IBP has been hard pressed to generate cash for its various expansion programmes largely because it found itself in the midst of a privatisation programme initiated by the government two years ago. This involved selling 33 per cent of the Centre's stake to a third player and the long exercise has finally resulted in the finance ministry rejecting the proposal.

"Valuable time has been lost and though IBP is not starved for cash, it certainly needs funds for various important programmes in 1999-2000," sources said. The company had sought government permission in 1997 to go in for a public issue which would have raked in close to Rs 50crore. Weak market sentiment ensured that this plan was put on the backburner.

IBP, subsequently, planned a Rs 382 crore rights issue which would have offered the government an exit option from the company. Latest reports suggest that the petroleum ministry is inclined to give the go-ahead to this proposal though this could not be confirmed from official sources.

The third option relates to settlement of dues from the OCC which amount to around Rs 100 crore. Sources say this should not be too late in coming except that it would not be a long term solution to the need for funds. In this context IBP's 19 per cent stake sale in Numaligarh refinery could become relevant as it would generate close to Rs 180 crore.

Bharat Petroleum Corporation is the co-partner in the project with a stake of 32 per cent. The navaratna will be offered the first right of refusal for IBP's equity holding though it is unlikely if it will accept the offer. Whether other oil PSUs like the Oil and Natural Gas Corporation could beroped in remains to be seen as experts reiterate that the upstream major has little to gain from being a shareholder in the Numaligarh refinery.

It is too clear that there is no way the ministry will allow IBP to exit from the project as it is all set to be commissioned shortly. There is also little possibility of either BPCL or another oil PSU buying out the company's stake as it would serve no strategic purpose. The ministry would be more inclined to give the okay to a rights issue (which would be pruned) and settling IBP's dues from the OCC.

The last two years have been particularly trying for IBP as it just could not go ahead with any programme to raise funds. The company found its hands tied while the Nitish Sengupta committee report was being prepared. There was some hope when the ministry suggested that BPCL buy out the Centre's stake in the PSU but this has now been shelved. Thus, even while awaiting bids from global companies, as per the directive of the finance ministry, IBP has made it clearthat it first needs to sort out its funding requirements.