"The entire process of disinvestment has cast a huge question mark over IPCL's ability to make any commitment to IOC," they said. The project has been planned as a natural downstream integration to IOC's six million tonne (now being proposed to be expanded to nine million tonne) refinery in Panipat.

An expert team from IPCL has, over the last two months, been studying the feasibility of the plan considering that the petrochemicals industry the world over has been facing troubled times. As per current plans, if IPCL decides to go ahead with the project, it would consider up to 24 per cent stake in the project where IOC would pick up a 26 per cent stake.

Petrochemicals being the area of expertise for IPCL, it is only logical that the company participates in the project. Sources say that the think-tank of the corporation is of the opinion that paraxylene may not be a particularly good idea as it would call for a capacity of 2.5 lakh tonne and an investment of around Rs 1,000 crore.

Instead, the team believes that other options could be considered like linear alkyl benzene (LAB) and rubber derivatives like butyl rubber. Polyester fibres is also another alternative and these issues would be discussed with IOC.

Others who have been tipped to participate in the plan include the Oil and Natural Gas Corporation (ONGC) which will now partner IOC in all petro-related activities both here and abroad. Like IPCL, ONGC would confine its stake to 24 per cent so that the joint venture remains a non-government company. Petronas of Malaysia was also keen to team up with IOC in this project with a 26 per cent stake.

"IPCL's role in the petrochemicals plan stillremains uncertain but IOC will, in that case, scout for alternatives," sources said. The same will, in that case, apply to the petrochemicals project being planned by IOC in Nagapattinam, Tamil Nadu, where IPCL has been offered a role. Again, due to the ongoing disinvestment process, the corporation could just find its hands tied as regards making any commitment.

"It is not as if IPCL is not interested in the plan but the complexities of the government's offloading schedule have put a spanner in the works," sources said. For one thing, 25 per cent of the Centre's stake will be offered to a strategic partner who may decide that the IOC projects may not be worth an investment for IPCL. Till this issue is sorted out, there is no way the petrochemicals major can plan any major investments till the disinvestment of government equity is complete.

What could be particularly exasperating in the process is that there is really no indication how long the exercise will last. The deadline has been set for March 31,2000 but given past experience of bureaucratic hurdles, especially on pricing of the Centre's holding, this may well slip into 2001. As experts reckon, the wait may end up being a costly one for IPCL. Incidentally, IOC was at one stage exploring the option of a strategic alliance between its Gujarat refinery and the Baroda petrochemicals complex of IPCL. The idea was to ensure ready supply of naphtha from IOC's facility to the Baroda unit which needs this as feedstock.

The proposal was, in fact, mooted more than two years ago to the ministry of petroleum and indications then were that a merger of IPCL and IOC could also be considered. However, there was no progress since and the petrochemicals major began scouting for alternative arrangements like picking a stake in a new refinery. The thinking at that time was to take a ten per cent in either the six million tonne Bina project promoted by BPCL and the Oman Oil Company or the nine million Paradip refinery being planned by IOC and Kuwait Petroleum. However,the problem of accessing the feedstock, naphtha, remained as both locations (Bina and Paradip) were far flung from IPCL's Baroda unit.