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Cementing law and policy

Cementing law and policy
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First Published: Wed, Feb 13 2008. 11 58 PM IST
Updated: Wed, Feb 13 2008. 11 58 PM IST
On 13 January, India quietly — albeit only literally —“celebrated” half a decade of a new, modern competition law on its statute book. The legislation merely remains on paper. It has not yet been notified to be functional. One of the greatest casualties today is consumer welfare that the new competition law has been formulated to take care of.
In the last half-decade, there have been several instances redolent of a need for early implementation of a robust competition law. Amongst them, an example par excellence of sheer brazenness is cartelization by cement companies. Time and again, Indian cement companies have cocked a snook at the law enforcement agencies. The extant Monopolies and Trade Practices Commission (MRTPC) has been utterly unsuccessful in dealing with them. The new Competition Commission of India, though legislatively empowered, remains hamstrung owing to failure on part of the government to notify the enactment.
The latest in the saga of cement companies’ impunity has attracted a threat of takeover by the state government of Tamil Nadu unless they arrested rising prices. It is common legal wisdom that Indian state governments have no constitutional mandate to take over cement companies. Nevertheless, the threat worked! Cement companies have promptly agreed to supply two million bags of blended cement every month in all districts at a “subsidized price” of Rs200 per bag, approximately 17% lower than the open market price of about Rs240.
It is arguable whether this is an effective mechanism to ensure low prices for cement, an essential ingredient for a mélange of economic activities. It is also facile to notice that the proposal of the cement companies is mere eyewash. They are most likely banking upon leakage in the distribution mechanism to ensure that the proposal for “subsidized cement” remains unimplemented. However, the proposal mooted by the cement companies raises several critical issues.
What should happen to the past consumers who have been forced to shell out higher price for cement? Shouldn’t they be entitled for some sort of compensation in order to recoup losses? The new competition law, of course, boasts of such provision for compensation that could be paid to consumers who have incurred losses. Non-enforcement of the new competition law means that the government can merely score small brownie points against companies and attract cheers from consumers. This is utterly disempowering and unsatisfactory. Much more is possible within the mandate of the new competition law.
The agency to detect and enforce the competition law against unscrupulous companies must also partly lie with the consumers. After all, ordinary consumers are the ones shelling out their hard-earned money in order to purchase goods and services. This is exactly what the new competition law envisages. Unlike the ambiguous Monopolies and Restrictive Trade Practices Act, 1969 (proposed to be replaced), the new legislation stipulates an empowered role to be played by ­consumers.
In order to get over the diffused power of consumers, they need incentive to file cases. A robust mechanism ensuring compensation promises to do the same. Companies, of course are loath towards this. They wish to carry on business as usual. This is perhaps the strongest reason why business lobbies have successfully stalled implementation of the competition law so far.
The law is targeted against illegitimate private power exercised by companies against the consumers. It is a pity that such ­legislation has been delayed by the government ostensibly acting in public interest. The government needs to act transparently and be more accountable to its people. It ought to shed light on the delay when day-in and day-out exploitation of consumers remains rampant.
Rahul Singh is assistant professor at National Law School, Bangalore, and member of the Competition Commission’s advisory committee on regulation. These are his personal views. Comment at otherviews@livemint.com
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First Published: Wed, Feb 13 2008. 11 58 PM IST