Efficiency of energy companies

What is it about?

Data Envelopment Analysis (DEA) is a non-parametric technique of computing efficiencies of decision making units using similar set of inputs to give similar set of outputs. The objective is to pick out inefficient units from a data set of similar units and thus analyze their performance amongst their peer group. Stock markets can be considered to be an economy’s barometer. Thus, evaluation of efficiency effectiveness of the companies operating at stock exchange is a valuable exercise. Further, if the inefficient units can be given a benchmark for improvement, they can increase their market value. The objective of the present paper is to evaluate the efficiencies of the Oil, Gas and Power sector of India for the companies that form a part of the CNX Energy Index and CNX 500 Index of the National Stock Exchange of India. A group of 24 units has been included in the study. DEA was applied for ranking the units as per their efficiency levels by computing their technical, pure technical and scale efficiencies. It was observed that only 9 units are efficient and the remaining 15 were inefficient. It was observed that ONGC is the most efficient unit and CESC Ltd is the least efficient unit in this group. Also in this group there are 10 units that show inefficiency due to their scales of operations. Further, benchmarking for the inefficient units has also been done in terms of inputs/outputs and the targets are suggested. It was observed that some of the Public Sector Companies like NTPC are using more inputs compared to the other units from the same group for achieving the same efficiency

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