LONDON (Reuters) - Britain's competition regulator defended plans for a new test for supermarket groups yesterday, saying its proposals could yield £1.9 billion ($3.1 billion) of benefits to consumers over 25 years.

The Competition Commission (CC) said in April 2008 that action was needed to improve competition among supermarkets in a number of local markets and proposed a new test for planning decisions on larger stores.

The test would apply to new or extended stores of over 1,000 square metres. It would examine the number of competitors within a 10-minute drive and aim to ensure no single retailer had more than 60 percent of grocery sales in that locality.

An appeal against the plan by Tesco, Britain's biggest retailer, was upheld by the Competition Appeal Tribunal (CAT) in March, which said the CC had not properly assessed the costs of the test and had failed to address its proportionality and effectiveness.

The CC said yesterday it had conducting a detailed analysis which compared the benefits of increased competition against the costs from any delay between a dominant retailer's development being blocked and a rival taking its place.

"The analysis concluded that over the longer term, the benefits to consumers would outweigh any such initial costs," it said in a statement.

Using a net present value model to estimate the benefits and the costs, the CC concluded that the benefits arising from the test could total £1.9 billion over 25 years.

Tesco, which has around a 30 percent share of Britain's grocery market, said the proposed test would not help consumers.

"We are concerned that the CC findings rely heavily on far-fetched assumptions which don't reflect the reality of the planning system," it said in a statement.

"The main effect of the proposed test will be to deter extensions which will prevent many older stores being updated to provide a better offer for customers up and down the country."

However Asda, Britain's second-biggest supermarket group with a market share of about 17 percent, backed the CC.

"Now more than ever, it is essential that consumers have the widest possible choice of supermarkets to do their shopping in. The Competition Test will do just that," it said in a statement.