Minority stake sale in IOC is a deviation from the stated government policy, which favours strategic sale along with handing over management control to the private party.

On a number of occasions, disinvestment minister Arun Shourie, his predecessor, Mr Arun Jaitley, and finance minister Yashwant Sinha have expressed their predilection for a strategic sale of public sector undertakings (PSUs).

This was vehemently opposed by Mr Naik, who argued that the oil sector is of "strategic importance." He cited security reasons, national interest etc, to buttress his arguments. This was despite an earlier Cabinet decision which accorded the strategic status to only three sectors - defence, Railways and atomic energy.

Mr Naik, however, persisted with his "strategic" arguments. In the course of negotiations with the DoD, he relented slightly, agreeing to privatise IBP. But he has had the last laugh: now, the DoD has veered around to Mr Naik's view that the oil sector has "some strategic importance."

So, what Mr Naik said in October 2000 would prevail: "ONGC, IOC and Gail would be the flagship companies of the government and the government would continue to hold minimum of 51 per cent equity in these companies." In other words, goodbye, privatisation! The DoD does not see the softening of its stand on the oil sector as a "defeat." Top officials in the DoD told The Financial Express that it would be wrong to see the entire episode as "a prestige issue," in which one side wins and the other loses.

Giving up oil sector privatisation means a big blow to not only the entire sell-off process, but also economic reforms, for oil is a major chunk of the economy. In any case, the sector would be thrown open on April 1, 2002.

Would the state-run IOC, ONGC and Gail would be able to compete in the liberalised market? Nobody is sure of the answer.