Trade policy review report by the secretariat

  Competition policy and price controls

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3.3.2  Competition policy and price controls  Competition policy

              1. The Competition Commission of India (CCI), established under the CCI Act 2002, is responsible for preventing practices having an adverse effect on competition, promoting and sustaining competition in markets, protecting the interests of consumers and ensuring freedom of trade carried out by other participants in the markets in India.139 It has powers of inquiry and enforcement, and may impose penalties for non-compliance with its procedures. The CCI may also take remedial actions to deal with anti-competitive agreements and abuse of dominant position, and impose penalties of up to 10% of the average turnover of an enterprise for the three preceding financial years. In the case of a cartel, the CCI may impose on each member a penalty of up to three times the profit or up to 10% of turnover, whichever is higher, for each year of the continuation of the agreement. After the inquiry, the CCI may issue a cease-and-desist order directing a delinquent enterprise to discontinue and not to re-enter into an anti-competitive agreement or abuse its dominant position. The CCI may self-initiate investigations. The CCI provides ex ante merger consultation free of charge. The CCI also has a role in competition advocacy; the authorities consider it necessity to develop "competition culture" in the economy, and enhance competition compliance by stakeholders. The CCI has organized various workshops, conferences, seminars, used electronic media and undertaken studies in pursuance of the advocacy mandate. The orders, directions or decisions made by the CCI may be appealed before the Competition Appellate Tribunal (CAT). The authorities state that the CCI is an independent body; it has full functional autonomy as a competition regulator in India, furnishes its annual report which provides a full account of its activities to the Government, and is subsequently placed before the Parliament. The chairperson and members are appointed by the Government from a panel of names recommended by a selection committee headed by the Chief Justice of India or his/her nominee. The appointments are subject to their satisfying the qualifications and experience requirements stipulated in the Competition Act 2002.

              2. Legislation dealing with competition issues in India includes the Competition Act 2002, the Competition (Amendment) Act 2007, the Competition (Amendment) Act 2009, and various regulations issued by the CCI.140 Sector-specific regulations exist in many sectors, such as capital markets, insurance, telecommunications, electricity, petroleum and natural gas, and civil aviation. The Competition Act does not distinguish between private and government enterprises except for limited exemptions relating to sovereign functions of government (including activity relating to energy, currency, defence and space). The Competition Act stipulates mandatory prior approval of combinations above the notified thresholds.141 The CCI must decide within 210 days to finalize and notify the decision on a combination filing. In this context, the CCI has a self-imposed limit to clear cases within 180 days on best-endeavour basis. As per provisions in "Combinations Regulations", the authorities consider that most filings are likely to be approved within 30 days and only those with serious competition concerns are likely to go beyond this period to the second stage of investigation.

              3. In June 2011, two new regulations concerning combinations (mergers) and recovery of monetary penalty, respectively, entered into force.142 The purpose of the CCI (Procedure in Regard to the Transaction of Business Relating to Combinations) Regulations 2011 is to provide detailed procedures to be followed in case of combination matters (e.g. merger review). The Regulations deal with, inter alia, the form of notice to be given, timelines, filing fees, procedure for filing notice. Combinations require filing notices within 30 days of: (i) approval of the proposal relating to merger or amalgamation; or (ii) execution of any agreement or other documents of acquisition. The CCI (Manner of Recovery of Monetary Penalty) Regulations 2011 contains, inter alia, detailed provisions with regard to issuance of demand notices, modes of recovery, reference to income tax authorities, and interest on penalties. The purpose of the Regulation is to enforce penalty recovery in an effective and pre-determined manner.

              4. The authorities state that CCI has kept the Combination Regulations aligned with international best practices, such as mandatory filing, clearly defining threshold for notification requirements, and timing of notices to be submitted. From this perspective, CCI amended the Combination Regulations on 23 February 2012, 4 April 2013 and 28 March 2014, respectively, with a view, inter alia, to simplifying filing requirements for combinations.143.

              5. In addition, in accordance with clause (a) of Section 54 of the Competition Act, the Government exempted: (i) an enterprise, whose control, shares, voting rights or assets are being acquired has either assets of the value of not more than Rs 2.5 billion in India or turnover of not more than Rs 7.5 billion in India from the provisions of Section 5 of the Act for a period of five years from 4 March 2011; (ii) a banking company, to which the Government has issued a notification under Section 45 of the Banking Regulation Act 1949, from the application of provisions of Section 5 and 6 of the Competition Act for five years from 8 January 2013144; and (iii) the Vessel Sharing Agreements of Liner Shipping Industry from the provisions of Section 3 of the Competition Act (Anti-Competitive Agreements) for a period of one year as from 11 December 2013.

