It was November 2020. Fear about an invisible virus was on everyone’s minds; and lockdowns, work from and a digital-first lifestyle were the norm.
As online payments were on the rise, with UPI payments and sign-ups increasing on a massive scale, authorities noticed two distinct trends: one, spams and cyber fraud were also proliferating, with many not-too-tech-savvy Indians who had only signed up for digital transactions for many essential needs due to the pandemic situation being increasingly at risk.
Second, despite many private players getting the mandate for operating as UPI providers, it was noticed that two operators, both foreign-owned, were head and shoulders ahead of others: Alphabet-owned Google Pay and Walmart-Flipkart-owned PhonePe.
This prompted what was then a contentious decision: the National Payments Corporation of India, the entity under the Reserve Bank of India that runs India’s real-time digital money transaction service UPI, or Unified Payments Interface, mandated that no private operator could maintain more than a 30 per cent market share.
Mind you, the market share of the top two in UPI was way less than the near-64 per cent market share of domestic aviation that IndiGo controls. Back in early 2021, when the authorities notified the rules for the implementation of the market cap of 30 per cent, the two dominant players had way less than what IndiGo presently has: PhonePe was at 42 per cent, while Google Pay had just 36 per cent of the share of transactions.
Is it time for the government to introduce a similar cap on market share in an essential service like domestic aviation? With around 16 crore domestic fliers annually, flying is no longer the preserve of the rich and the well-heeled, but that of the common man who uses it to save time and fly for work, important family matters and even leisure.
And when a dominant market player indulges in market pains that have a direct impact not just on daily lives but on the economic bottomline of the nation itself, it's time all unconventional options are perused.
Another option, which Americans use very effectively, is to break up IndiGo into smaller airlines. Nowhere in any free market country does a private company have the kind of market dominance in an essential service the way IndiGo has in India in civil aviation — in countries like the US and China, shares of the biggest airline are all less than 25 per cent.
With even the mighty Modi government having no other option but to succumb to the IndiGo drama and waive off the implementation of the new duty rules till February, questions have been raised about the bear hug one airline has on India’s transportation sector and what can be done about it.
India does have antitrust laws and a history of attempting the same in other essential services. Of course, breaking up a monopoly is well within the ambit of actions a government can take, considering that nearly 7 out of 10 domestic flights in the country are by IndiGo. What was till last week lauded as a case study for efficiency and competitiveness and economies of scale, has turned out to be a disaster when the airline decided to prove a point by holding a national essential service hostage in the last few days.
The classic example of breaking up a company to help a nation’s economy and citizen welfare is that of AT&T, the monopoly in telecom services in the US, which was broken up into seven smaller companies thanks to actions initiated by the US Justice Department in the 1980s. This led to healthy competition, better customer service, a better value for money proposition, and helped the growth of the communications sector.
And for those who say that it is the US and not India, please note that India does have a competition commission and an effective Competition Act, passed in 2002 and empowered with updated provisions just three years ago. It prohibits anti-competitive agreements and abuse of dominant market position, with the commission’s primary job being to protect consumer interests. Is it listening?
The UPI intervention, interestingly, is yet to be implemented – it has been postponed three times, with the latest deadline only being December of next year.
When NPCI came out with that controversial move five years ago, its aim was to mitigate concentration risks, prevent the emergence of a duopoly, and ensure a more diversified and resilient ecosystem. Exactly the reasons our aviation sector is in want of, wouldn’t you say?
