What will happen when all 21M bitcoins are mined? What will happen when all 21M BTC are mined ? How will miner get new coin as reward? In absence of it, the only option available will be to increase transaction fees? If I have to pay anyway fee, I can pay that to centralized entity now also. Help me understand.
the only option available will be to increase transaction fees?


You are right, when no more bitcoins can be mined, the only reward for miners are transaction fees.

According to Section 6 of Satoshi Nakamoto's Bitcoin whitepaper, 2008 - the only mining incentives are these two possibilities.




  If I have to pay anyway fee, I can pay that to centralized entity now also.


Of course, Nakamoto intended to create "an electronic payment system" but Bitcoin appears to be mostly used as a speculative investment platform.

It may be that this predominant use has hastened the increase in mining difficulty and made use of bitcoin for small retail transactions unattractive to many in a shorter timescale than Nakamoto may have envisaged.

According to Bloomberg July 2017:


  Bitcoin Acceptance Among Retailers Is Low and Getting Lower


There have been a variety of efforts to make Bitcoin more scalable and more usable as an electronic payment system - especially for smaller transactions. One of the more prominent is the Lightning Network - but this seems to be an additional layer with some overtones of corporate financial institutional structures.

According to the Lightning Network whitepaper, January 2016:


  The Bitcoin blockchain holds great promise for distributed ledgers,  but
  the  blockchain  as  a  payment  platform,  by  itself,  cannot  cover  the  world’s commerce anytime in the near future. 


When you create a Bitcoin transaction today, you are essentially placing trust in two or three large Chinese corporations who process the majority of transactions and who are somewhat beyond the reach of your government (unless you are a PRC citizen) and it's financial regulators.

It is yet to be seen whether LN will be as decentralised as its proponents hope or will, as some detractors say, also come under the control of large corporations.