The IUP Journal of Applied Economics
An Efficiency Analysis of Selected Indian Oil and Gas Companies: A Window DEA Approach

Article Details
Pub. Date : Oct, 2018
Product Name : The IUP Journal of Applied Economics
Product Type : Article
Product Code : IJAE31810
Author Name : Mohd Afjal and Mohd Izhar Ahmad
Availability : YES
Subject/Domain : Economics
Download Format : PDF Format
No. of Pages : 24

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Abstract

The present study examines the Overall Technical Efficiency (OTE), Pure Technical Efficiency (PTE) and Scale Efficiency (SE) of six sample companies—Bharat Petroleum Corporation Ltd. (BPCL), Hindustan Petroleum Corporation Ltd. (HPCL), Indian Oil Corporation Ltd. (IOCL), Oil and Natural Gas Corporation of India Ltd. (ONGC), Oil India Limited (OIL) and Reliance Industries Ltd. (RIL)— selected from the oil and gas sector. These companies account for the major portion of India’s total oil and gas production. The data have been collected from the Prowess database and annual reports of the selected companies. The study covers a period of 27 years, i.e., from 1991 to 2017. The Data Envelopment Analysis (DEA)-based Window DEA Approach has been applied by conceptualizing one output and three inputs to analyze the technical and scale efficiency of the selected oil and gas companies. The empirical results show that the highest OTE, PTE and SE are recorded by ONGC and OIL, while the lowest OTE, PTE and SE are recorded by BPCL and HPCL. None of the companies is operating at most productive scale size. The inefficiency is attributed to managerial inefficiency and inappropriate choice of the scale size. The study highlights the need for concrete steps on the part of policy makers to choose the appropriate scale size and to eliminate managerial inefficiency.


Description

The performance of any industry, including petroleum industry, depends on the overall growth of domestic economy and the economies of those countries where its products and services are exported. Conversely, industries play an important role in the growth and development of any economy. It means, rise and fall in the economic activities in domestic and foreign economies may pose greater risk and challenges to the industry. The Indian petroleum industry is one of the vital industries in India. In this context, constant monitoring and improving performance of individual petroleum companies and setting benchmarks for relatively inefficient ones become crucial for the growth and sustenance of these companies. It will help the companies to improve their efficiency, which ultimately will lead to growth of the whole petroleum industry.

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