On May 07, 2025, the Competition Commission of India (“CCI”) has officially notified the Competition Commission of India (Determination of Cost of Production) Regulations, 2025 (“Cost Regulations 2025”),[1] repealing the earlier Cost Regulations, 2009. This move follows a public consultation process conducted between February 17 and March 19, 2025, during which feedback was received from 14 stakeholders.[2]
Key Features of the Cost Regulations 2025:
- The term ‘total cost’ now explicitly includes depreciation and excludes financing overheads.
- Editorial refinements have been made to ‘total variable cost’ and ‘average avoidable cost’ for improved clarity.
- The definition of ‘long run average incremental cost (LRAIC)’ has been revised to include all variable and fixed costs (including sunk costs) attributable to the relevant product or service. For multi-product entities, common costs are included to the extent they are incrementally attributable.
- In response to stakeholder concerns, the role of experts has been clarified. Experts appointed under the regulations will only assist the Commission in cost determination and will not take any final decisions. Only parties to the proceedings may challenge the Commission’s cost findings.
- Despite suggestions to include market value as an alternative benchmark, the Commission has reaffirmed its commitment to a cost-based assessment grounded in verifiable data, consistent with international practices and jurisprudence.
- The suggestion to limit the pool of experts to members of the Institute of Cost Accountants of India (ICMAI) has not been accepted. The Commission may appoint professionals from a range of disciplines, including Cost Accountants, Chartered Accountants, and Economists, as needed.
- While concerns were raised about the chilling effect on price competition, the Commission emphasized that the regulations are procedural and are not intended to define the substantive legal test for predatory pricing. Notably, recoupment is not a necessary condition for establishing predation under the Competition Act.
The General Statement accompanying the Cost Regulations 2025 sets out the Commission’s detailed response to stakeholder inputs and clarifies the regulatory intent and application.
[1] https://www.cci.gov.in/images/whatsnew/en/general-statement1746633770.pdf
[2]https://sarthaklaw.com/cci-update-cci-determination-of-cost-of-production-regulations-2025/