 "Constraints on commercial function should be removed: Ashok Chawla")
The Competition Commission of India last week came out with a landmark judgment, penalising for the first time a government company. Jyoti Mukul spoke to Ashok Chawla, CCI chairman, on why the constraints on commercial functioning of government companies should be removed. Edited excerpts:
Do you think competition law can be evenly applied to government companies when they do not operate in the same paradigm as private companies?
Law is unambiguous in that it covers all enterprises-private or public. It is ownership neutral. The entity has to be performing commercial function. That is the crucial test. If it is an entity like Coal India Ltd (CIL), it is at par with any other company. Same is the case with oil marketing companies.
The CIL matter arose out of a number of petitions made by the user power companies who alleged abuse of dominance in the terms of contract.
Is it fair to apply the same yardstick to CIL when it was in the first place reluctant to sign the fuel supply agreements?
They were government mediated contracts. That's something the enterprise has to resolve with other government agencies. If some leeway is given for decision-making that goes on behind the enterprise, then operation of a commercial enterprise will never change and it will not act according to the established principles of competition in a marketplace. But it will be the enterprise that will end up paying a fine for a situation that has arisen out of historical economic decisions.In competition law, there is no economic offence arising out of dominance. It arises from the abuse of dominance. If CIL continues dominance, yet its commercial relationships and agreements are structured in a balanced and reasonable way, there will be no abuse of dominance. We are not interfering with the public policy paradigm which is substantially the domain of the government.
There is also an ongoing case on e-auction. Wouldn't the application of competition law prevent the company from doing the only way it can do business outside the framework of notified price as a commercial entity?
We have no issue with e-auction as an instrument. The point being made is the way e-auction is structured. There are some uncompetitive factors built in by the CIL. The investigation is still underway.
Do you think the exemption available under section 54 of the Act can be made applicable to CIL and oil marketing companies?
The government has the legislative mandate to do that but it would, according to us, be retrograded. If the law is used liberally, specifically for government entities, a whole lot of public enterprises would be outside the ambit of the law and it would apply squarely to private companies. It is not the spirit of economic architecture post-1991.
We appreciate that many government enterprises have constraints on their commercial function but the whole objective of the Competition Law and principles of competition is that those constraints be done away by the government itself as rapidly as possible. There should be a new kind of architecture, which allows a large number of enterprises to come in areas which were national monopolies and whittle down the possibility of abuse of dominance by those companies who are operating in the space of monopoly.
Do you think competition law can be evenly applied to government companies when they do not operate in the same paradigm as private companies?
Law is unambiguous in that it covers all enterprises-private or public. It is ownership neutral. The entity has to be performing commercial function. That is the crucial test. If it is an entity like Coal India Ltd (CIL), it is at par with any other company. Same is the case with oil marketing companies.
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There could be certain areas, which are specifically kept outside the company where decision making is not with the PSU. For instance, in diesel or kerosene prices, it is the Union government which decides, but there are many areas where commercial decision making is with the enterprise concerned so they are subject to the provisions of the Competition Act.
The CIL matter arose out of a number of petitions made by the user power companies who alleged abuse of dominance in the terms of contract.
Is it fair to apply the same yardstick to CIL when it was in the first place reluctant to sign the fuel supply agreements?
They were government mediated contracts. That's something the enterprise has to resolve with other government agencies. If some leeway is given for decision-making that goes on behind the enterprise, then operation of a commercial enterprise will never change and it will not act according to the established principles of competition in a marketplace. But it will be the enterprise that will end up paying a fine for a situation that has arisen out of historical economic decisions.In competition law, there is no economic offence arising out of dominance. It arises from the abuse of dominance. If CIL continues dominance, yet its commercial relationships and agreements are structured in a balanced and reasonable way, there will be no abuse of dominance. We are not interfering with the public policy paradigm which is substantially the domain of the government.
There is also an ongoing case on e-auction. Wouldn't the application of competition law prevent the company from doing the only way it can do business outside the framework of notified price as a commercial entity?
We have no issue with e-auction as an instrument. The point being made is the way e-auction is structured. There are some uncompetitive factors built in by the CIL. The investigation is still underway.
Do you think the exemption available under section 54 of the Act can be made applicable to CIL and oil marketing companies?
The government has the legislative mandate to do that but it would, according to us, be retrograded. If the law is used liberally, specifically for government entities, a whole lot of public enterprises would be outside the ambit of the law and it would apply squarely to private companies. It is not the spirit of economic architecture post-1991.
We appreciate that many government enterprises have constraints on their commercial function but the whole objective of the Competition Law and principles of competition is that those constraints be done away by the government itself as rapidly as possible. There should be a new kind of architecture, which allows a large number of enterprises to come in areas which were national monopolies and whittle down the possibility of abuse of dominance by those companies who are operating in the space of monopoly.