              6. Between May 2009 and December 2014, the CCI received 557 cases (excluding combination filings as described in the next paragraph). As at 31 December 2014, 283 cases (out of 557 cases) were closed at the prima facie stage, 144 cases decided/disposed of after the report of the Director General (DG) of Investigation, 55 cases under consideration before the CCI, and 75 cases under investigation before the DG. The CCI has issued cease-and-desist orders in various cases as well as ordered modification of agreements; between 2011 and 2014, 77 cease and desist orders were issued. Penalties have been imposed in some cases (e.g. a cartel involving cement)145; in the same period, there were 58 cases (including combination cases) where penalties were imposed, the total amount of the penalty amounting to Rs 124.7 billion.

              7. On merger review, between June 2011 and March 2014, the CCI received more than 150 combination filings, all of which being cleared by the Commission at the first phase of scrutiny within 30 days of filing in accordance with the provisions of the Combination Regulations.

              8. The CCI identifies the Memorandum of Understanding (MOU) as a potent tool to enhance international cooperation in competition policies. It has signed MOUs with: the Federal Antimonopoly Service (Russia) in 2011; the Federal Trade Commission and the Department of Justice (the United States) in 2012; the Australian Competition and Consumer Commission in 2013; the DG Competition, European Commission in 2013; and Competition Bureau, Canada in 2014. In various regional trade agreements that India has signed (e.g. with Japan, and the Republic of Korea), competition chapters are included; the authorities state that all RTAs to be concluded by India are likely to have a chapter on competition.

              9. The authorities are currently formulating a National Competition Policy.146  Price controls

              1. The Government maintains various price support schemes for agricultural commodities. These include minimum support prices (MSPs) for major agricultural commodities, price support schemes (PSS) involving procurement, the market intervention scheme (MIS) covering agricultural commodities that are not covered by MSPs, the fair and remunerative price (FRP) and the state advisory price (SAP) schemes for sugarcane. There is also a new pricing scheme (NPS) for urea.147 These schemes have remained largely unchanged since 2011.148

              2. Under the targeted public distribution system (TPDS), the prices of certain essential commodities (i.e. wheat, rice, coarse grains, sugar and kerosene) continue to be subsidized for a targeted population living below the poverty line.

              3. In addition, the prices of LPG for domestic use are controlled with the provision of subsidies. LPG for domestic use is made available at subsidized prices up to 12 cylinders per year per household. Price controls on petrol and diesel were abolished on 26 June 2010, and 19 October 2014, respectively.

              4. A two price regime system continues to exist for natural gas: gas priced under the administered pricing mechanism (APM) and non APM gas. The APM applies to gas produced in fields awarded to India's national oil companies (ONGL and OIL) prior to the implementation of the New Exploration Licensing Policy (NELP) in 1999. The non APM applies to: (i) gas produced in fields awarded under the NELP for which the price is determined by the production sharing contract (PSC) between the Government and the private contractor; and (ii) to imports of LNG for which the price is determined by an agreement between buyer and seller. The price formula used to determine the prices under the PSC must be approved by the Government. APM gas may only be used by priority sectors, i.e. fertilizers (urea), LPG plants (owned by GAIL and ONGC), power, city gas distribution, steel plants, refineries, and petrochemicals. Other consumers are not allowed to use subsidized gas and must buy it from private companies or LNG importers. The price of gas produced by ONGC and OIL under the APM was US$4.2/MMBTU prior to 1 November 2014, when it was increased to US$5.61/MMBTU (on net calorific value) to be valid until 31 March 2015, as per the prescribed formula reflecting international gas markets. Prices are to be revised every six months.

              5. The Government closely monitors the price of certain sensitive hydrocarbons. In case of high price volatility in the international market, the Government will intervene to stabilize prices.

              6. On 7 December 2012, the Government introduced the National Pharmaceutical Pricing Policy 2012, and subsequently the Drugs (Price Control) Order, reflecting the Policy, was issued on 15 May 2013.149 The objective of the Policy is to introduce a pricing framework for drugs to ensure availability of "essential medicines" specified in the National List of Essential Medicines at reasonable prices while providing sufficient opportunity for innovation and competition. Under the Policy, prices of some 348 essential medicines are regulated on the basis of formulations through "market-based pricing", which takes the simple averages of retail prices of all brands having a market share of no less than 1% of total market turnover.150 The ceiling price of scheduled formulations will be revised as per the annual wholesale price index (WPI) for the preceding calendar year on or before the first day of April every year and will be notified on the first day of April every year.

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