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Tuesday, 19 June 2012
Page: 7158

Mr ALEXANDER (Bennelong) (21:04): I have some questions regarding the landmark Productivity Commission report released in April, which investigated claims by Cyclopharm, a small business in my electorate of Bennelong, which is in competition with PETNET, a whollyowned subsidiary of ANSTO.Cyclopharm alleged that ANSTO had entered into a franchise-style agreement without public review process or tender and that PETNET's pricing does not reflect true production costs, is not applying commercial rates of interest on borrowings and cannot achieve commercially acceptable profits over a 10-year payback period.

According to the Productivity Commission report, PETNET is in breach of its competitive neutrality requirements. This means that taxpayer funding is being used to eliminate competition and commercially ruin Cyclopharm. It is very rare that the Productivity Commission delivers such damning findings. Recommendation 2.1 of the report states:

For ANSTO to comply with competitive neutrality policy, it would need to adjust PETNET Australia’s business model such that it can be expected to achieve a commercial rate of return that reflects its risk profile and the full investment in PETNET Australia.

They concluded that the current situation represents an ex ante breach of competitive neutrality policy. In Senate estimates last month Dr Paterson from ANSTO stated:

This concept of an ex ante breach is not well known to us

…    …   …

We have written to the … Australian Government Competitive Neutrality Complaints Office, requesting a meeting to further explore this concept and in addition to get an understanding of the types of models that they used.

Perhaps the minister can provide ANSTO with a copy of the Treasury department publication, Australian government competitive neutrality guidelines for managers, February 2004, which clearly spells out how competitive neutrality guidelines are to be met. ANSTO claimed in estimates that if PETNET increases its prices it would be in further breach of competitive neutrality yet the Productivity Commission report clearly states that in order to meet their competitive neutrality obligations they would need either to increase their prices or to increase the market. Freedom of information requests have shown that, from their own business model and their own numbers, ANSTO entered into the marketplace with an approach that will not meet its competitive neutrality requirements based on current and projected prices.

When PETNET entered the market in January 2011 they changed the price determination model to drive down prices by approximately 20 to 30 per cent and to capture as much of the market share as possible. In October 2011 ANSTO misled Senate estimates on the amount of their investment in PETNET. Finally, the Productivity Commission report states that the government will need to decide whether to maintain the business at the impaired asset value in breach of competitive neutrality policy or to dispose of the assets.

Minister, how can the government continue to justify funding a venture that is not commercially viable, found to be in breach of competitive neutrality and, in its market behaviour, eliminating competition? Can you provide the result of ANSTO's meeting with the Australian Government Competitive Neutrality Complaints Office to discuss their breach? Do any PETNET customers receive any favourable funding or support from ANSTO either through grants or through research collaboration? If so, what value is placed on these arrangements and when did the financial or in-kind considerations commence or plan to commence? What changes will ANSTO be implementing, and when, to remedy these competitive neutrality breaches and to minimise the damage being done to small businesses like Cyclopharm? What are you, as Minister for Industry and Innovation and as representative of the minister for science and research, doing to address this misuse of market power by this rogue government-owned enterprise?