PSUs need more autonomy: Manmohan

 

Pitching for public sector enterprises being made more competitive, Prime Minister Manmohan Singh on Thursday said the state-run companies need to be given greater functional autonomy, be freed from bureaucratic control and not shielded from private sector competition.

“Going forward, our governments will have to increasingly adopt competition-neutral policies... Competitive neutrality requires that the government not use its legislative and fiscal powers to give undue advantage to its own businesses over the private sector,” Mr. Singh said.

Speaking at the BRICS International Competition Conference, Mr. Singh said “solution lies in giving public sector firms greater functional autonomy and freeing them from bureaucratic control and not in tolerating a slip in their competitiveness and then shielding them from competition.”

Addressing the anti-trust regulatory authority officials from the five countries forming BRICS block — Brazil, Russia, India, China and South Africa — Mr. Singh said that a competitive public procurement market can make bid rigging more difficult.

Stating that the state-owned companies or PSEs (Public Sector Enterprises) may have long enjoyed captive markets, he said the government’s ownership in such entities does not mean that these enterprises should be shielded from competition.

“There is an increasing need to recognise the complementarities between competition law enforcement and liberalisation of markets for procurement,” Mr. Singh said.

Emphasising that public procurement forms a substantial slice of state spending, the Prime Minister said competitive procurement markets can help save valuable fiscal resources.

The Prime Minister said the crucial issue is exposure of public sector companies to competition.

“The government may own a public sector firm and exercise the normal rights for ownership. This does not mean it should shelter the firm from competition as well,” Mr. Singh said.

Talking about the five-country block, Mr. Singh observed the BRICS countries have a combined population of three billion with a total GDP of nearly $14 trillion and around $4 trillion of Forex reserves.

“Competition authorities are also ideally positioned to bridge the gap between mature competition authorities and nascent ones,” he said.

Mr. Singh said BRICS countries also face common challenges with monitoring and managing capital flows being one such challenging task in times of global uncertainties.

He also listed out structures of cooperation being worked out among BRICS nations, including setting up of a BRICS development bank and a contingency reserves fund, and called for greater cooperation among the five countries.

“Growth, development and poverty reduction are the most important challenges that our governments face,” he said.

Mr. Singh said India is poised to become the most significant exporter of services, while China is on the path to becoming the global leader in export of manufactured goods.

Besides, South Africa is ideally situated to reap dividends from the untapped growth potential of African continent, while Russia and Brazil dominate as exporters of raw materials, he added.

The two-day conference would deliberate various issues and challenges including enforcement of competition laws vis-a-vis state owned enterprises, public procurement and creation of competition culture.

There would also be discussions on the role of competition regulation in innovation and economic development.

The theme of this year’s conference is ‘Competition Enforcement in BRICS Countries: Issues and Challenges.’

This is the third ICCI summit, which is organised every two years. The last two summits were held in Russia and China.

The conference is being organised in pursuance of the Beijing Consensus, New Delhi Declaration and Action Plan adopted at fourth BRICS leaders summit held in New Delhi in March 2012.

The Prime Minister further said there was an increasing need to recognise the complementarities between competition law enforcement and liberalisation of markets for procurement.

"Public procurement, more specifically, is a substantial slice of State spending in most emerging economies. Elimination of unnecessary restrictions and better tender design can therefore enhance possibilities for effective competition, thereby making bid rigging more difficult. As a result, competitive procurement markets can help save valuable fiscal resources and release funds for development," he said.

"State owned or public sector enterprises are another challenge. By virtue of their ownership, they have been shielded from competition and have long enjoyed captive markets. A crucial issue is the exposure of these firms to increased competition," he said.

"...Unfortunately, government ownership inevitably brings with it a bureaucratic style of decision-making and the end result is that the enterprise cannot compete in a market populated by equals," he said.

Observing that "several possible distortions can arise because of the advantages some public sector businesses have due to their government ownership," Mr. Singh said that "going forward, our governments will, therefore, have to increasingly adopt competition neutral policies."