The Planning Commission has proposed that the Centre should financially assist states in adopting a business environment that will be in line with a National Competition Policy.

The policy, which is being formulated, will provide guidelines for competitive practices to be observed by business enterprises in public and private sectors as well as by state governments.

The policy will be designed and implemented by a team of experts comprising government officials, legal experts, economists and social activists.

Paving the way: Planning commission deputy chairman Montek Singh Ahluwalia. The commission has also recommended setting up of a competition council to monitor the implementation of the policy.

According to the 11th Plan document, which is expected to be approved by various state governments on Wednesday at a meeting of the National Development Council, financial grants could be given to states that will enforce norms set by the competition policy.

“Financial grants given to states may be linked to the progress made by the states in aligning their respective state policies and laws with the principles of the National Competition Policy," the proposal says.

A Planning Commission official, who did not wish to be named, said the proposal will be put before the council, which is headed by Prime Minister Manmohan Singh.

The policy takes its cues “from what is being practised in Australia, where provinces are being aided by the federal government to implement a national competitive policy," said a senior official at Competition Commission of India who also didn’t want to be named.

The competition commission, which has statutory powers to enforce competition laws in the country, was actively involved in coming up with the National Competition Policy.

The Planning Commission has also recommended setting up of a competition policy council to monitor the implementation of the policy. It has suggested that the council have 25 members from government and non-government sectors, including representatives of non-profit groups, media and academics. It plans to review the impact of new competition laws, regulations and policies.

“The Planning Commission has recommended financial grants by the Centre could be released based on the recommendations received from the competition policy council," said the Planning Commission official.

The competition policy council will also try and make sure state government undertakings are not getting undue importance at the cost of private enterprises.

Still, “states should open up sectors where there is a case to bring in more private sector investment but not at the cost of larger strategic, environmental or other interests," says R.S. Srivastava, a professor at Jawaharlal Nehru University.

“For instance, while it may be desirable to open the mining sector to private enterprises, too much of private participation may lead to environmental degradation, which needs to be taken care of."