The IOC team will finalise its report in the next fortnight following which a formal agreement will be signed with IBP. The latter has only recently entered into a similar arrangement with Bharat Petroleum Corporation which will see 50 per cent of its product requirements met. The balance will come from IOC which has the advantage of its refinery locations in the northern region.

"Eventually, IBP will benefit because it will get the best commercial terms from the two navratnas. BPCL has inherent advantages in its infrastructure like rail fed depots while IOC's biggest strength is the Kandla-Bhatinda pipeline which traverses across 1,500 km," sources say. This will immediatelytranslate into IBP reaping the benefits in the north and east from IOC and the south and west from BPCL. Prior to this, around 80 per cent of IBP's product requirements were met by IOC. The marketing company then decided to change its strategy as excess dependence on a single entity would be risky in a deregulated environment. Hence, the move to go ahead with BPCL and IOC equitably so that one would make up for the other's absence in a probable supply crisis.

The grapevine has it that IOC was not particularly pleased with IBP's decision to team up with BPCL as it meant the end of an otherwise comfortable arrangement. The Fortune 500 company then gave an attractive option to IBP where it could sell its popular Servo lubricants at its retail outlets. IOC's thinking at that time, and quite logical in the circumstances, was that it made more sense to consider an all-encompassing agreement with IBP where there would be no other PSU involved. This was, however, unacceptable to the latter which was as keen on anarrangement with BPCL.

Sources say that IOC's terms for a product assistance pact may not be as competitive as BPCL's given that it only needs to cater to 50 per cent of IBP's requirements. However, the broader framework will be similar in that products will be imported on behalf of IBP; purchase of IOC's product by IBP at refineries, installations, tap off points (TOPs)and depots and vice-versa; and use of IOC's infrastructure at installations, TOPs and depots by IBP for storage and handling of products.

The agreement between BPCL and IBP stipulates that the two PSUs will identify mutual areas of further interest to optimise resources and control distribution cost.

IBP enters domestic LPG segment

IBP has made an entry in the domestic LPG market and recently kicked off operations in Vandavasi, Tamil Nadu. The company plans to build up a chain of 81 distributors for LPG during the current financial and will now join a chain of names in the business that include IOC, BPCL, HPCL and privateplayers like Bharat Shell, Reliance Gas, Century Gas & Petrochemicals etc. IBP hopes to attain a market share of four per cent in the domestic LPG business in a year. It will focus on the semi-rural segments of the country where there is always a huge demand in households for cylinders.