Rise Of Oligopolistic Dominance

As debt-laden distressed companies fall by the wayside, some cash-rich large companies are practically monopolising their sectors

- DIPAK MONDAL

During the 26th meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI), one of the MPC members — Jayant R. Varma, Professor, Finance and Accounting, IIM Ahmedabad — made an interesting observation, which many in government institutions would barely admit to.

“Anecdotal evidence suggests that in several sectors which are characterised by an oligopolistic core and a competitive periphery, the oligopolistic core has weathered the pandemic well and it is the competitive periphery that has been debilitated. Rising profits and profit margins, improving capacity utilisation and lack of new capacity additions create ripe conditions for the oligopolistic core to start exercising pricing power,” he had said. An oligopoly is a form of market form where a sector/industry is dominated by a small group of large companies.

Professor Varma refused to comment on the issue and name the companies when Business Today contacted him, saying “there were some constraints on MPC members commenting on MPC matters.”

In the last couple of years, many large businesses fell by the wayside as mounting debt forced them to distress-sell or sell their assets after being put through the insolvency process. Reliance Communications, Reliance Infratel, Essar Steel, Bhushan Steel, Future Retail and Videocon Industries were sold off either through merger & acquisition (M&A) deals or the insolvency process.