Breaking up for good

Mining for coal? Not any more. The Indian government  is currently looking to abolish the state run monopoly Coal India. Now this action is not just to increase the competition within the coal industry,  but to also ensure that the Indian society , especially in the rural areas has access to coal derived power. The major causes for this disintegration are the fact that Coal India has to import expensive coal due to the scarcity of local coal,the coal mines are leased to companies in the cement and steel industries and that the government has to subsidise kerosene to areas with no power. By breaking up Coal India, the government is planning to reduce its trade deficit, increase innovation and efficiency amongst firms, lower power prices to customers, lower price inflation and ensure accessible reliable power  to remote rural areas. Although it seems like this is a win win situation , let us remind ourselves that by breaking up a natural monopoly, the firms will face very high start up costs that can lead them  becoming  insolvent. Moreover, there seems to be a lot of corruption regarding the accessibility of power and the government has to take careful measures to ensure that rural power becomes a reality. Check out this interesting article and try to come up with your own evaluations.

The break up of Indian Coal



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