PM pitches for more functional autonomy for PSEs to ensure fair competition

PM Manmohan Singh in New Delhi on Thursday

PRIME Minister Manmohan Singh has advocated the need for more functional autonomy for public sector enterprises (PSEs) saying the state-owned entities have for very long been protected from competition and are now needed to be free from bureaucratic control.
"The government may own a public sector firm and exercise the normal rights of ownership. But this does not mean that it should shelter the firm from competition as well," said Singh...
at the inauguration of the 3rd BRICS (Brazil, Russia, India, China and South Africa) International Competition Conference in New Delhi on Thursday.
"The government may own a public sector firm and exercise the normal rights of ownership. But this does not mean that it should shelter the firm from competition as well," said Singh during the two-day long conference. He said the governments should not to give undue benefits to their own businesses over private sector, which can lead to possible distortions.
He said the PSEs need to be exposed to increased for more efficiency. "A crucial issue is the exposure of these firms to increased competition."
Singh said 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.
“The 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. “
The nature of ownership of these PSEs may also give rise to some sort of distortions. “Competitive neutrality, therefore, requires that the government not use its legislative and fiscal powers to give undue advantage to its own businesses over the private sector. Going forward, our governments will, therefore, have to increasingly adopt competition neutral policies,” he added.
Singh also highlighted the need for greater cooperation among competition authorities across the world in the wake of the growing number of cross-border mergers and acquisitions.
"The increasing integration of the world economy in the form of multi-jurisdictional mergers and cross-border anti-competitive conduct makes international cooperation in this arena vitally important for all modern competition authorities," Singh said.
Stressing that public procurement constitutes a major chunk of state spending, he said competitive procurement markets can help save valuable fiscal resources. There is an increasing need to recognize the complementarities between competition law enforcement and liberalization of markets for procurement, said the prime minister. “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.”