Sources confirmed that discussions were on at an advanced stage, but refused to give further details. A final decision is expected to be made during the next 3-6 months.

HPCL already markets MRPL's products in its vast network of over 4,000 retail outlets. However, with the oil sector opening up and total deregulation barely three years down the line, experts feel that it makes sense for stand-alone refiners like MRPL (as also Madras Refineries and Cochin Refineries) to have formal marketing tie-ups in place with stronger companies.

MRPL is a joint venture of HPCL and the AV Birla group of companies where the partners hold stakes of 26 per cent each. The capacity of the refinery is being expanded from three million tonnes to nine million tonnes at a cost of around Rs 3,700 crore. The expansion would necessitate a marketing pact so that MRPL can look forother options in case HPCL does not absorb all the products.

Sources say the recent agreements between CRL and IOC as also Reliance Petroleum (again with IOC) could be useful inputs to MRPL for its own marketing pact with HPCL. MRL has also been in talks with both BPCL and IOC for finalising a similar arrangement and sources say that a decision would be taken in the next few weeks.

It remains to be seen what options MRPL would have in the event of HPCL not being able to buy all its products. The stand-alone refining company could, in that case, either export its products or even ask another marketing PSU to take the balance. This would then exactly be on the lines of the agreement Reliance has worked out where 50 per cent of its products would be marketed by IOC and the balance shared equally between BPCL and HPCL.

Interestingly, MRPL is also exploring the option of setting up its own marketing network when the oil sector is completely opened up in 2002. The company has invited presentations from topinternational consultants like Arthur D Little, Arthur Andersen, Boston Consulting Group, PriceWaterhouse Coopers and others. Such an exercise, experts say, is a time-consuming one which would require shortlisting a candidate first and then work on the need to set up a marketing network at all.

The fact remains that investing in retail product outlets is an expensive proposition and this could mean that MRPL's effort will be preceded by roping in a strategic partner who is tipped to pick a stake of up to 26 per cent also.

The grapevine has it that this player would be a top global name like Shell, Exxon or Mobil. The company concerned would obviously help MRPL in all aspects of marketing right from preparing a detailed feasibility report to sharing costs in putting up retail outlets.

The exercise is not expected to get over till 2002 . The Nitish Sengupta committee which submitted its report on restructuring the downstream oil sector was of the view that there is no way stand-alone refiners cansurvive in a free environment. Hence, the key recommendations included an alliance of CRL with BPCL and of MRL and BRPL with IOC. This, the panel felt, was the best bet for these companies though the report has little significance now given the political crisis.