INTRODUCTION

Market forms
Market refers to a place or locality where commodities can be bought and sold. In economies
market does not necessarily mean or refer to a particular place but to the mechanism by
which buyers and sellers of a commodity are able to contact each other for having economic
exchange

MONOPOLY
Derived from two Greek words:
‘Monos’=’Single’ & ‘Poles’ =‘Seller’
Monopoly means existence of a single producer or seller who produces or sells a product
which has no close substitutes.
Features of monopoly:
 Single seller many buyers
 No close substitutes
 Closed entry
 Price Maker
 Price discrimination.

MONOPOLY REVENUE CURVE:-

Types of Monopoly:
1. Natural monopoly: when a monopoly is established due to natural causes then it is
called natural monopoly. Today India has got monopoly in mica production and
Canada has got monopoly in nickel production. These monopoly are provided by
nature to these countries.
2. Public monopoly: The monopoly firm owned and operated by public or state
government is called public monopoly. Also known as social monopoly. Their main
motive is to provide welfare to the public. Example, the Post Office
3. Private monopoly: The monopoly firm owned and operate by private individuals is
called the private monopoly. Their main motive is to make profit. Example, US steel,
American telephone,etc.
4. Legal monopoly: When anybody receives or acquires monopoly due to legal
provisions in the country and rights are given by the government. Example,
Trademark.
5. Simple monopoly: In this firm charges a uniform price for its output sold to all the
buyers.
6. Discriminating monopoly: In this firm charges different prices for the same product to
different buyers.
7. Technological monopoly: When firm enjoys monopoly power due to technical
superiority over other products in the market. Example, products produced by Godrej.
8. Absolute monopoly: It is also known as Pure monopoly. In this type of monopoly
single firm controls the supply of a commodity which has no substitutes not even a
remote one.
9. Imperfect monopoly: It means a limited degree of monopoly.It refers to a firm which
produces a commodity having no close substitutes. The degree of monopoly is less
than perfect in this case and it relates to the availability of the closeness of a
substitute.
10. Geographic Monopoly: When only one business provides products or services to a
local area then that business is a geographic monopoly.
Indian Railways: A Monopoly Organisation
Indian Railways is the biggest monopoly organization in India. Having a budget of few
thousand crores, the organization has 1.6 million employees, the largest employer in India.
The Railway network was started in 1853, to cater to the needs of the defence forces, which
had to travel all over India. Initially the network was controlled by a number of companies,
which were later joined together after independence to form a single system. In the first few
years after independence, a few of the state railways, such as Jodhpur Railways, Kutch
Railways etc. were also merged in the same system. The whole system is under the ministry
of railways, also called the Railway Board. The system is so big, that a separate budget is
presented in the parliament. Indian Railways is the biggest transportation system in India, and
has the second biggest rail network in the whole world, next only to China. It carries twenty
one million passengers per day, out of which about eleven million are on suburban system.
For suburban traffic, especially in Mumbai, rail traffic is the main lifeline, accounting for
about eighty percent of the whole suburban traffic. Any failure of the suburban network in
Mumbai has very serious ramifications on the overall city life. Indian Railways are the major
carrier for bulk goods like steel, cement, coal, fertilizers etc. It carries more than nine
hundred million tons of freight traffic per year. It can thus be seen that it is the lifeline for
movement of bulk goods in the country. With a budget of approx. One lac crore of rupees, it
is a vast network spread over more than sixty thousand km. with a staff strength of more than
13.2 lacs, with an average wage bill of more than four lacs per employee. The problems
involved in managing such a large system can be imagined, especially when the whole
system is under the central government. The whole system has been divided in sixteen zones,
besides one zone for metro Kolkata, each headed by a general manager for running of trains.
Besides there are eight more units each headed by a general manager to look after research,
electrification, construction, and manufacturing units for locomotives, passenger coaches,
wheels and axles etc. Besides this there are sixteen public sector undertakings/organizations
to look after other work like consultancy, construction, catering, finance, and container
services etc. This gives a rough idea of the vastness of the system. Because of the large staff
strength, the unions are very powerful. The top people of the two unions also interact with the
cabinet secretary, the senior most civil servant of the central government, besides co-
ordinating with the railway minister and chairman Railway Board. Because of govt. control,
the system remained independent, and private sector was not allowed to participate in it.
Efforts are now being made to allow private sector in limited areas, but the overall progress is
negligible. One of the major reasons for the same is that it is highly capital intensive, with a
low profitability. The Railways is a mixture of opposites. While it is supposed to be
financially viable, at the same time, the fares are kept low, so that the common man can
freely travel on the same. On the one hand, all principles of commercial working are
applicable, at the same time; the fares are being kept very low. A situation has arisen where
the bus fare is six to seven times more than the railway fare in passenger trains, over the same
distance. In the railway system, friction is between steel and steel and as such, tractive effort
required to pull the trains is much lower. In case only business principles are followed, the
railways can be a highly profitable organisation. However, the decisions are not on business
principles, but popular demands of the masses, thereby finishing off the viability of the
