The Government is also working simultaneously on a plan which could involve sale of its 59 per cent equity in IBP, the stand-alone oil-marketing public-sector unit (PSU). The current thinking is that it makes little sense for stand-alone refiners and marketeers to survive on their own in a deregulated environment. Such sale would also be a vital input to the disinvestment target of Rs 10,000 crore set for the current fiscal.

However, no decision has been taken on Cochin Refineries (CRL), though logically, this should go to Bharat Petroleum Corporation (BPCL), which needs additional refining capacity for its vast network of retail outlets. CRL has been maintaining that it could hold its own post-reforms, but experts say this is impossible.

A proposal first drafted by the Nitish Sengupta committee more than a year ago had mooted 33 per cent sale of the Centre's holding in IBP to BPCL, and its entire holding in MRL and BRPL to IOC. It had also sought sale of its stake in CRL to BPCL. The Centre subsequently set up various sub-committees to work on Hydrocarbon Vision 2025, and suggest a suitable recast proposal for the oil sector. The report will be finalised in the middle of February.

Sengupta had subsequently recommended that IBP be sold to a private or joint-sector refinery with substantial capacity in India. This would have narrowed down the list of candidates to Mangalore Refinery & Petrochemicals and Reliance Petroleum. However, sources say an open-bidding process is the more likely option for IBP. As regards MRL, acquisition of the PSU makes sense for IOC, as it would not only give it a foothold in the elusive southern market, but also access to its lube production plant. MRL is one of the three oil PSUs with this facility, the other two being IOC's own at Haldia and that of Hindustan Petroleum Corporation at Mumbai.

BRPL has a small refinery with a crude processing capacity of 2.5 million tonnes and a petrochemical complex consisting of xylene, DMT, and PSF units. While the petro-products are marketed by IOC, BRPL directly markets the petrochem output, as also petroleum coke from the refinery.

BPCL has a marketing pact with MRL (while IOC has one with CRL), but has entered into a product-swap arrangement with IOC, which will help the two marketing giants consolidate their shares in the northern and southern regions.

This will involve BPCL sourcing the key decontrolled products -- furnace oil, naphtha, bitumen, low sulphur heavy stock, and light diesel oil -- from IOC's inland refineries in Koyali, Barauni, Mathura, and Panipat, and selling them in the northern region.

In turn, IOC will buy products from BPCL in the south (which, in turn, would have sourced them from Madras Refineries, with whom it recently entered into a 10-year marketing agreement), and sell them in the region. This would do away with the need to import products at the coast and transport them to the markets concerned.