National Competition Policy (Draft)

Draft National Competition Policy has been uploaded on the website of Ministry of Corporate Affairs. The policy promises several positive benefits for the country’s economy, including lowering of food prices, because all the monopolies and anti-competitive forces will have to be dismantled. Here are some important points which all of you must note:

Various Committees on NCP:

A committee was constituted by Ministry of Corporate Affairs under Chairmanship of Shri Dhanendra Kumar, Former Chairperson of Competition Commission of India for formation of National Competition Policy. This committee also took into account various reports of as early as 2007 that include the Raghavan Committee, Vinod Dhall Panel, Dr. Vijay Kelkar panel etc.

Recent Developments:

  • Since 2007, some important developments have already taken place which includes constitution of the Competition Commission of India (CCI) in 2009 and commencement of enforcement of the provisions of the Act by it.
  • The Committee has noted that the CCI is now fully operational and is undertaking enforcement of all provisions of the Act, including anti-competitive agreements, abuse of dominance, mergers and acquisitions as well as advocacy.
  • The Act, however, provides that while formulating a Competition Policy, the Government may make a reference to the Commission under section 49 (1) of the Act, for its opinion on possible effect of such policy on competition, and may thereafter take further action as it deems fit.
  • Also, the Government made a commitment before the Parliamentary Standing Committee on Finance to bring out a National Competition Policy.
  • The Committee had submitted a draft Policy to the Government. The Ministry placed the draft on its website seeking public comments, and also made a reference to the CCI.

Difference between competition law and competition policy

  • Competition Policy means government measures, policies, statutes, and regulations including a competition law, aimed at promoting competitive market structure and behaviour of entities in an economy. Competition Law is a sub-set of the Competition Policy.
  • The Raghavan Committee had observed that “Competition law must emerge out of a national competition policy, which must be evolved to serve the basic goals of economic reforms by building a competitive market economy.”

Need for a Competition Policy

  • Strong competition policy is not just a luxury to be enjoyed by rich countries, but a real necessity for those striving to create democratic market economies.
  • National Competition Policy is necessitated as an overarching Policy framework to infuse greater competition across sectors, and unleash full growth potential of the Indian economy.
  • Faced with dynamic market realities, there is a need for promoting economic democracy, the forces of competition and transparency in markets in keeping with the rapidly changing market conditions to ensure the protection of consumer interests, while at the same time protecting the rights of market players to fair competition.

Premise of Competition Policy

  • Fundamental Role →Guarantee consumer welfare by encouraging optimal allocation of resources and granting economic agents appropriate incentives to pursue productive efficiency, quality and innovation.
  • Basic Premise → To unlock full growth potential of Indian economy, tapping the opportunities arising from the demographic dividend of our country.
  • Promote good governance by transparency, accountability through competing responses and avoidance of rent seeking.

Objectives of the Policy

  • Promotion of economic democracy, achievement of highest sustainable levels of economic growth, entrepreneurship, employment, higher standards of living, and protect economic rights for just, equitable, inclusive and sustainable economic and social development, and supports good governance by restricting rent seeking practices.
  • Preserve the competition process, to protect competition, and to encourage competition in the domestic market so as to optimize efficiency and maximise consumer welfare.
  • Promote, build and sustain a strong competition culture within the country through creating awareness, imparting training and consequently capacity building of stakeholders including public officials, business, trade associations, consumers associations, civil society etc.,
  • Achieve harmonization in policies, laws and procedures of the Central Government, State Government and sub-State Authorities in so far as the competition dimensions are concerned with focus on greater reliance on well-functioning markets,
  • Strive for single national market as fragmented markets are impediments to competition
  • Ensure that consumers enjoy greater benefits in terms of wider choices and better quality of goods and services at competitive prices.

Principles of the Policy

  • Effective prevention of anticompetitive conduct’
  • Fair market process
  • Institutional separation between policy making, operations and regulation
  • ‘Competitive neutrality’, such as adoption of policies which establish a ‘level playing field’ where government businesses compete with private sector and vice versa.
  • Fair pricing and inclusionary behaviour, particularly of public utilities, which could be imbued with monopolistic characteristics and a large part of the consumers, could be excluded.

Institutional Arrangements

The Government has already set up the Competition Commission of India and the Competition Appellate Tribunal to enforce competition laws. To further infuse the principles of competition, enhance the role of competition and competitive markets in government policy making at the central and state levels and promote competition culture in the market place, the Government will establish and resource an agency, the National Competition Policy Council.

The National Competition Policy Council will do the following functions:

  • Facilitate and provide technical assistance to the in-house cells of different government departments/ministries at the Central and state governments in undertaking competition assessment of the policies, laws, regulations and practices under their purview.
  • Encourage consumer movement in implementation of the National Competition Policy by building their capacities and strengthening their resource base
  • Encourage formulation, adoption and wide dissemination of Competition Policy Principles in all ministries, departments and bodies of the central government, state, sub-state governments, business and cooperative sectors to increase representation, accountability and transparency.
  • Undertake, or get undertaken through expert agencies, sectoral studies or reviews in accordance with transparent procurement principles, and make recommendations for fostering policies and practices that increase competition in the concerned sector.
  • Undertake measures to build capacity of government departments, ministries and other stakeholders.

NCPC will work with and assist government departments and ministries in undertaking Competition Impact Assessment to see if any anti-competitive effect is exerted by a provision in the law/regulation/ and policies, enforced by them.