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Q. Oil sector reforms initiatives: comment on the issues related to oil sector reform initiatives.
Feb 06, 2017 Related to : GS Paper-2 and 3

Ans :

Introduction-

In budget 2017 the central government has announced that it wants to merge the existing state-owned oil and gas companies to set up a global behemoth that would compete with some of the largest global petroleum companies. 

Issue-

Many observers apprehended that creating one large entity by merging all is very risky move. As a single giant entity if it made any unwise or capricious decisions it will multi-fold repercussions on whole Indian oil sector.  

What can be done-?

  • India being the world’s third largest oil market has huge potential for oil market and companies operating here. We need a policy that must enhance the competition among players.   
  • Hence, the government instead of micromanaging, it should frame the policy and facilitate their implementation. It should be left to broad managed companies to take decisions about merger and acquisitions. 
  • It will give competitive edge to state owned companies to have solid presence across the value chain in oil sector, so as to better manage risks in the high-risk areas.
  • There is need to optimise refining process and value-addition aspects, which in turn helps in enhancing the brand value of state owned oil companies across the globe.
  • Similarly petroleum products need to be liberalised completely so that all players including state owned companies will face tough competition and enhance the productivity and quality of the products.


Conclusion-

Indian is one of the most emerging markets for oil sector. In India oil sector is dominated by state owned oil companies. Hence government instead of pushing for giant state owned company for global market, it should guide on policy matters and allow companies to operate in competitive environment. This will not only improve efficiency of the companies but also their brand value.


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