"The first objection will come from the ministry of petroleum and natural gas which has maintained that there is no way the Government's holding in the four oil companies will come down below 51 per cent at least till 2002," top sources said. This is the time the administered pricing mechanism (APM) will be completely dismantled as per the time schedule of the Nirmal Singh committee report on oil reforms.

This apart, there is a fear in industry circles that the Government could compel both IOC and ONGC to go in for further crossholding to help out in the privatisation effort. Thetwo oil companies received a lot of flak from investors when they decided to go in for such an equity arrangement in January. This time around, both are firmly believed to be of the opinion that they will not "repeat the mistake" even if there is undue pressure to do so.

The cabinet nod also indicates that the Disinvestment Commission's views on the subject of privatisation have not been taken into account. This is bound to generate a fair deal of protest as the oil sector, though now classified as non-strategic, still remains highly sensitive so far as the overall interests of the country are concerned. This is especially relevant in the case of ONGC, experts aver, as it has a onerous responsibility of being the sole crude supplier.

The general reaction to the cabinet proposal is that the Government is in a tearing hurry to mop up funds to meet the disinvestment target of Rs 10,000 crore for the current fiscal. A ready source for such revenue would be the rich oil companies but the petroleum ministrywill not yield easily to the plan which could see a tug-of-war with the finance ministry in the days to come.

However, in the view of experts, this decision by cabinet could apply to the stand-alone refiners-CRL, MRL and BRPL-as also IBP, the oil marketing company. It is in this context that the recommendations of the Nitish Sengupta committee become relevant.

Hence, it would make sense to sell Government holding in these oil companies to either BPCL or IOC. And even while both CRL and MRL are keen on maintaining their identities as sole refiners, observers believe that there is no way they can survive this way in a deregulated scenario. Current estimates also indicate that such offloading of Government stake in these companies would contribute over Rs 1,000 crore to the exchequer.

There is also a cross-section of observers who believe that the Centre need not insist on a 26 per cent holding in non-strategic PSUs and should, instead, focus on making a total exit. "What is the big idea in insisting on a26 per cent stake in a company like Engineers India which is better off without Government control," they ask. The need of the hour is to think of a long-term strategy which would also involve some strong local private players who could contribute their skills to the management of these enterprises.