"This is the best alternative if BPCL has to save on costs in putting up two projects," sources said. The six-million-tonne Bina refinery, a joint venture of BPCL and Oman Oil Company, is scheduled for commissioning in 2004 while the Allahabad facility should be operational five years later.

BPCL has also planned a product pipeline from Bina to Kanpur via Jhansi which will be commissioned by Petronet India. A separate product pipeline will carry the output from the Allahabad refinery to Gorakhpur which is a potential consumptionzone.

At one point, BPCL was considering using the Paradip coast in Orissa as the receiving point for crude which in turn could be transported to Allahabad. A loop line was also conceived as a link to Bina but this has now been dropped and Gujarat will now be the "nerve centre" for the crude input.

BPCL and Oman will hold 26 per cent each in the equity of the Bina refinery whose commissioning has been delayed owing to environmental hurdles.

However, these are expected to be cleared in a month following a recent meeting at the Prime Minister's office with representatives of the Gujarat government.

The Oil and Natural Gas Corporation was keen on a stake of around 15 per cent in the project but has since dropped the proposal. The balance equity will now be offered to strategic and financial investors. The refinery cost, initially pegged at Rs 5,300 crore, is now close to the Rs 8,000-crore mark.

The Allahabad project was first conceived as a joint venture of BPCL and Shell but after the latter'swithdrawal, the oil PSU has decided to go it alone. As per present plans, BPCL will hold 50 per cent and offer the balance equity to public and financial institutions.

However, as sources say, there is a long way to go before these ideas are actually implemented so that both refineries are fully operational by 2010. The Bina project ran up huge cost overruns of around Rs 600 crore a year and the same could happen to the Allahabad refinery whose current outlay is projected at around Rs 6,500 crore.

"There are possibilities of glitches occurring en route but it is imperative for BPCL to start planning immediately. The fact remains that the company only has one refinery in Mumbai which can hardly satiate its vast network of 4,500 retail outlets," experts say. This explains why BPCL needs to increase its refining capacity in the years to come, they add.

McKinsey to chart out retail strategy

BPCL has zeroed in on international consultant, McKinsey, for an exercise on retail strategy. Work isexpected to begin in the next few weeks once all the formalities are in place. The corporation's greatest strength is its retail network which is now an exclusive strategic business unit following the recommendations of Arthur D Little and ICICI. McKinsey will do a detailed review of BPCL's sites and suggest appropriate ways to boost the PSU's brand. As the latest annual report states: "BPCL realises the necessity of having a strong retail brand. The emphasis is on moving from being purely a purveyor of fuel to a retailer meeting a wider range of customer needs like convenience goods, banking and communication.