Petroleum Industry in India

Petroleum Industry in India

The Indian petroleum industry began to grow very slowly over the years. It started mainly in the northeastern part of India especially in the place called Digboi in the state of Assam. Until the 1970s, the production of petroleum and the exploration of new locations for extraction of petroleum were mainly restricted to the northeastern state in India. However, an important advancement in the Indian petroleum industry came with the passing of Industrial Policy Resolution in 1956, which emphasized the focus on the growth and promotion of industries in India. Another major incident was the discovery of Bombay High, which changed the scenario of the Indian petroleum industry drastically. The Indian petroleum industry was sponsored completely by the government, and the management control of the petroleum industry and all its related activity was entire with the government. The petroleum industry has the most significant role to play in changing the Indian economy from an agrarian economy to an industrial economy.

Growth and Evolution of Petroleum Industry in India:

The petroleum industry includes the global processes of extraction, exploration, refining, transporting (often by pipelines and oil tankers), and marketing petroleum products. The largest volume products of the industry are gasoline (petrol) and fuel oil. Petroleum (oil) is also the raw material for many chemical products, including solvents, pharmaceuticals, pesticides, fertilizers, and plastics.

The adoption of liberalization and privatization in July 1991 changed the situation again. The government started allowing the Indian petroleum industry to go into private hands and also entered into government and private joint ventures. The government also eased the stringent regulatory process in the petroleum industry. This gave a tremendous boost to the petroleum industry in India. The industry began to grow at a tremendous pace. The production of petroleum and petroleum products also showed a significant rise.

The petroleum industry in India is particularly favourable for foreign investment because the industry is one of the fastest growing segments, and it has shown a staggering growth rate of around 13% in the recent past. Apart from the tremendous growth rate in the Indian petroleum industry today, it also boasts technology of international standards, easy availability of infrastructure at very cheap rates, high demands for petroleum products, and increased spending habits of the middle-class people. All these factors make investments in the Indian petroleum industry an attractive proposition for foreign investors.

Along with liberalization and privatization, the overall economy of India grew. Also, the demand for petroleum products increased at an annual rate of about 5.5%. The demand for petroleum and petroleum products still continues to grow, and there is great potential for investors to invest in the sector and gain valuable returns while meeting the increasing demands for petroleum products.

It has thus attracted new foreign investments. Some of the main petroleum products that are manufactured for trade with foreign countries are petroleum gases, gas oil, propane, distilled crude oil, naphtha, ethane, and kerosene.

Players in the Industry:

The various competitors are available in the petroleum industry which including the government and the private sector. most of the petroleum companies are huge operations and with billion dollar balance sheet. The oil and gas production and distribution are dominated by government-owned companies which are heavily regulated excepting for Reliance Industries. After liberalizing the operations of the companies like Indian Oil Corporation Ltd (IOCL), Hindustan Petroleum Corp. Ltd (HPCL) and Bharat Petroleum Corp. Ltd (BPCL) run billions of dollars in losses as they are forced to sell petroleum products at below their cost.

The policies of the government are mostly informal compensating these companies through money transfers and bonds. some government companies like OIL India, ONGC and GAIL which operates in the production and have to bear less of the subsidy burden have grown and performed very well. In the private sector companies like Aban Great Offshore, Essar and Reliance have managed to grow rapidly as well with changeable degrees of success.

Here is the list of the major petroleum Companies in India:-

Indian Oil Corporation Ltd (IOCL)

GAIL India

Reliance Industries

Bharat Petroleum Corp. Ltd (BPCL)

Hindustan Petroleum Corp. Ltd (HPCL)

ONGC Corporation

Contribution of the industry to India:

The petroleum industry has contributed heavily to the manufacturing industry in the country through foreign trade in petroleum products. Rapid globalization, fast-changing technology, and the changing methods in the way business are conducted have brought significant changes and enormous opportunities for petroleum companies in India to flourish and expand their operation to global markets.