Estimating technical efficiency of petroleum refineries using DEA and tobit model: An India perspective

Due to a small profit margin, and for sustaining the level of competitiveness in the market, evaluation of the technical efficiency of Indian oil refineries can contribute in improving the overall performance. However, the technical efficiency of Indian refineries has not been analyzed until today. Therefore, this study measured the technical efficiency of 12 Indian oil refineries from 2011 to 2016. This research has utilized a two-stage approach: (1) Data Envelopment Analysis (DEA) is used to evaluate the technical efficiency of refineries; and (2) Tobit Regression model was applied to explain the variations in the efficiencies with the help of diverse explanatory variables. The DEA results revealed that IOCL-Barauni, BPCL-Kochi and IOCL-Panipat refineries are found highly efficient between 2011 to 2016 with an average efficiency score of more than 95%. A Tobit regression analysis also suggested four significant factors as explaining variations in refinery efficiency. (C) 2020 Elsevier Ltd. All rights reserved.