CIRC PRESS RELEASE - January 2006

REGULATORY MECHANISM FOR KEY SECTORS MUST BE PUT IN PLACE AT THE EARLIEST: RANGARAJAN

New Delhi, January 19, 2006

Calling for putting in place a full fledged regulatory mechanism to manage the economy, Mr C Rangarajan, Chairman, Economic Advisory Council to Prime Minister of India, said that for efficient functioning of market driven economy that is fast emerging in India, appropriate Competition Law and Regulatory Mechanism for key sectors has become extremely essential.

“For the last four decades, ‘market’ has been a dirty word and the bureaucracy felt that there has to be someone to tell the market what it needs to do and how it should operate. But things are changing and there is a remarkable difference since the liberalisation move that started in 1990s. Competition Law and suitable regulatory mechanism have become imperative because in their absence, mergers and acquisitions can result in monopoly,” Mr Rangarajan said while addressing a Seminar on ‘Capacity Building on Competition Law’ organized by CUTS- Institute of Regulation Competition (CIRC) in the capital.

There is considerable knowledge in other countries. We need to learn from their experiences and look at the structure of our future economy to evolve a mechanism that best suits our individual needs and makes us competitive in the global market, Mr Rangarajan said.

It is an established fact that competition delivers efficient results. But if we compromise with competition, the economy suffers inefficient outcomes and ultimately the consumer suffers, Mr Rangarajan added.

While inaugurating the CIRC website on the occasion, Mr Rangarajan said that lack of regulatory experience in the country needs to be filled in with suitable capacity building institutes. CIRC, as a pioneer institute in this field, would go a long way in filling this gap.

Speaking on the occasion, Prof. Eleanor M Fox of New York University of Law and world renowned expert on the subject, said that India should have effective Competition Law in place as an important ingredient of reforms process, to avoid any abuse of dominance. This should be backed by suitable regulatory mechanism that provides the will and ability to protect competition and stand up to pressures including political and thus help the country in participating as a big player in the world market.

Non intervention of government in competition is the most accepted norm across the globe so long as consumer interest is preserved, Ms Fox said. There are indications that even European Union is fast moving towards this concept.

Price fixing and production limiting cartels are regarded as clear violations of law as competitors join hands to rule the market. This must be stopped. Talking about India, Ms Fox said that one observes that there are a lot of price fixing agreements that come into force because various companies come together toe segment the market. Choices must be made carefully to identify such cartels and take action against them.

Earlier, in his welcome remarks, Mr Pradeep S Mehta, Secretary General, CUTS stressed on the importance of competition policy and mechanism being put in place so that the economy can derive efficiency gains of the ongoing reforms process.

While the government has been setting up regulatory authorities, there is a clear recognition of lack of experience in competition and regulatory issues in India. CUTS has established CIRC primarily to bridge this gap and for enhancing knowledge and strengthening capacity in this critical area, Mr Mehta added.

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