Terms of Reference for Sector Studies

1. National Competition Policy and Economic Growth in India(ComPEG Project)July 2012 – December 2013 Terms of Reference for Sector Studies

2. Background • Competition: optimal resource allocation to address structural rigidities and achieve dynamic efficiency • In India, no documented policy on competition principles • The Government of India has, therefore, drafted a National Competition Policy. • The proposed National Competition Policy of India has identified nine principles of ‘competition’.

3. Context • To carry forward the Advocacy Agenda of the NCP, CUTS is implementing the ComPEG Project • Purpose: given political economy constraints, identification of possible implementation concerns vis-à-vis competition reforms so as to make a strong economic and political case for competition impact assessment • Phase I: sector-specific studies on pharmaceuticals, electricity, and petroleum & natural gas • Phase II: awareness generation among a diverse set of stakeholders and policy advocacy

4. Some Selection Criterion of the Sectors: • importance in terms of their contribution to national income and economic growth • political economy dimensions • consumer welfare dimensions • infrastructure dimensions • evolving nature of their regulations • Quantitative analysis: to highlight economic gains from competition • Qualitative political economy analysis • To develop a robust methodology for undertaking competition impact assessment in future. • To help stakeholders to conduct advocacy for policy and practice changes.

5. Research Questions • Are all existing policies, laws, regulations, practices, etc in the three selected sectors compatible with the principles of the proposed National Competition Policy of India? If yes, how can they be reinforced for implementing an effective competition regime in India? If no, how can they be changed so as to make them compatible with the principles of the proposed competition policy of India? • What could be possible economic gains, in terms of increase in producer and consumer surplus, as a result of expected changes in policies, laws, regulations, practices, etc. in the three selected sectors? • What are possible political economy constraints for an effective implementation of competition principles in the three selected sectors and how should they be addressed?

6. Chapter Outline • Introduction of the sector, objective of the study and overall outline • Existing market structure (concentration, entry barriers, etc) and prevalence of structural rigidities in the market • Existing market conditions determining producer behaviour • Competition reforms vis-à-vis existing policies, laws, regulations, practices, etcincluding an analysis of flanking policies • Conditions necessary for making changes in existing policies, laws, regulations, practices, etcto make them compatible with the principles • Possible gains to producers and consumers due to changes in existing policies, laws, regulations, practices, etc • Conclusion & Recommendations including an agenda for “competition advocacy” Maximum 20,000 words, excluding footnotes, references, graphs, charts, tables

7. Methodology • Analytical research on market structure, conditions, etc. • Political economy analysis of evolving regulatory regimes • Structured questionnaire-based interview of key informants onpolitical and economic aspects of competition and regulatory regimes vis-à-vis these sectors • October 2012: First round of analytical and narrative research • November-December 2012: Interview of key informants • December 2012: first draft of the studies • January 2013: review of first draft • February 2013: submission of the final draft • March 2013: overview chapter • Publication of an edited volume Timeline & Use of the Studies

8. ISSUES TO PONDER