Government Monopoly in India

Presented by:

Mr. Shiva Teja(10041)

Mr. Naresh(10042)

Economics Project Presentation on

Monopoly:

Market situation where there is only single seller of a commodity and

there are no close substitutes of that commodity.

Characteristics of Monopoly

Single seller

No close substitute.

No entry of new firms

Profit in long run

Losses in short run

Price discrimination

Firm is a price maker

Government Monopoly

Monopoly in which a Government agency or a Government Corporation is the sole provider of a particular good or service.

Government Monopoly types:

National

Regional

Local

Coercive Monopoly

Advantages of Government Monopoly

Stability of prices.

Public benefited.

Source of revenue for Government.

Price discrimination can be applied.

Economic differences can be reduced.

Disadvantages of Government Monopoly

Poor level of service.

No consumer sovereignty.

Lack of competition & proper care leads to lower quality.

No consumer choice.

Hinders the economic growth.

Government Monopoly in India

Indian Government is the sole provider of some goods & services in the country.

No private organizations or firms should enter in those.

State or Local Government bodies are the Monopolies in their respective regions.

1. Indian Railways

IR is the state-owned railway company of India.One of the largest and busiest rail networks in the world.

Very recently, Indian govt allowed FDI to invest in railways.

2. State Electricity Boards

State Electricity Boards(SEBs), Licensed suppliers of Electricity operated by the state governments.

Consumers have no other alternatives, but the option of purchasing electrical power from SEB’s / Single Licensees.

3. Hindustan Aeronautics Limited

An Indian PSU leaning on Domestic Monopoly in the production of aircraft.

Government allowed FDIs in 2011 to invest upto 26% in it.

4. Nuclear power

Main reasons are safety & risk, for the Government being monopolistic.

It is being done through NPCIL.

Corporate Giants Reliance, TATA have been forcing the Government for liberalizing the Nuclear power production since a long time.

5.

• Tele communication White elephant of Indian Government.• After 1991, its monopolistic identity has confined only to

Landline communication.

5.

6. Bus Transportation

Though private travelling agencies competing with RTC, it is still the sole transportation source for many rural areas.

In those respective regions, it is still the Monopoly.

Government Granted Monopoly

Form of Coercive monopoly.

Government grants exclusive privilege to the private firms.

Regulations will be made by the Govt in favor of firm for being Monopolistic.

Examples:

Copyrights

Patents

Contracts

History at a glance

Government Monopoly had significance till 1991.

India came out as a mixed economy after independence.

The deep rooted Socialistic ideas made the Government act as monopolistic in major economic issues.

The country’s backwardness was also the main reason.

At the end of 1980’s & early 1990’s economic crisis pinged the nation.

History at a glance (contd.)

The crisis became the main cause for the historical Economic reforms which changed the face of the country’s economy.

This was happened under the Govt of Dr. PV Narasimha rao, Prime Minister & Dr. Manmohan Singh, Finance Minister.

History at a glance (contd.)

The reforms stretched their welcome hands for the private firms to invest.

The highlights of the Liberalization are:

Private Couriers came into action. Private firms started their services in Telecom Sector. Buses of Private Travels came on the roads. Availability of Motor Vehicles increased

Why Government Monopoly failed in India?

Government owned everything in the country.

Only small & medium sectors were allowed for public.

The intension was to provide service at a reasonable cost & also employment.

The leaders intended to take forward the nation with their socialistic ideas.

The process was slow because of the Direct Democratic System.

Decision making became a tough task.

The absence of economic policies & their perfect execution dragged the economy into severe crisis.