The ministry of petroleum and natural gas, it may be recalled, had recommended sale of government holding in these PSUs, either wholly or partially, to Indian Oil Corporation and Bharat Petroleum Corporation. The government believes that an open bidding route is a better option both as regards transparency as well as to ensure that the maximum revenue can be generated. This is because a host of financially strong MNCs will also be part of the bidding process.

Interestingly, Reliance had recently announced its intention to stake a claim for BPCL, HPCL, IBP and EIL. Sources say that the government is unlikely to put the two navratnas on the block but is keen to make a partial exit from both IBP and EIL. In the event of an open bidding process, only IOC and Reliance would be interested in EIL whereas IBP will have additional contenders like BPCL and HPCL.

A fair deal of speculation has been doing the rounds that IOC and Reliance would consider bidding jointly for HPCL and BPCL after 2002 through their joint venture company. However, officials denied this reiterating that the companies would chalk out their plans individually in the buyout process. The finance ministry made it categoric even six months ago that sale of equity in these oil PSUs would have to go through a process of open bidding. The petroleum ministry argued that the proposals were meant to protect the interests of the oil sector which would, otherwise, face the threat of a takeover from stronger companies. It was also of the view that such sale only translated into transfer of government equity from one company to another while assuring a good price in the bargain.

A presentation was subsequently made to the committee of secretaries on a mega oil recast plan which involved sale of the government's 55 per cent stake in CRL to BPCL and 51 per cent in MRL to IOC. Similarly, it would dispose of 33 per cent of its 59 per cent stake in IBP to BPCL and 26 per cent in EIL to IOC while offloading its entire equity in Bongaigaon Refinery and Petrochemicals (BRPL) to IOC. Experts say that the coming together of the stand-alone refining and marketing companies with stronger allies is the best bet for the oil sector. For instance, the alliance between IOC and BRPL is important as northeast crude for BRPL is unlikely after the commissioning of the Numaligarh refinery.

In this context, IOC's Haldia-Barauni-BRPL pipeline would become the lifeline for crude inputs to BRPL apart from the fact that the Fortune 500 company has a market share of over 90 per cent in the northeast.

As for the CRL-BPCL "marriage", observers say that there would not only be economies of scale but synergies in crude procurement. Customers would benefit from the saving on turnover tax. BPCL's terminal at Kochi is also an ideal backup storage to CRL. The two PSUs, it may also be mentioned, are joint equity holders in the Rs 535 crore Cochin-Karur pipeline being constructed by Petronet India. Significantly, CRL is vital to BPCL which desperately needs extra refining capacity to be able to feed its vast network of over 4,500 retail outlets.