Study Material | Test Series
Drishti IAS
call1800-121-6260 / 011-47532596
Drishti The Vision Foundation
(A unit of VDK Eduventures Pvt. Ltd.)
prelims Test Series 2019
बेसिक इंग्लिश का दूसरा सत्र (कक्षा प्रारंभ : 22 अक्तूबर, शाम 3:30 से 5:30)
Q. Merger of public sector oil companies: Comment on recent discussion of merger of public sector oil companies to create one major oil conglomerate.
Jul 26, 2016 Related to : GS Paper- 3

Ans :

Introduction-

After following a merger proposal of  state-run banks into few banking behemoths, now a high-level bureaucratic panel is reportedly considering the idea to create one major oil conglomerate merging all India's state-owned oil and gas firms.

Background-

  • In 2005, such a proposal of merging all state-owned oil firms into monolith structure came before government, but such proposal did not find favours with an Advisory Committee on ‘Synergy in Energy’ constituted by the then government.
  • Then advisory committee advised against merger of any state-run firms, and it has argued that any such merger in the Indian context is not viable.

In the present context monolithic public sector oil company is viable?

Arguments in favour-

  • The proposed move will bring synergy in the operations of state-run oil companies and it can shore up the innovations that are required for effective functioning of state-run oil firms.
  • It will rationalise the expenditures of these companies and increases competitiveness of these firms by better utilisation of infrastructure and logistics for our vast oil economy.
  • To boost productivity, efficiency and innovativeness across oil segments in in the national interest and a single behemoth entity may serve this interest better than current fragmented entities.

Against arguments- 

  • Many observers believes that merger of several public sector oil companies to form one behemoth is a terrible idea.
  • To some extent, creating big conglomerate may synergies the operations and shores up innovations, but the move to aggrandize monopoly in the hugely voluminous oil sector is more likely to lead to inefficiencies and scuttle productivity gains across the board.
  • India being far more dependent on oil products, complete dependent on a single conglomerate is not good idea and poses severe risk in case of any economic misadventure.

Suggestions-

  • Instead of creating a single conglomerate, the present structure of state-owned companies should be strengthened through policy changes and management and structural improvements.
  • Instead of creating a single monolithic structure, a better option is to have two or three large entities, which can not only compete in the global market but also protect risks.

Conclusion-

Merger of several oil firms may lead to quicker decision making and better utilisation of infrastructure, but creating a monolith structure poses severe threat for India. Hence government should consider of having two or three large entities, which not only increases the efficiencies of oil firms but also gives protection from possible risks.


Helpline Number : 87501 87501
To Subscribe Newsletter and Get Updates.