The Indian oil industry is unique in many ways. No other country in the world has as many state-owned oil companies competing with each other. One has to accept that the consequent competition has proved beneficial for the growth and development of the industry. Three of the six major public sector oil companies, IOC, HPCL and BPCL are represented in the prestigious Fortune 500 list for 2004. Four of them occupy a place of pride among the Navratnas at the national level. The government’s return on investment from the oil majors has been splendid with most of them paying handsome dividends. However, the government, particularly the Ministry of Petroleum and Natural Gas under Mani Shankar Aiyer, who is also the Minister C O V E R S T O R Y Should they be merged? Chartered Financial Analyst ! October 2004 ! 19 companies to stick to their core competencies, hint at the Ministry’s intention to retain and strengthen its control over the companies.

The UPA Government’s taking over the reigns at the Center coincided with rather difficult conditions in the international oil market, which have percolated to the national level as well. The continued geopolitical uncertainty in Iraq, Venezuela and the legal hassles of Yukos, the Russian oil giant and the increasing demand have all significantly contributed to the rise in crude oil price to about $50 a barrel. The Ministry has softened the effect of increasing global prices on the consumer through rationalization of custom and excise duties as well as providing a price band for transportation fuels, petrol and diesel.