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Impact of regulatory framework on bidding behavior of firms: Policy implications for the oil & gas sector

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  • Sharma, Sunil
  • Sud, Mukesh

Abstract

India's economy is heavily dependent on foreign oil with the country importing nearly 80% of its crude requirement. Consequently, government of India has been keen to encourage private investment in this sector through attractive policy frameworks. The earlier New Exploration Licensing Policy (1999–2015) has met with limited success, especially in the context of attracting multinational firms, necessitating its replacement with Open Acreage Licensing Policy. The factors that resulted in the limited success of a regulatory framework are not fully understood, especially the impact of firms bidding behavior. This paper adopts a qualitative approach to examine bidding decisions of four petroleum exploration firms across several bidding rounds from a resource picking mechanism perspective. Our findings suggest that uncertainties in the regulatory framework were exploited by the firms resulting in policy inefficacy. Our research identifies four variants of uncertainties and three types of aggressive bidding behavior. We recommend that in order to increase policy efficacy, there is a need to decrease stance uncertainty. Further adoption of a behavioral strategy lens to examine regulatory policy can inform the extant literature.

Suggested Citation

  • Sharma, Sunil & Sud, Mukesh, 2019. "Impact of regulatory framework on bidding behavior of firms: Policy implications for the oil & gas sector," Energy Policy, Elsevier, vol. 131(C), pages 33-42.
    • Handle: RePEc:eee:enepol:v:131:y:2019:i:c:p:33-42
    DOI: 10.1016/j.enpol.2019.01.075
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