M ONOPOLY OF ‘I NDIAN R AILWAYS ’

I NTRODUCTION In economics, a monopoly is defined as a persistent market situation where there is only one provider of a product or service. Monopolies are characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods. Monopoly should be distinguished from monopsony, in which there is only one buyer of the product or service; it should also, strictly, be distinguished from the (similar) phenomenon of a cartel. In a monopoly a single firm is the sole provider of a product or service; in a cartel a centralized institution is set up to partially coordinate the actions of several independent providers (which is a form of oligopoly).

P RIMARY CHARACTERISTICS OF A MONOPOLY Single Sellers No Close Substitutes Price Maker Blocked Entry Price Discrimination

G RAPH S HOWING ‘P RICE SETTING FOR UNREGULATED MONOPOLIES ’

I NTRODUCTION TO INDIAN RAILWAYS Indian Railways (IR) is the state-owned railway company of India. Indian Railways had, until very recently, a monopoly on the country’s rail transport. It is one of the largest and busiest rail networks in the world, transporting just over six billion passengers and almost 750 million tonnes of freight annually. IR is the world’s largest commercial or utility employer, with more than 1.6 million employees. The railways traverse through the length and width of the country; the routes cover a total length of 63,940 km (39,230 miles). As of 2005 IR owns a total of 216,717 wagons, 39,936 coaches and 7,339 locomotives and runs a total of 14,244 trains daily, including about 8,002 passenger trains. Railways were first introduced to India in By 1947, the year of India’s independence, there were forty-two rail systems. In 1951 the systems were nationalised as one unit, becoming one of the largest networks in the world. Indian Railways operates both long distance and suburban rail systems.

R AILWAY ZONES The Map of India above shows the different railway zones in India. The zones are numbered in the map. The red dots are the zonal headquarters. For administrative purposes, Indian Railways is divided into sixteen zones.

G IVEN BELOW IS THE TABLE SHOWING THESE 12 ZONES. Â K ONKAN R AILWAY * (KR) IS CONSTITUTED AS A SEPARATELY INCORPORATED RAILWAY, WITH ITS HEADQUARTERS AT B ELAPUR CBD (N AVI M UMBAI ). I T COMES UNDER THE CONTROL OF THE R AILWAY M INISTRY AND THE R AILWAY B OARD.

Concentration Ratio (CR) The concentration ratio is the percentage of market share owned by the largest m firms in an industry, where m is a specified number of firms, often 4, but sometimes a larger or smaller number. The concentration ratio often is expressed as CR m, for example, CR 4. The concentration ratio can be expressed as: CR m = s 1 + s 2 + s s m where s i = market share of the i th firm. If the CR 4 were close to zero, this value would indicate an extremely competitive industry since the four largest firms would not have any significant market share. In general, if the CR 4 measure is less than about 40 (indicating that the four largest firms own less than 40% of the market), then the industry is considered to be very competitive, with a number of other firms competing, but none owning a very large chunk of the market. On the other extreme, if the CR 1 measure is more than about 90, that one firm that controls more than 90% of the market is effectively a monopoly.As in this case there are no other railway industry so here market share of Indian railway industry is 100% and so its became an example of monopoly.

Herfindahl-Hirschman Index (HHI) The Herfindahl-Hirschman Index provides a more complete picture of industry concentration than does the concentration ratio. The HHI uses the market shares of all the firms in the industry, and these market shares are squared in the calculation to place more weight on the larger firms. If there are n firms in the industry, the HHI can be expressed as: HHI = s s s s n 2 where s i is the market share of the i th firm. Unlike the concentration ratio, the HHI will change if there is a shift in market share among the larger firms. The Herfindahl-Hirschman Index is calculated by taking the sum of the squares of the market shares of every firm in the industry. For example, Indian railways industry where only one firm in the industry, that firm would have 100% market share and the HHI would be equal to 10, the maximum possible value of the Herfindahl-Hirschman Index. On the other extreme, if there were a very large number of firms competing, each of which having nearly zero market share, then the HHI would be close to zero, indicating nearly perfect competition.

CHANDRIMA DEY PGPM-11A KAUSTAV CHATTERJEE AVINASH GUPTA GROUP-4 OOINDRILA KAR BIKASH DUTTA GBS MOURYA ROY