10. Structural Efficiency of the Indian Petroleum Industry: Restructuring Options for Indian National Oil Companies

Multiple specialised national oil companies (NOCs) operate in the Indian petroleum industry, which is contrary to the dominance of vertically integrated private and NOCs in the global petroleum industry. The recent restructuring decisions by the Indian government of selling its stake in Hindustan Petroleum Corporation Limited (HPCL) to Oil and Natural Gas Corporation (ONGC) and the privatisation of Bharat Petroleum Corporation Limited (BPCL) are a departure from the past efforts at vertical integration and privatisation of NOCs. However, no study has evaluated whether the current option is the best among the other possible options to restructure the Indian NOCs. In this paper, we compute the structural efficiency of the Indian NOCs under the data envelopment analysis framework and evaluate the various restructuring options available to the Indian NOCs. We create hypothetical integrated firms through mergers between specialised upstream and downstream companies and compare their efficiency with integrated firms to assess the potential of Indian NOCs to improve their technical efficiency. We assemble a novel database of 96 companies comprising of specialised, integrated, private, and NOCs from 30 countries for the year 2018 to compute efficiency. Our results indicate that the merger of ONGC and IOCL and the privatisation of BPCL would have the maximum potential to improve the efficiency of Indian NOCs. We conclude that the government has alternative restructuring options to further improve the efficiency of Indian NOCs.