCI: The draft NCP seeks to establish the NCPC consisting of representatives from the CCI , Planning Commission, Finance Ministry and other ministries. A lot of the tasks assigned to the NCPC like advocacy and undertaking sectoral reviews are at present also carried out by the CCI. More clarity will be needed on the exact demarcation of tasks between these two bodies so as to avoid duplication.
3) 'Essential Facilities': The draft NCP places special emphasis on the need for dominant infrastructure owners to grant access to open up competition. It must be kept in mind that the essential facilities doctrine is highly controversial in other jurisdictions as granting such access may actually be bad for competition in the long term as it discourages other firms to invest in building new infrastructure. While it is acceptable to mandate access to facilities owned by state entities (which have traditionally held a monopoly through state protection) to open up the sector to competition caution must be adopted in applying the principle to purely private enterprises. Although most of the examples mentioned by the policy do relate to state owned infrastructure like railways, electricity etc the NCP just mentions 'dominant firms' which could include private firms as well. Another point to be noted here is that there is a growing recognition in other jurisdictions that sectoral regulators are more suited to the task of mandating access to essential facilities than competition authorities because of the difficulties of monitoring and setting access prices. The draft NCP certainly seems to imply that it is the regulators who will take care of such access but a clarification would be desirable.
Phew that was a long post! Hope you guys find it useful though!
No comments:
Post a Comment