The management of Bharat Bhari Udyog Nigam Ltd, the holding company of Burn Standard, was considering merging the two companies about two months ago as Bharat Brakes' revival was hit by poor market conditions.

Sources said Bharat Brakes had two options, one of which was the proposed merger and the other was modification of the existing revival package.

``The merger proposal has been cancelled when the financial factors were considered. The initial idea was to weigh the financial aspects of both these possibilities and then accept the cheaper option. In fact, the finance department of Bharat Brakes was against the proposed merger and supported a modified revival package,'' sources said.

Bharat Brakes, which makes air-brakes for the Indian Railways, came out of the Board for Industrial & Financial Reconstruction (BIFR) net only in June 1996. After reporting net profits successively in 1996-97 and 1997-98, the company suffered a net loss in 1998-99.

The parent company, Burn Standard, too received a Rs 158-crore revival package from BIFR, which was approved by the Union Government on April 16 this year.

The package does not mention anything about seven of the parent company's eight refractories, one of which is located at Gulfurbari in Bihar. There are two at Newar and Jabbalpur in Madhya Pradesh and the rest at Ranigunj, Durgapur, Ondal and Lalkuthi in West Bengal. The company's Salem refractory has been retained in the revival package.

The operating agency for Burn Standard, Industrial Development Bank of India and that for Bharat Brakes, Industrial Investment Bank of India, were also working on the two options.

While discussing the proposed merger about two months back, chairman and managing director of Bharat Bhari Udyog Nigam, RP Singh, had said it would help Bharat Brakes & Valves in reducing its expenses.

Singh had said: ``The revival package for Bharat Brakes & Valves is going haywire and somewhere one has to intervene. The market scenario has changed too. It has become more competitive and so we have to reduce our costs. By merging Bharat Brakes & Valves with Burn Standard we can certainly reduce the overhead expenses and get some sales tax advantages because the valves are ultimately used by Burn Standard for wagon manufacturing.''

Jessop & Co Ltd, another ailing wholly-owned subsidiary of Bharat Bhari Udyog Nigam, and just out of the BIFR net, is also facing the same problem of not being able to adhere to the revival package.

``Reduced wagon orders from Indian Railways for the current financial year have affected the revival process of this company too. Here also we are working on the modification of the revival package,'' sources said.

The National Productivity Council (NPC) was engaged this year to work out the productivity norms for Bharat Brakes & Valves. Earlier a private agency -- Development Consultants Ltd -- was pressed into service but its proposal was dropped since the workers were against any private company recommendations.