India has about a dozen such state-run companies, including Oil and Natural Gas Corp., the biggest of them. Other major energy companies are Indian Oil Corp., Gas Authority of India, Bharat Petroleum Corp. and Hindustan Petroleum Corp.

 

If the top eight of these companies which have a combined market value of over $100 billion are merged, it will create a conglomerate able to compete with international players such as BP and Royal Dutch Shell. 

 

"We see opportunities to strengthen our CPSEs [central public sector enterprises] through consolidation, mergers and acquisitions. By these methods, the CPSEs can be integrated across the value chain of an industry," Finance Minister Arun Jaitley said in his annual budget speech on Wednesday.

 

"It will give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders," he said.

 

There are possibilities of such restructuring, Jaitley said, in the oil and gas sector. "We propose to create an integrated public sector 'oil major' which will be able to match the performance of international and domestic private sector oil and gas companies," he added.

 

In India, Reliance Industries is the biggest private sector player in the field. It owns the world's largest oil refinery complex in Jamnagar in western Gujarat state with a production capacity of 1.24 million barrels a day.

 

Oil Minister Dharmendra Pradhan pointed out that the merger process would not simply fold all the companies into one. "It will not be wise to put all eggs in one basket. There will be multiple companies," he told the Economic Times, adding that the state-run companies will decide on mergers and acquisitions on their own. "The government will not micro manage [the merger]."

 

Each new company will be engaged in the entire value chain exploration and production, refining and marketing the minister told the newspaper, adding that he expected the Indian companies to enter the league of BP and Shell.

 

The oil and gas sector contributes about 15% to India's gross domestic product. A country of over 1.25 billion people, India is the third largest consumer of crude oil and petroleum products globally, accounting for 4.5% of world oil consumption in 2015, behind the U.S. and China.