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Does India Need a Giant Integrated Oil Company?
Over the last 22 years, there have been attempts by different governments to merge state-owned oil companies to create a mega company. Two different advisory committees have recommended against it. This article analyses different mega merger alternatives using a multiple criteria methodology based on eight factors to show that the formation of such a company could have a negative impact on energy security and competitiveness.
Several politicians feel there is a need for one giant integrated oil company in the public sector. However, most of their advisers and officials argue against forming such a company.1 When the goal of both groups is to maximise national interest, why is there such a divergence of opinion?
The merger idea is not new (see Box 1).2 It was first suggested in 1994–95 soon after the liberalisation of the economy. While presenting the budget this year, the finance minister announced a plan to merge public sector oil companies into a giant one to compete with the likes of Exxon, BP, Shell, Chevron, and Total.3 The petroleum minister hastily tried stepping back by stating that the aim is not to form one giant company, but multiple integrated oil companies to compete in the world market and “to bear higher risks, to avail of economy of scales, to take higher investment decisions and create more stakeholder value.” Since then, there has been an intense debate on the pros and cons of the proposal.
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