system.
Decisions on construction of new railway lines. Instances are galore, where after spending
hundreds of crores on the construction of a new railway line, there is not enough traffic even
to run the system. We spend a lot of money to construct a railway line, and pay for running
the line, for all subsequent years. This is unthinkable in any business proposition. Because of
public pressure, we continue to run trains where it results in massive losses, what to talk of
recovering interest on the capital employed. In suburban travel, the monthly pass, is only of
six single journey tickets, making it so low, that the public only travels by train, bringing the
system under strain. Indian Railways is a monopolistic organization controlled by the central
government. Because of its being a ministry, it is not allowing any legislation to be passed,
which will give it any competition. Since the earlier freight rates were much cheaper than the
road freight, the administration because of populist measures raised the freight rates to
compensate for the loss in passenger traffic, where the fares have been kept very low, to
please the masses. A situation has arisen, where the road traffic is giving tough competition,
which it was not supposed to do. On the other hand, the passenger fares are so low, that the
masses want to travel by train, resulting in overcrowding in trains with its own safety
implications. Since there is no competitor, the railway has been dictating its own terms,
thereby losing business. One of the worst examples is transportation of oil from the refineries
to the petrol pumps. Sending by truck is not possible because of the logistics involved. All the
refineries initially came to the Railways for transportation of finished goods such as petrol,
diesel etc. to the destination. The railways hiked the freight rates abnormally high and also
asked for compensation for extra facilities being created for transportation of oil. As the oil
companies had to transport oil, initially they accepted a lot of demands under duress. But the
overall scenario was so tough that it became costlier than the pipe lines. Since the railways
did not treat the oil companies as big customers, but as persons who needed them, the oil
companies became sick of the entire arrangement and decided to go in for the pipe lines. The
railways being a ministry became aware of these plans when they came before central
planning board, but the railways did not wake up, and as a result, lost the entire business to
the pipe lines, resulting in a big loss to the railways. A situation arose when the railways
started soliciting traffic to use their wagon fleet, but the oil companies gave only marginal
traffic, which could not be carried by pipe line. Since there is no competition, the unions
bargained hard for extra facilities, lower output, and a number of other issues. Since there
was no competition, the general feeling remained, that additio9nal money could come out of
increased fares, both passenger and freight. The political class was against rising of passenger
fares, therefore there was no alternative but to raise freight fares, which became so high that it
lost in competition to the road traffic. The above are a few examples, as how an organization,
which if run on commercial lines could have minted money became financially bankrupt,
requiring a lot of assistance from the central govt. Safety was also affected, as the railways
were not able to purchase critical spare parts for want of funds. Being a monopoly
organization, the staff strength was much above the actual need.
Various committees have recommended that the staff strength be reduced drastically, but the
same could not be implemented because of stiff resistance of the two unions. Any major
downsizing requires shifting of staff on a major scale, which the two unions are not prepared
to agree. The staff cost is 54% of the total working expenses, a figure unheard of in any
organization. In spite of these high figures, there is no serious effort to reduce staff strength.
Being a government organization, all pay commission, recommendations become applicable
on railways also, which the central government insists has to be financed by the railways
from their own sources, which is not possible considering, the amount of money involved.
The pension payments are also creating havoc, because of the numbers and the amount of
pension being paid High cost of staff is playing havoc with the maintenance of the
infrastructure, such as locos, coaches’ wagons, track, signaling equipment etc. Out of total
money received, payment to staff, pensioners and fuel has to be made on priority, leaving
little margin for purchase of spare parts, maintenance contracts etc. this severely affects the
maintenance programme, affecting the working efficiency of the system and also affecting
safety to some extent. Situations arise when the minimum schedule of replacement of spare
parts, as prescribed by the Railway Board, are not adhered to, when the coaches, locos,
wagons etc. are sent for regular maintenance schedule. The reason for the same has already
been mentioned earlier. Cases are also galore where the over aged locos, wagons, coaches
etc. continue in service, against the norms laid down by the Railway Board, affecting safety.
Because of lack of competition, serious efforts are not made to bring in financially viable
system. The import of technology depends on the views of the railway board members, who
can be prejudiced, for one reason or the other. One such example is the freight corridor, on
the Indian Railways, which was a very profitable item, especially on Delhi – Mumbai route,
but has lost its profitability because some of the people at the top, have introduced
specifications superior to high speed trains, forgetting that the corridor is meant to run goods
trains. In case there is fair competition in the rail transportation system, the staff and the
management would wake up to the problems more seriously, and the efficiency would.
Improve. The private sector has been asking for slots on the railway track to run their own
trains, but so far the progress has been negligible. Some serious thought is required to
introduce fair competition in the system.

