MONOPOLY OF

‘INDIAN RAILWAYS’
INTRODUCTION
 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).
PRIMARY CHARACTERISTICS OF A MONOPOLY

 Single Sellers
 No Close Substitutes

 Price Maker

 Blocked Entry

 Price Discrimination
GRAPH SHOWING
‘PRICE SETTING FOR UNREGULATED MONOPOLIES’
INTRODUCTION 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 1853. 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.
RAILWAY 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.
GIVEN BELOW IS THE TABLE SHOWING THESE 12 ZONES. Â KONKAN
RAILWAY* (KR) IS CONSTITUTED AS A SEPARATELY INCORPORATED RAILWAY, WITH
ITS HEADQUARTERS AT BELAPUR CBD (NAVI MUMBAI). IT COMES UNDER THE
CONTROL OF THE RAILWAY MINISTRY AND THE RAILWAY BOARD.
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 CRm, for example, CR4
.
The concentration ratio can be expressed as:
CRm = s1 + s2 + s3 + ... ... + sm
where si = market share of the ith firm.

If the CR4 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 CR4 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 CR1 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 = s12 + s22 + s32 + ... ... + sn2

where si is the market share of the ith 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 10,000 -- 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