NEW DELHI : Pitching for public sector enterprises being made more competitive, Prime Minister Manmohan Singh today said the state-run companies need to be given greater functional autonomy, be freed from bureaucratic control and not shielded from private sector competition.
“Going forward, our governments will have to increasingly adopt competition-neutral policies… Competitive neutrality requires that the government not use its legislative and fiscal powers to give undue advantage to its own businesses over the private sector,” Singh said.
Speaking at the BRICS International Competition Conference here, Singh said “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”.
Addressing the anti-trust regulatory authority officials from the five countries forming BRICS block — Brazil, Russia, India, China and South Africa — Singh said that a competitive public procurement market can make bid rigging more difficult.
Stating that the state-owned companies or PSEs (Public Sector Enterprises) may have long enjoyed captive markets, he said the government’s ownership in such entities does not mean that these enterprises should be shielded from competition.
“There is an increasing need to recognise the complimentarities between competition law enforcement and liberalisation of markets for procurement,” Singh said.
Emphasising that public procurement forms a substantial slice of state spending, the Prime Minister said competitive procurement markets can help save valuable fiscal resources.
The Prime Minister said the crucial issue is exposure of public sector companies to competition.
“The government may own a public sector firm and exercise the normal rights for ownership. This does not mean it should shelter the firm from competition as well,” Singh said.
Prime Minister further said there was an increasing need to recognise the complementarities between competition law enforcement and liberalisation of markets for procurement.
“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,” he said.
“State owned or public sector enterprises are another challenge. By virtue of their ownership, they have been shielded from competition and have long enjoyed captive markets. A crucial issue is the exposure of these firms to increased competition”, he said.
“…Unfortunately, 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,” he said.
Observing that “several possible distortions can arise because of the advantages some public sector businesses have due to their government ownership”, Singh said that “going forward, our governments will, therefore, have to increasingly adopt competition neutral policies”. (agencies)
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