Finance and corporate affairs minister Arun Jaitley on Friday said there was a need to ensure greater competition in the country in sectors such as public transport, railways, power distribution companies and insurance that are currently dominated by the public sector.
Delivering a lecture on 'Competition, Regulator and Growth' at an event organised by the Competition Commission of India (CCI), Jaitley, said one of the reasonable exceptions to the fundamental right to trade and occupation (in the Indian Constitution) was the entitlement given to the government to create monopolies. The rationale behind this seemed to be that private monopolies are "bad" but state-owned monopolies are "good" in public interest, he said.
However, he said, this situation led to sluggishness in the economy, restriction in consumer choice, inefficiency in markets, goods & services of poor quality, licence raj and corruption.
Citing the examples of sectors like telecom, automobiles and civil aviation, which were liberalised and thrown open to competition, he said these sectors had only grown and become more competitive post-opening up.
Jaitley said air passengers in India had grown from 1.7 crore in 2001 to 8.3 crore today, while telephone call rates had fallen from Rs 16.9 per minute in 1999 to Rs 0.5 per minute today and tele-density had risen from 0.8 per cent in 1991 to 74.1 per cent now. The number of four-wheelers had also jumped from 5.13 lakh in 2000 to 33.78 lakh at present, he pointed out.
He, however, said price-controls can be justified in a sector like pharmaceuticals where it was important to balance the need for innovation with public health considerations. "India cannot have a situation where essential and life-saving medicines are unaffordable," he said.
"Protection incentivises inefficiency"
The minister said that there were still several sectors where public sector firms were provided either a purchase preference or a price preference. He added that many believed this protection granted to state-owned firms only incentivised inefficiency.
Jaitley, however, stressed the need to ensure that liberalisation went hand in hand with efficient implementation of competition rules. Citing the example of Russia, he said though Russia undertook liberalisation, it was not pro-competition — a move that led to the creation of private monopolies, oligarchy and instances of crony capitalism. Therefore, he said, "being pro-business alone is not enough, you have to be pro-competition. Otherwise, the consequences will be dangerous."
He said, "competition creates innovation, efficiency, price competitiveness, greater choice and better quality of products and services and higher investment."
"India one of the most under-insured societies"
The minister also said India was one of the most under-insured societies in the world as the country relies mostly on state monopolies. He said due to inefficiencies and poor quality of services in the state-owned railways sector, consumers had shifted to airlines — where liberalisation and more private players resulted in greater competition, lower prices and better services.
Turning to the public transport in states, where government-owned companies enjoy a monopoly, he said the Centre wanted to free this sector up for competition and would work with the state governments on the matter.
Referring to state-government owned distribution companies, he said they were the third-largest contributor to bad loans — mostly due to the populist policies adopted by the state governments to score political brownie points. Opening up the power distribution to competition was an important reform that must be done soon, Jaitley said.
"Competition heart of a market economy"
"Competition is at the heart of a market economy. Socialism per se is anti-competitive as it promotes state-owned monopolies and restrictions. That is never in the consumer interest. It is always competition which ensures that the best product and service wins," he said.
He said in sectors where there are government-owned companies, the government had a dual role — that of the rule-maker and a player. This was why independent regulators were set up in these sectors, to ensure that the regulator maintains an arm's length distance.
Though the Centre is doing its part to ensure greater ease of doing business through faster environment clearances and Foreign Investment Promotion Board approvals, there were still several entry-level restrictions at the state-level, especially in sectors like real estate and construction, he said.
On other issues, he said e-commerce was an area that India needs to pay greater attention as its advent had become a turning point in the nature of doing business and in policy-making. He also said it was important to ensure ease of exit through a bankruptcy and insolvency law.
CCI chairman D K Sikri, who was also present, said there was a need to address the issue of the digital market not being as regulated as the traditional market. Competition Appellate Tribunal chairperson G S Singhvi added that the government needed to pay attention to the deficiencies in the competition law and remove the same expeditiously.
