(LM)
Union finance minister Arun Jaitley recently mooted the idea of a mega-merger of upstream and downstream oil public sector units (PSUs). The intention, presumably, is to gain the benefits of “economies of scale”, diversification of risk, and market power in the global purchase of oil assets.
In a recent issue of the Economic And Political Weekly, two people had made some of the problems with this clear. Former petroleum secretary Saurab Chandra had clarified that buying oil assets abroad through national oil PSUs (Nopsus) would not serve energy security objectives due to inherent political risks that would prevent oil from being shipped to India in times of crisis. It may give some return on investment, but Nopsus are not required for that; sovereign wealth funds can do the job better.
In the same issue, Bhamy Shenoy has evaluated a couple of alternatives and noted that the finance minister’s mega-merger is the worst of all possible scenarios. Instead, splitting the Indian Oil Co. Ltd into three or four smaller companies would increase competition as well as shareholder value due to the benefits of decentralization.
