Why introduce a Competition Policy, when the Act is in place, having undergone a prolonged complex gestation? What purpose can the Policy serve when the CCI is operational? A policy is usually introduced with certain objectives and goals in mind, culminating in the introduction of a law. These and other queries are being raised in the context of the Competition Policy Draft being posted on the MCA site last month.
The Constitution provides for the law to be enacted by the Parliament, but its initial preparation rests with the executive, while enforceability is part of the judicial system. In the Indian system, the kick start for any policy / law is given by the ruling party, taken up by the respective ministers, when a white paper is produced, which usually forms the basis of the law. Public and stakeholders views are often invited, considered, and a draft bill, approved by the Cabinet Committee is tabled before the Parliament. A policy unless backed by a legal framework for implementation and enforcement is ineffective, but does not necessarily become obsolete because the legal structure is in place. On the contrary, policies represent continuity and have to constantly evolve in reflecting changing trends, which include updating laws. By and large, the Government and the Legislature follow the above pattern, but there are exceptions, whether on an ad-hoc basis, or dictated by the exigencies of a given situation, but neither explains the delay or the purpose in the introduction of the Competition Policy in 2011.
Going back in time, the need for a functional Competition Policy and Law for promoting competition in domestic markets was identified and recognised in the 1980’s Industrial Policy. Pro-competition Reforms, bringing about radical changes in the existing industrial and trade regimes formed part of the various policies mooted in the 90’s reforms – notably the Industrial Policy, 1991, which virtually removed licensing requirements and capacity and expansion restrictions, in one stroke. The changes in the Trade Policy 1991 in the reduction of tariffs, quotas, adopting international controls, signing the WTO documents, and eventually removal of quantitative restrictions on imports in 2001, represented the paradigm shift in policy perspectives, as did the privatisation and disinvestment initiatives, in unshackling the insulation which State owned enterprises enjoyed in a protected and subsidised environment. There has not been much progress on this front, which is unfortunate as privatisation is one of the key instruments of reducing State control and monopoly. There is also no Consumer Policy, on the other hand there is a robust and fairly effective law. Does that imply that consumer interest does not require any separate policy? These are the issues which a Competition Policy has to address.
The Act was introduced in 2002 subjected to several delays, and operational only in 2010. There is no rationale for the delay in the introduction of Competition Policy. The Act lays down and implements the law in correcting and penalising instances of dominance and other non-competitive market practices. But for a holistic and long term vision and approach, in promoting and fostering competition, a policy is imperative, of which the law is only one element. The Competition Advocacy envisaged in Section 49 of the Act, cannot be a substitute – it’s a situation of the tail wagging the dog.
In the interregnum, sector specific policies and reforms in electricity, telecom, infrastructure, while opening up to private parties, were undertaken independent of a Competition regime and in the absence of a policy, establishing independent sectoral regulatory authorities, which have inured to the benefit of the consumer. But other sectors such as the real estate sector, is unregulated even now, while India’s Labour Policy is in a perpetual time warp.
The Approach Paper in the 11th Five Year Plan had recommended promoting competition in the agriculture sector by abolishing mandi taxes, and proposing reforms in transport and FDI. The business potential of these sectors has yet to be fully realised. The proposal on de-regulation of transport sector has only recently gained impetus. FDI policies though substantially liberalised in the last two years, still requires removal of roadblocks.
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The Act and the Policy both have their genesis in this Report, which led to the setting up of a Working Group by the Planning Commission with high profile members, and a detailed report submitted to the Government in 2007. It is not clear why this Report which is comprehensive, and inclusive, in its recognition of the need for a consumer policy in convergence with a Competition Policy and identifying instruments and procedures and the institutional separation between policy making, operations and regulation was abandoned, since at best it required updating.
The draft policy in essence does not bring anything new on board which was not covered in the 2007 Report except issues of updation and language changes and emphasis on government initiatives at all levels. The reference to promotion, encouragement and involvement of consumer movement is no different from the Working Group Report. It is indeed unfortunate that the entire exercise has to be duplicated de novo — the end result is only delay.
Kumkum Sen is a partner at Bharucha & Partners Delhi Office and can be reached at kumkum.sen@bharucha.in