3rd BRICS International Competition Conference November 20-22, 2013, New Delhi

Abstract

Dhanendra Kumar Principal Adviser, Indian Institute of Corporate Affairs (IICA) and Chief Mentor, School of Competition Law, IICA

Session III: Competition Enforcement and State Owned Enterprises: Creating

Level Playing field

Competition Enforcement and State Owned Enterprises: Creating Level Playing Field In 1954, while inaugurating the Bhakra Nangal dam, the then Prime Minister

Jawahar Lal Nehru christened the same as the ‘temple of modern India’, and so

were born the India’s modern temples – the State Owned Enterprises (SOEs) that

were expected to reach commanding heights, build the badly needed vast

infrastructure after independence and make India economically self-reliant.

It was the Industrial Policy Resolutions and the Five Year Plans that embarked the

journey of SOEs in India. A large number of SOEs were set up across various

sectors and they played a significant role in the overall growth and development of

the nation. They transformed the economy from agro-based to industry led and

contributed heavily to various capital intensive and core sectors of the economy such

as oil and gas, defence, steel, mining, telecommunications etc. Moreover, their

contribution in rural and far-flung areas which were then considered risky and

unviable by many cannot be overemphasized.

The 1991 reforms led to the creation of newer markets and enhanced participation of

the private players. It was widely perceived that the mere existence of liberal trade

and investment policies, unless complemented with strong regulatory and

competition policy regime, may not be able to create conducive business

environment.

The adoption of new competition law regime in India through the enforcement of

Competition Act, 2002 (as amended in 2007) in May 2009 has witnessed multiple

cases involving SOEs- both in the capacity of an informant as well as the opposite

party before the CCI. The Act covers within its ambit both the private enterprise and

the government departments (excluding atomic energy, currency, defence and

space), in their economic/commercial activities (as distinct from Government’s

sovereign obligations, subsequently clarified in a High Court judgement as primary,

inalienable and non-delegable), and SOEs. The CCI had found prima facie ground to

initiate an inquiry in many of the complaints received against the state departments

and SOEs in varied sectors including the railways, coal, oil companies, mining

companies, metro rail corporations, Steel companies etc. The Act and subsequent

jurisprudence has laid ground for competitive neutrality in this regard. However, at

times there are also some grievances of SOEs of reverse discrimination when they

have to fulfil certain government directives and social obligations and others not.

The challenges posed with the enforcement of the Act in the functioning of SOEs are

numerous, which include wide interpretation of the term ‘enterprise’, scrutinizing

anticompetitive conduct, establishing dominance and its abuse, and regulating

combinations.

The High Court of Delhi, in Union of India v CCI, recognized ‘Railway’ as an

enterprise covered within the ambit of Competition Act, 2002 and also highlighted the

clear distinction between sovereign and non-sovereign functions of the government

for the purpose of application of the Act, as elucidated above. In Royal Energy Ltd

vs. M/s Indian Oil Corporation Ltd & Ors, it was observed, even if anticompetitive

conduct flows from any policy of the government, the Commission will still have

jurisdiction to examine the impugned act. However, these are areas on which the

proposed National Competition Policy, still under the consideration of the

Government, has also addressed

In my address I shall briefly deliberate upon the prevailing scenario in this regard,

and the specific challenges which are confronted by the SOEs with the enforcement

of new competition law regime in India. I shall also reflect upon the areas/sectors

where both private and public sector enterprises can play a significant

complementary role yet having a healthy competition in the best interests of

economy.