Reform Raises Efficiency of Oil Refining Public Sector Enterprises in India

The study compares the performance of the oil refining PSEs of India between two stretches each spanning over nine years; one ending in 1999-00 – the APM regime – and the other beginning in the next year – the post-APM regime. The basic question being asked here is whether undoing of the APM led to improvement in technical efficiency of the public sector refineries. The study uses stochastic frontier approach and introduces heterogeneity of companies. Use of service capital index, rather than the asset values, as capital input in the production function is an important innovation of the present study. It concludes that the relaxation of regulatory constraint on the public sector refineries by undoing the APM has paid off even within the corporate framework of public sector enterprises.