Oil PSUs’ merger may cut prices of petroleum products by 5%

While prices of oil stocks climbed up as union finance minister Arun Jaitley in Budget announced creation of a single oil & gas company through merger of the existing state-run oil and gas PSUs, experts feel that this can lower the prices of petroleum products by at least 5% since it will cut down on the overhead expenditure as well as on the operating capital.

While Oil and Natural Gas Corporation (ONGC), one of the largest companies in the country will lead the pack of 13 state oil companies that are being considered for the merger, the consolidated entity could rival the likes of Russia’s Rosneft and UK’s BP, both of which have huge financial power. According to T K Chatterjee, a project management consultant, a company like the Indian Oil Corporation maintains a highly uncompetitive executive to workmen ratio of 1:1.35, which bears a huge overhead cost.

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