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PSUs in sectors such as defence, railways and telecom account for a majority of the procurement
The purchases are estimated to be about 30% of the GDP
Public procurement in India should gradually be opened up in a fair manner to ensure greater competition, while privatisation of public assets has to be done keeping in mind the country’s socio-economic needs and objectives, Commerce Minister Nirmala Sitharaman said.
Public procurement (procurement by government/its agencies for their own consumption and not for commercial resale) in India is estimated to be about 30% of the countrys GDP, with sectors such as defence, railways and telecom — having state-owned enterprises — accounting for a major portion of it, Ms. Sitharaman said at the National Conference on ‘Economics of Competition Law’ organised by the fair-trade watchdog Competition Commission of India (CCI). Referring to the recent CCI orders imposing penalties on some cement companies for rigging bids for supply of cement to the government, as well as on firms for bid rigging of tenders floated by Indian Railways for procurement of ‘brushless DC fans,’ the minister said these regulatory orders are with an aim to ensure greater competition in India’s public procurement.
‘Fair manner’
“You have to open it (public procurement) up, but layer by layer in a fair manner even in this transition stage, for greater competition,” Ms. Sitharaman said.
“Collusive bidding and cartelisation (in public procurement) are very serious. The CCI has an important role to play to prevent them and to ensure that there is fair trade and ultimately the consumer benefits,” the minister said.
During her speech, Ms. Sitharaman referred to a recent article by the economics commentator Martin Wolf, where he quoted Jawaharlal Nehrus phrase “tryst with destiny” and wrote that once again India has a tryst with destiny as it is trying to emerge as a democratic superpower by the middle of the century, but faces enormous challenges.
She, however, said though it might be easy for many to state that India needs to move faster, “opening up of the economy cannot be done at any cost.”
Opposing demands for expediting the privatisation process, the minister said, “Public assets cannot be just thrown away resulting in undesirable outcomes. India’s socio-economic needs and objectives and demographic divided will have to be kept in mind… We are not jumping straight into privatisation. We can’t be an open economy like Singapore straight away. India is moving cautiously with a well-planned middle path.”
Russia, China
Speaking on the occasion, chief economic adviser Arvind Subramanian said privatisation per se will not lead to greater competition and referred to the case of Russia and China saying privatisation there has led to oligarchy.
Mr. Subramanian said regulatory institutions in India are still a “work-in-progress,” adding that they need to learn that instead of using blunt instruments such as bans and restrictions including in the area of competition policy, what will work better is to have a nuanced approach and intervention.
He said India is becoming a highly litigious society, in turn leading to a situation promoting decision-making by the judiciary, and the judiciary at times becoming more powerful than the executive and legislature.
“How do we expedite the implementation of decisions taken by the executive in such a situation,” he asked.
‘Dynamic institution’
Ms. Sitharaman differed with Mr. Subramanian saying “I would not say regulators like the CCI are a ‘work-in-progress’. The CCI is trying to be a dynamic institution. You have to take into consideration the peculiar needs of India rather than compare the situation here to Singapore or China.” |
