India's Antitrust Regulator goes extreme in fining Cement Cartel ,Scares Yarn Producers in lowering Prices

India has for long lacked an agency to control the monopolistic and predatory practices of Indian companies . The old MTRP Act had become quite toothless after the 1991 reforms and the Indian industry had turned into the wild west. Monopolies and oligopolies could operate quite freely and there was nobody to investigate price fixing and cartelization. Industries like telecom, cement and others saw many such abuses. Most of the developed countries like USA and European Union have highly developed and advanced competition regulators which impose hundreds of millions in fines against domestic and international companies who indulge in anti-market practices. The  fines serve as a great deterrence where powerful corporates try to undermine the market forces through their sheer size. The landmark anti monopoly legal cases against Microsoft, LCD companies have proved to be very effective in punishing super powerful businesses who have shafted consumers through illegal practices.

However the situation is changing with the advent of a new authority Competition Commission of India. India’s anti monopoly watchdog Competition Commission of India (CCI) had started out a year ago tentatively by finding film producers a pittance of Rs 1 lakh. However with a year behind it, the watchdog has apparently gone to the other extreme by fining top cement companies in India 50% of their profits for the last 2 years instead of the expected 8% of their last 3 year’s revenues (regulation allows for a maximum penalty of 10%) . This comes to around Rs 6300 crores which is almost the whole profit made by the industry. Note there is a seemingly lack of balance about its orders going from one extreme to the other extreme. The order against DLF was a good one finding the right balance , however the cement companies one seems too high and will be overturned in all probability by the Appellate Council.

Not Rs3,500 crore, Rs6,300 crore!

Note India desperately needs someone to break the oligopolies and cartels created by numerous sectors such as yarn producers, cement players etc. But you have to find a balance between penalizing them and bankrupting them. However some good has come out with this huge penalty as the yarn producers have lowered their prices fearing a big fine against them.