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Budget 2017: Grand plan for an oil super major unveiled
Feb 02: The finance minister has unveiled a grand plan for an integrated public sector ‘oil major’ which will be able to "match the performance of international and domestic private sector oil and gas companies".
8"We see opportunities to strengthen our CPSEs through consolidation, mergers and acquisitions.  By these methods, the CPSEs can be integrated across the value chain of an industry.  It will give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders," he said in his budget speech.
8The minister however refused to elaborate on the concept. When asked to elaborate on the statement at a press conference, he said, "I am not going to say anything more, you can speculate on what I said."
8Clearly the idea seems to be to build one super major, in the lines of the Chinese majors like Sinopec or CNPC or PetroChina.  These three companies are the largest oil companies in the world, after Saudi Aramco, with revenues of a massive $455 billion, $428 billion and $367 billion respectively in 2015. In comparison, the largest independent oil major in the world, Exxon Mobil, has a turnover of just $ 268 billion.
8In contrast, the largest Indian public sector oil company, Indian Oil Corporation and BPCL had revenues of $ 81 billion and $ 41 billion.
8Cumulatively therefore, the Indian public sector oil majors will not equal the turnover of any of the Chinese super majors.
8Nevertheless, enthusiasts claim that such a merger will allow for collective decision making and economies of scale while those who are wary of the suggestion are of the view that sum of the parts may not be equal to the whole on account of clash of cultures among these oil companies.
8It is unlikely that  the finance minister is merely speculating on such a merger, or else he would not have devoted a paragraph of his speech to the merger. It will all depend on the political will of the Modi government to see such a merger come through. If the process is started now, it will take a long time to visualize a possible structure and then go about implementing it.
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