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Merger of oil companies: Advantages and disadvantages
Feb 08:
A global rating agency has claimed that the proposed merger of India's state-controlled oil companies could reduce inefficiencies across the sector.
8It would also create an entity that is better placed to compete globally for resources, and less vulnerable to shifts in oil prices.
8But problems can arise as well, as it will have significant execution challenges, particularly in terms of managing the integration of employees, addressing overcapacity in the merged entity, and winning the backing for the merger from private shareholders.
8There is also a question of how the state will handle the likely decline in competition after a merger.
8Consumers have benefited from competition among the state-controlled retail companies, which has supported improvements in service standards.
8Private companies are increasing their market share from a low base, but could find it even harder to compete with a single large state-controlled company.
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8It would also create an entity that is better placed to compete globally for resources, and less vulnerable to shifts in oil prices.
8But problems can arise as well, as it will have significant execution challenges, particularly in terms of managing the integration of employees, addressing overcapacity in the merged entity, and winning the backing for the merger from private shareholders.
8There is also a question of how the state will handle the likely decline in competition after a merger.
8Consumers have benefited from competition among the state-controlled retail companies, which has supported improvements in service standards.
8Private companies are increasing their market share from a low base, but could find it even harder to compete with a single large state-controlled company.
Click on Reports for more
