As we know at the global level energy is one of the most precious contributions
to a country’s economy and also for the development of Human Beings. The
development of any nation, consisting of various sectors of the economy, is
basically dependent on the ability to give decent and reasonable entryway to
different sources of energy.
As India has the target to achieve a sustained annual economic growth rate,
there is a need to supplement its energy and its related infrastructure. To
achieve this growth, energy demand is estimated to raise annually. India is
expected to witness one of the highest growth in terms of energy demand in the
current decade. Although, the demand for commercial energy has grown
significantly, but still a large part of India’s population continued to have
limited or no access to various energy resources. Thus, the time has come to
promote competition in the energy market by making strategies to enable
competition, so that it can be used by all.
Competition Law And Its Regulations
Competition law promotes streamlined allotment and usage of natural resources,
that are commonly meager in emergent nations. An accessible competition law
lessens the entrance obstacles in the market as well as makes the market
propitious to promote entrepreneurism.
Regulations, on the other hand, are public barriers on market. They are
basically a benchmark set by the governments on business and as well as to the
These regulations can be bifurcated as mentioned below:
- Economic Regulation – These are the regulations which hold up the market
decision such as competitions, entry or exit and pricing.
- Social Regulations – The regulations which protects the public interest
at large which are in the form of health, safety, environment etc.
- Technical Regulation – The regulations help in dealing with the
technical regulations and various technical aspects those are evident and
exclusive in the market.
- Administrative Regulations – These regulations help in dealing with the
administrative formalities which helps in collecting the important
information which are helpful by the government in decisions making the
As far as the regulations are concerned, we need to understand the market
structure and its power and also its relevance in implementing competition law.
Market for the purpose of Competition Law
Market is usually addressed as a category consisting of various types of sellers
and buyers for really unique goods and services. It depends on the consumer to
decide the orders for the products, and the seller decides the availability of
the products in the relevant market. the important ingredient which maintains
the visible equilibrium in a market, mostly with respect to the consumer
well-being is the healthy competition. the reason behind is that is equalizes
the abuse of dominance of any particular product in the market.
The main aim of the law of competition is to control and curb the unhealthy
competition in the market for profitable efficiency, consumer benefits and to
encourage the aims such as, market consolidation. In order to succeed in these
objectives; the first prerequisite is identification of a market. The market
definition works as a systematical instrument in order to define the range of
competition. And affect the formation and implementation of connected
strategies, between the undertakers. The reason behind is to identify that the
gamers does not conclude the price separately, for their product or service,
which is opposed to consumer well-being.
Market power occurs when one buyer or seller in a market has the capacity to
exert significant influence over the quantity of goods or services, or the price
at which they are bought/sold. In a perfect competitive market, market
participants have no market power. The ability of an entity to raise its price
above competitive levels is limited by the competition law.
Market power comes into picture when the price exceeds from the minimal or
marginal cost, so the entity make out the good amount of profits for itself.
Market power has the power of controlling supply and demand of goods or services
as increase in price leads to decrease in demand and then its leads decline in
the supply because of the influence of market power.
There are different types
of Market Power:
Oligopoly Market Power: There are basically handful of sellers who have
significant shares, which results into the collusions among themselves. Due to
which there is reduction in the market competition and further it leads to
higher prices. These big giants exercise the market power through cartel system.
Monopoly Power: when one seller has the capacity to influence the prices in
market. There are various methods through which the monopoly power can be
exercised in the market like, Predatory pricing, brand loyalty, large scale
Various Source of Market Power
One of the frequently adopted trend to achieve market power is to prevent these
competitors from entering the market by applying various hurdles on their entry.
These are the source which helps in attaining the market power:
Exclusive control over input
A sole entity has absolute control over the goods and services and no other
entity have access in the market in relation to these inputs, and thus that
particular entity attains power and hike the pricing of the products without
losing their customers.
Copyrights and Patents
This source of market power is created by the Government which is a kind of
barriers for the organizations to enter the market. The organization which has
acquired the patent or copyrights on the products, then they can bar the other
entities to enter into the same product market until the patent is given to
them. And due to this the patented company enjoys the market power and increased
the pricing of the products according to their wish.
Economies of Scale
Economies of scale are cost advantages reaped by companies when production
becomes efficient. Companies can achieve economies of scale by increasing
production and lowering costs. This happens because costs are spread over a
larger number of goods. Costs can be fixed and variable.
