Estimation of gross refining margin of Indian petroleum refineries using Driscoll-Kraay standard error estimator

Highlights: • The refinery with higher complexity increases gross refining margin. • The specific energy consumption helps in increasing gross refining margin. • The complex refinery consumes more specific-energy. • Higher fuel consumption and loss increases costs. • Higher fuel consumption and loss reduces gross refining margin. The prudent combination of technological, economic, and other factors can enhance the performance of any manufacturing unit. Indian petroleum refineries are no exception to this. In this background, an effort has been made to estimate the gross refining margin using the Fixed Effect and Random Effect Models as well as the Models of White, Rogers, and Driscoll-Kraay standard error Estimators for seven Indian refineries for the period between 2008–09 and 2018–19. The study found that complexity, specific energy consumption, and distillate yield significantly and positively influenced gross refining margin, whereas refinery fuel & loss (loss due to evaporation, flaring, and seepage and chemical losses) and heavy yield significantly and negatively influenced it. The study recommends that Indian refiners should invest more in secondary process units as well as advanced technology to enhance the complexity and distillate yield in order to increase the gross refining margin. They should adopt waste heat recovery, flare gas recovery, and other best operating practices in order to reduce fuel and loss of refinery to increase the gross refining margin. Therefore, policies to optimize the utilization of resources through technological intervention and investment will certainly enhance the gross refining margin of Indian refineries.