WHY INDIAN RAILWAYS IS CONSIDERED A MONOPOLY:-

 Single seller many buyers
 No substitutes ‘not even close’
 Closed entry
 Price Maker
 Price discrimination
o Senior citizen
o Students
o handicapped
o Army officials, etc
SUMMARY
Indian Railways is the biggest monopoly organization in India. The Railway network was
started in 1853.Initially the network was controlled by a number of companies, which were
later joined together after independence to form a single system. The whole system is under
the ministry of railways, also called the Railway Board. The system is so big, that a separate
budget is presented in the parliament. Indian Railways is the biggest transportation system in
India, and has the second biggest rail network in the whole world, next only to China. It
carries twenty one million passengers per day. Indian Railways are the major carrier for bulk
goods like steel, cement, coal, fertilizers etc. It carries more than nine hundred million tons of
freight traffic per year. The problems involved in managing such a large system can be
imagined, especially when the whole system is under the central government. The whole
system has been divided in sixteen zones, besides one zone for metro Kolkata, each headed
by a general manager for running of trains. Besides there are eight more units each headed by
a general manager to look after research, electrification, construction, and manufacturing
units for locomotives, passenger coaches, wheels and axles etc. Besides this there are sixteen
public sector undertakings/organizations to look after other work like consultancy,
construction, catering, finance, and container services.
Because of the large staff strength, the unions are very powerful
Because of govt. control, the system remained independent, and private sector was not
allowed to participate in it. While it is supposed to be financially viable, at the same time, the
fares are kept low, so that the common man can freely travel on the same.
Railways can be a highly profitable organisation. However, the decisions are not on business
principles. Because of public pressure, they continue to run trains where it results in massive
losses. The passenger fares are so low, that the masses want to travel by train, resulting in
overcrowding in trains with its own safety implications.
One of the worst examples is transportation of oil from the refineries to the petrol pumps.
Sending by truck is not possible because of the logistics involved. All the refineries initially
came to the Railways for transportation of finished goods such as petrol, diesel etc. to the
destination. The railways hiked the freight rates abnormally high and also asked for
compensation for extra facilities being created for transportation of oil. As the oil companies
had to transport oil, initially they accepted a lot of demands under duress. But the overall
scenario was so tough that it became costlier than the pipe lines. Since the railways did not
treat the oil companies as big customers, but as persons who needed them, the oil companies
became sick of the entire arrangement and decided to go in for the pipe lines. The railways
being a ministry became aware of these plans when they came before central planning board,
but the railways did not wake up, and as a result, lost the entire business to the pipe lines,
resulting in a big loss to the railways.
Various committees have recommended that the staff strength be reduced drastically, but the
same could not be implemented because of stiff resistance of the two unions.Being a
government organization, all pay commission, recommendations become applicable on
railways also, which the central government insists has to be financed by the railways from
their own sources. The pension payment are also creating havoc.
REASONS FOR LOSSES IN THE MONOPOLY AS PER THE CASE:-
 While it is supposed to be financially viable, at the same time, the fares are kept low,
so that the common man can freely travel on the same.
o Railways can be a highly profitable organisation. However, the decisions are
not on business principles.
o Because of public pressure, they continue to run trains where it results in
massive losses.
o The passenger fares are so low, that the masses want to travel by train,
resulting in overcrowding in trains with its own safety implications.
 One of the worst examples is transportation of oil from the refineries to the petrol
pumps.
o Sending by truck is not possible because of the logistics involved. All the
refineries initially came to the Railways for transportation of finished goods
such as petrol, diesel etc. to the destination.
o The railways hiked the freight rates abnormally high and also asked for
compensation for extra facilities being created for transportation of oil.
o As the oil companies had to transport oil, initially they accepted a lot of
demands under duress.
o The overall scenario was so tough that it became costlier than the pipe lines.
Since the railways did not treat the oil companies as big customers, but as
persons who needed them, the oil companies became sick of the entire
arrangement and decided to go in for the pipe lines.
o The railways being a ministry became aware of these plans when they came
before central planning board, but the railways did not wake up, and as a
result, lost the entire business to the pipe lines, resulting in a big loss to the
railways.
 Various committees have recommended that the staff strength be reduced drastically,
but the same could not be implemented because of stiff resistance of the two unions.
o Being a government organization, all pay commission, recommendations
become applicable on railways also, which the central government insists has
to be financed by the railways from their own sources.
o The pension payment are also creating havoc.
RECOMMENDATIONS TO THE MONOPOLY OF INDIAN
RAILWAYS:-
 The ownership of the railway infrastructure must be government owned.
 The design, operation, expansion and management of the railway network and
infrastructure must be with a regulatory body like that for aviation.
 The ministry of railways must be merged into the ministry of civil aviation, surface
transport, national highways, and others to form a ministry of transport. This will
formulate critical legislation regarding safety regulations, costumer rights and
welfare, standardization, quality of service etc.
 This train operating company called Indian railways shall compete with private train
operating companies which will also be allowed to run trains using the same network
on equal terms.
 Divide the railway network into 5-12 trunk routes and others. Let the ministry of
transport own these routes and transfer the rest to the respective states. Let the central
establishment work mostly on trunk routes and the state governments expand the local
network, light rail systems and integrate them with the trunk routes. This will give
better coverage and utilization.
 Any proposed routes, expansions or modernizations must be cleared by the national
rail governing body to ensure it meets the national rail standards, quality, safety etc.
and is compatible with the existing trunk routes.