FM warns CCI against creating hurdles in way of growth

Last Updated: Tue, May 21, 2013 09:49 hrs

Finance Minister P Chidambaram has cautioned the Competition Commission of India (CCI) against becoming another bureaucracy to pull down economic growth.

"Competition regulation must not become another bureaucracy, stifling growth," Chidambaram said while delivering an inaugural speech in the annual day function of CCI here last night.

He said the CCI must continue to be a lean organisation, picking the issues it can weigh on carefully, and making a difference when it does.

Its rulings must be transparent and afford clarity rather than obscurity.

"And it should avoid the perils of overreach as well as regulatory capture. The Competition Commission will play an important part in defining the role of the government as a regulator of competition and as a participant in the competitive process. Increasingly, the government's role as regulator will, and should, become more important than its role as a competitor. The Competition Commission will be a part of this transformation," he said.

Chidambaram also added a caveat that sometimes choice can be improved in more subtle ways than regulation.

"Competition is about improving choice. And sometimes choice can be improved in more subtle ways than regulation," he said.

He cited an example of direct benefit transfers to buttress his point of view. DBT, he said will allow the poor much more choice on who they get their benefits from -- the bank or the post office. "And if it is a bank, which bank and from which banking correspondent. That will truly empower the poor and force providers to compete for their custom. I cannot think of a bigger blow for competition, choice, and empowerment," he said.

An important role of the Competition Commission in the years to come will be to guide us on how the interaction between the Government and public sector firms should play out to create the most competitive environment that we can, he added.

Chidambaram also posed queries before the audience in the new era of competition policy. "Are there ways to push the envelope on efficiency without compromising equity? Should the few remaining public sector monopolies be broken up into competing public sector entities? How do we create a role for the private sector in areas that are still perceived to be natural monopolies and hence reserved for the public sector? And what about public sector entities that cannot compete, and have been kept alive through regular contributions from the exchequer? Are such regular infusions distorting the competitive arena?"

At a time when the government's minimum support price policy for agricultural produce often draws flak, the finance minister said an often neglected area of competition policy is public procurement.

"In the case of agriculture the minimum support price (MSP) and open-ended procurement have served our farmers well. But can we procure in a better way?" he asked.

Currently, as a result of how the MSP and procurement policy are set, the government is the largest and in many ways the only bulk buyer of cereals, Chidambaram said.

"But, in the process, it is crowding out private sector procurement.The discovery of market prices for cereals is affected by government policy. What role should competition policy play in bringing private players into procurement and in improving the benefits to both the farmer and the consumer? The role of competition policy in improving procurement is a question we need to debate," he said.

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