For a competitive efficient oil sector

For a competitive efficient oil sector

Oil minister Dharmendra Pradhan has clarified that the government’s plan to merge state petroleum companies will not lead to one giant entity. This is most welcome. We do need multiple companies in our large and fast-growing oil economy to gainfully compete for custom. And, in tandem, we need to genuinely open up the retail oil market. A large amorphous entity would mask losses made in unwise or capricious decisions such as domestic or foreign acquisitions that have no sound commercial rationale.
The oil minister has also stressed that the Centre’s role would be limited to framing policy and facilitating implementation, and that there would be no attempt at micromanaging merger and acquisition in the oil sector. This is also assuring. It makes perfect sense to leave it to the board-managed companies to seek synergy and explore their options for M&A.
There can be competitive advantage for companies to have solid presence across the value chain in oil, so as to better manage risks in the high-risk upstream segment, optimise throughput in refining and value-addition, and seek brand value in the marketing of oil products. And they must face competition. The domestic oil majors should have integrated operations across the value chain. But, in parallel, we need to purposefully liberalise the marketing of petroleum products. It makes no sense to ring-fence the retailing of petro-products only for oil concerns.
Abroad, in the mature markets, stand-alone oil retailers account for as much as half the offtake. As the third-largest oil market that is poised for huge volumes growth going forward, we do need a policy for independent oil retailers posthaste, even as we put in place policy for fully integrated oil majors here. Integration must not rev up monopoly rents in oil.