At present, the products of MRPL's refinery are marketed by HPCL through its vast network of retail outlets. However, the company is keen on carrying out this function directly as the returns will be far more attractive than merely investing in refining.

MRPL shortlisted Andersen Consulting from a list that included McKinsey, Arthur D Little, Boston Consulting Group and PricewaterhouseCoopers. The entire selection exercise lasted nearly a year and sources say that preparation of the report could take up to six months.

The first job on hand would involve checking out if there is a need in the first place for MRPL to enter direct marketing of products given the huge outlay that would be required. Setting up a retail product outlet alone requires an investment of at least Rs 2 crore and marketing giants like HPCL, BPCL and IOC have over 15,000 between them.

However, this may not be such a major issue as MRPL has already indicated that it would like to induct a strategic partner with a 26 per cent stake. The companies in the running include Shell, Total, Exxon-Mobil, Kuwait Petroleum Corporation and Conoco. The candidate eventually chosen as partner will also invest in MRPL's marketing infrastructure.

Experts say that the ideal starting point for this plan would be the south keeping in mind the Rs 1,100 crore Mangalore-Bangalore pipeline which will be commissioned towards the end of 2002. The network will carry products from MRPL's refinery through deficit zones in Karnataka and Andhra Pradesh and this is where marketing support would be appropriate. MRPL and HPCL plan to hold 13 per cent each in the equity of the pipeline with the balance to be taken up by Petronet India and other strategic investors.

MRPL's interest in a foray into marketing stems from the fact that this would be the best way to make up for the disadvantages of being a stand-alone refiner. This also applies to PSUs like Madras Refineries (MRL), Cochin Refineries (CRL) and Bongaigaon Refinery and Petrochemicals (BRPL) whose products are being marketed by BPCL and IOC. This is the reason why the government is keen on a merger of sole refiners and stronger marketing allies, a proposal that is now awaiting cabinet approval.

HPCL and MRPL are, incidentally, in the process of drawing up a formal marketing pact which, sources say, will be on the lines of those executed between CRL and IOC, BPCL and MRL and between IOC and Reliance Petroleum. There is every possibility of a "take-or-pay" clause inserted in the agreement with HPCL though this could not be confirmed from company officials.

Multinational oil companies keen on getting a foothold in India's oil sector have made it clear that they would require access to marketing before contemplating any investment in refining. Shell and Saudi Aramco, in fact, presented a unique proposal to the petroleum ministry which involved creation of a marketing company whose assets would comprise the retail outlets of a PSU. The plan was rejected following strong opposition from the oil companies.

Company in the red

MRPL has reported a net loss of Rs 83.59 crore for the second quarter of the current financial, compared to a profit of Rs 12.88 crore in the same period last year. Net sales/income from operations was, however, higher at Rs 720.53 crore as against Rs 586.95 crore. Total expenditure for the quarter was Rs 723.37 crore (Rs 512.71 crore). In a press release, MRPL has attributed the poor results to the lower difference between global price of crude and products and to the lopsided duty structure on crude oil and finished products. However, company officials maintained that the loss figure was down by Rs 40 crore from the first quarter and cost-cutting efforts would continue for the rest of the year.