It has now become the trend for the organizations to evade the Patent law by
doing few changes into their products. Patent protection may be a temporary
solution. At last, the government grants only to few users every year. But the
economies of scale are both widespread and persistent.
Since, network economies are almost same as to economies of scale. When network
economies are beneficial for the consumers, the quality of the product increases
as it is directly proportional to the number of users. Hence, the number of
users also increases in the market, so it is said that, with increase in the
volume of sales, the quality level of the products also escalates. Therefore,
network economies may be observed as an alternative form of economies of scale
in the production.
Strategy for Allowing the Competition in India’s Energy Sector
India requires an energy market which is flexible, competitive, and integrated,
and also which provides a genuine setback for electricity, oil and gas where
there is demand. In order to tackle India’s energy and climate defiance and to
make sure profitable and safe energy supplies to each and every households and
also to the business enterprises, India must make sure that the energy market
should operate efficiently and with full flexibility.
Advantages of unprejudiced, unsegregated and versatile energy market
The native governments, businesses and individuals of any nation can be
satisfied only when the market gives them the best opportunity to deal with. But
such a situation is not possible at the present moment. As the generation market
is still highly intense in India. The energy market in India in general sense
are not to be transparent enough or adequately open for new entities to have a
level playing field in the market. Economically, rational investments in energy
efficiency are not up to the mark and those which are in existence they are not
enough. Even Consumer’s satisfaction is very low in India even though, we can
see that there is fairly competitive market.
Some of the Strategies already Accomplished:
Need for Private sector participation
Since 1990’s, India has progressively involved the private sector in supply and
financing of energy services.
This trend has to be continued due to the
Demand –Supply position in India’s Energy Market
- There is a rising demand-supply gap in availability of various energy
- There is need to attract greater private players to deal with the energy
projects and also operational efficiency.
- There is need to reduce to energy poverty.
- There should be technological innovations that will help to increase
- There is a need for realization that an efficient energy infrastructure
is essential for competition at global level.
The rising demands can be either met by imports or by cutting the supply
infrastructure of energy resources. It can also be met by increasing in studying
certain activities, development and advancement in the transmission and
distribution infrastructure as well as setting up of new advanced Technology in
the fulfilling the Energy market demands.
Currently, gap/shortages of energy and demand supply raise serious concerns
about India’s energy and its impact on the overall economic development.
The World Bank (2006) has projected that developing countries including India
need about US$ 165.0 billion from 2010, increasing at 3% per annum till
2030-2031 to ensure complete energy access in energy sector. However, financing
of projects which is available can meet only half the requirement, which results
in huge investment gap in the energy sector.
The Public Investment in the energy sector (power, petroleum and natural gas)
reflects a consistent and compounding gap between planned investment and actual
expenditure. The business in the energy sector is as usual and the economic
development objectives still remain unfulfilled and it will be so, if the need
of the investment in the energy sector is not realized.
Reduction in Energy Poverty
Improved efficiency, access and affordability of energy resources to the lower
strata make a significant difference to their socio-economic development and
will be a bone of contention for human development. The linkages in
energy-development in multi-dimensional, such as, energy indirectly related to
every aspects of economic activity, enables use of equipment’s needed for
improved production, enhances the standard and the quality of the life and
well-being and improves access for the information.
However, the challenges threatening policymakers is to create a competitive
energy market that not only raises investment and efficiency but also improves
national welfare and development, particularly that of the poor. Certain
frameworks either legislative or regulatory who have strong focus on the
delivering of the energy services to the poor should come into the picture.
Other Strategies which have to be fulfilled:
- More efficient use and development of grids.
- Utilizing the energy packages provided in Five-year plans.
- Ensuring a level playing field.
- Bridging gap between member states.
- Enhancing consumer awareness about taking advantages of opportunities.
- Enabling the delivery of diverse and innovative sciences.
- Flexibility to the customers and competitive pricing.
Opening of energy markets gives consumers variety of choices. It restricts the
public interference and prevents inappropriate public interruption. There are
some of the important issues which need to be addressed urgently and
expeditiously in order to cover the energy market in India. These issues act as
impediments in realizing full benefits to users, raises certain limitations for
competition and innovation in technologies used and also chip away the security
and sustainability of energy resources in India.Written By: Aditya Kumar