The panel includes J Jayaraman, former chief of Cochin Refineries, AK Sinha, director (finance) IBP, AK Bide, director finance, Oil Coordination Committee and A Sachdev, managing director of Eicher Consultancy Services.

It was set up by the ministry of petroleum and natural gas recently to suggest probable alliances between refining and marketing PSUs with an eye on their survival in a deregulated environment. The idea was also prompted by an IBP proposal suggesting a tieup with Madras Refineries (MRL), Cochin Refineries (CRL) and Bongaigaon Refinery and Petrochemicals (BRPL).

The committee will not only examine the IBP plan but study in greater detail other possible "marriages" which would serve the interests of oil companies in the long run. The meetings with BPCL and HPCL are intendedtowards meeting this objective and it is quite likely that the two oil companies could press their claims for an alliance with IBP.

This would, in any case, make far more sense than the IBP brainwave of a tie up with MRL, CRL and BRPL. The logic of a stand-alone marketing company teaming up with a sole refiner sounds practical on paper except that IBP just does not have enough retail outlets to market the products of the two south-based refineries.

Hence, the committee would be more inclined to present a proposal linking IBP with BPCL, CRL and Numaligarh Refinery scheduled to be operational early next year. "This is the most viable option and there is no way IBP can be merged with either MRL or CRL given its low equity base and poor presence in the south," sources say.

In fact, a separate panel headed by Jayaraman had prepared restructuring proposals for MRL and CRL and was of the opinion that these stand-alone refiners would be able to survive in a deregulated environment only if they entered intotieups with strong marketing companies. The Jayaraman committee is believed to have recommended an alliance leading to a merger, if needed, of MRL and IOC and of CRL and BPCL.

"Though IBP is a stand-alone marketing company, it would be wrong to assume that this status alone would permit a marriage with a sole refiner like MRL or CRL," sources said. According to them, it would make more sense for IOC and BPCL to step into the picture as they have a strong marketing network in the south which would help CRL and MRL.

IBP is slated to subscribe to its 19 per cent equity in the three million tonne Numaligarh refinery and is well positioned in the eastern region to market its products. Likewise, this can also be done in the case of BRPL, a suggestion mooted by international consultant, Arthur D Little in its report on restructuring the Indian downstream sector four years ago. However, sources in the ministry say that IOC would prefer to continue marketing BRPL's products

The logic of roping in BPCL for theIBP alliance stems from the fact that the oil PSU is the major promoter of Numaligarh refinery and will, hence, help market its products through its own retail outlets. And with the Jayaraman committee suggesting a BPCL-CRL alliance, this would be the best bet for IBP in a deregulated scenario.