HPCL has reportedly been silent on the issue which is expected to be taken up in MRPL's forthcoming board meeting.

Sources say that the company's request is legitimate as both IndianOil and Bharat Petroleum Corporation share marketing margins with their stand-alone refining allies like Cochin Refineries (now Kochi Refineries) and Madras Refineries (rechristened Chennai Petroleum Corporation).

``If HPCL does not accede to MRPL's request, the company could think of alternative strategies like seeking other marketeers like IOC and BPCL,'' sources say. There have also been unconfirmed reports that MRPL is considering a formal ``take-or-pay'' agreement with HPCL on the lines of what stand-alone counterparts like Reliance Petroleum (RPL), CRL and MRL have drafted with their marketing allies.

MRPL is a joint venture of HPCL and the Aditya Birla group of companies. It is a stand-alone refining company which is reliant on HPCL for marketing of its products. The retail trade is a big money spinner and this has prompted MRPL to ask HPCL for a share of its marketing margins.

The company has been going through hard times because of wafer-thin refining margins and a skewed import duty structure on crude and products. The only way it can set right the balance is to go in for direct marketing of products by the time administered pricing mechanism (APM) is completely dismantled in April 2002.

It is but obvious that there is no way MRPL can hope to replicate a retail product chain on the lines of HPCL which has over 4,000 outlets all over the country. The company, however, hopes to make a small beginning in the south and observers believe this could be in the consumption zones of Karnataka and Andhra Pradesh.

The plan for direct marketing could dovetail with the Mangalore-Bangalore pipeline scheduled to be commissioned in November 2002. HPCL is the lead company of the Rs 700-crore project which will evacuate products from MRPL's nine million tonne refinery. This is a strategic network which has caught the fancy of other investors like RPL, IOC and Oil India.

To supplement its marketing endeavour, MRPL has been in talks with Kuwait Petroleum Corporation (KPC) and TotalFinaElf of France to pick a stake in the refinery. The strategic partner will be offered 26 per cent equity which will pave the way for an entry into the profitable marketing arena.

KPC's interest in the project could stem from the fact that there will be a ready buyer for its crude, akin to the agreement it has with IOC.

TotalFinaElf, on the other hand, is more keen on marketing and an investment in refining will only be perceived as a mandatory requirement to enter the lucrative retail scene. It now remains to be seen if HPCL will continue to be the exclusive marketeer of MRPL's products post-2002.

Andersen for MRPL foray into marketing
Andersen Consulting has suggested that MRPL enter the direct retail trade for petro-products, an effort that will begin in an era of market-determined pricing. MRPL has, for long, debated on a foray into marketing and roped in Andersen to help out in this effort. Sources say that the joint venture company will be better off promoting its own brand in the market rather than stay under the HPCL banner permanently. Andersen is still to submit a final report though the initial feedback has been ``encouraging.''