Reforming SOEs in Asia: Lessons from Competition Law and Policy in India

Abstract

State-owned enterprises (SOEs) or public sector enterprises/undertakings (PSE/Us) form an inherent part of the growth story of countries around the world. As the name suggests, these entities are owned and/or controlled by the state and the very nature of their ownership structure differentiates them from private enterprises. Backing from the government gives them a unique positioning in the market, both on the demand side and on the supply side. While, on the one hand, these entities enjoy a special advantage in terms of confidence/trust from the consumers, on the other hand, being publicly owned, expectations are also high from these SOEs. For example, in India, the Life Insurance Corporation (LIC) enjoys dominance in the life insurance sector and is perceived as the preferred insurer, particularly in rural areas, over the private players. While this is good for the LIC, the Supreme Court of India has declared it as ‘state’ under the Constitution and hence subject to the writ jurisdiction of the country with stricter scrutiny than private enterprises. The philosophy behind this approach is that the government or its instrumentalities may not be allowed to act arbitrarily and have to confer benefits/largesse in accordance with the established norms and policies, which is primarily driven by the ‘socialistic’ approach of the Constitution.