Regulation and Competition Issues: Case Study of Indian Railways' Procurement

Abstract

Public procurements, i.e., purchase of goods and services by various public departments, accounts for a significant proportion of both public expenditure and total demand for goods and services in the economy. Various studies, audit findings of the Comptroller and Auditor General of India, and vigilance reports by India's Central Vigilance Commission have invariably highlighted the incidence of anti-competitive practices in Indian public procurements. Public sector procurements are highly regulated, given the transparency concerns and principal–agent problem.These regulations outlining the rules and procedures in public procurement directly or indirectly influence the short- and long-run market dynamics (with respect to entry, market concentration, prices, innovation, etc.). This paper aims to analyse the impact of existing regulation on competition in public procurement in India through a case study of procurements in the Indian Railways. Based on the key anti-competitive concerns identified in Indian Railways’ procurements, the study outlines an important set of recommendations to enhance the degree of competition in public procurement in India.