Coal is not the only monopoly India wants to break up…

Apparently, a lot is being split or broken up… As Mashiat posted earlier, the state run monopoly Coal India is being broken up, but that is not the only vital industry being broken up, – The Indian government, acting on Air Force demands, has offered to spend $12 billion to encourage private firms to establish an aircraft manufacturing facility — a move that would break Hindustan Aeronautics Limited’s (HAL) monopoly on aircraft manufacturing.

The reason for this potential break are years of delays on several essential projects, possibly due to the diversification. HAL is involved in the design of fighters, transports, trainers and helicopters, avionics and engines, which meant a decline in focus, decrease in efficiency and a delay in projects.

Many experts have expressed their views on the issue, eluding to various concepts we have discussed in class. See if you can figure out what these concepts and terms are…

“It is absolutely essential to set up an additional military aircraft facility here, as HAL is overloaded for the next 10 years and has become too unwieldy,” defense acquisition expert Miral Suman said.

Vivek Rae, former director general (acquisition) in the MoD, said, “India sorely needs aircraft manufacturing capability in the private sector. We cannot afford to put all eggs in the HAL basket.”

Subhash Bhojwani, retired Air Force air marshal, agreed an additional manufacturing facility is needed, but said HAL should be made more commercial.

“HAL is into the design and contemporary manufacture of fighters, transports, trainers and helicopters, as well as avionics and engines,” he said. “It is possibly the only company in the world to be so diversified. However, while this may sound good in a book of world records, it isn’t good as a commercial model.”

Defense analyst Amit Cowshish, a retired Defence Ministry bureaucrat, said the objective should be “not to create an entity that could compete with HAL but to have additional capability in India to manufacture aircraft so that the requirement, both of the military and civil sectors, could be met in a more cost-effective manner and in shorter time frames. Of course, competition would help in improving HAL’s efficiency.”

Sujith Haridas, deputy director general of India’s industry lobbying agency, the Confederation of Indian Industry, said, “It is very much desired to have an additional manufacturing facility, but one should not ignore that it takes several decades of consistent investment and efforts to create a mammoth system integrator like HAL.”

The continued break up of Indian monopolies



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