The proposal to merge state-owned oil & gas companies to create a single, unified giant has raised many eyebrows, and hackles.
SMALL MAY STILL BE BEAUTIFUL, but ‘larger the better’ is a more apt motto for modern business organisations. Size matters; particularly in the oil and gas industry where capital investments tend to be huge, and the risks, even higher. In contemporary times, technology giants are increasingly displacing traditional companies from the Fortune 500 lists. But oil is right at the top of the heap. And yet, the recent move by the Indian government to merge state-owned oil and gas companies to create a unified behemoth has triggered responses that range from surprise to disbelief to skepticism. Of course, there were some who have welcomed the move as a timely, wise and strategic decision.
While delivering his fourth budget speech on 1 February, finance minister Arun Jaitley declared: “The government plans to form a major oil company by merging some of the existing firms in the oil and gas sector to take on international and domestic players... Possibilities of such restructuring are visible in the oil & gas sector now and we propose to create an integrated public sector oil major that will be able to match the performance of international and domestic private sector oil and gas companies. (It will give them the) capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders. India has 18 state-owned oil and gas companies at present. The top six include large exploration and production players namely Oil and Natural Gas Corporation (ONGC), Oil India, and refining and marketing companies namely Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL), besides the gas giant GAIL.
The Unified Giant
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