" We have realised that we have our inherent strength in the form of an extremely strong supply chain and we will capitalise on this," top sources from these oil companies told The Financial Express. The trio has however, made it clear that this will not include joint participation in refineries, their core business, for which they have drafted individual plans and targets. However, should there be economies of scale in sourcing supplies (as in BPCL and HPCL, which have neighbouring facilities in Mumbai), the spirit of pooling strengths can be applied. Interestingly, IOC and BPCL are already in talks for an informal strategic alliance in key areas like crude imports, creating infrastructure for liquefied natural gas (LNG) etc where the driving force for such a tie-up has been to save on costs. Prior to this, HPCL and BPCL identified IT as an area where their skills could be pooled together besides sharing their own depots and terminals. A beginning was made in Manmad and Loni where BPCL and HPCL have theirterminals.

The two have now decided to drop their plans of commissioning individual facilities as it makes more sense to offer spare capacity to the others. Progress has been slow in strengthening the alliance between the two PSUs, but observers say that this will change as there is little time left before administered pricing is completely dismantled. The ministry of petroleum and natural gas, realising that the oil companies needed some kind of protection in a deregulated environment, worked on creating a joint holding company structure for HPCL and BPCL. A merger was also concieved prior to this though neither idea saw the light of day.

Observers aver that the best bet for these oil companies is to confine themselves to a strategic alliance in some key areas instead of getting "too ambitious or idealistic" and go in for a merger. They say that there is no way the cultural identities of BPCL, HPCL and IOC will permit smooth functioning, should this happen. An example of this can be cited in the case of the IOC-ONGC (Oil and Natural Gas Corporation) tie-up to participate in some crucial petro-related activities.

While nothing concrete has emerged in the last 20 months since the alliance was announced, industry sources say that the two companies have just not been able to comprehend the other's work culture and ethos. ONGC is a huge monolith where decision-making is unbelievably slow while IOC is a lot more aggressive and determined to make giant strides even if it means getting into a predatory role. This disparity has caused to the slow pace of the alliancethat seemed, on paper, a prudent thing to bring India's top oil majors together and create an entity to take on the might of global companies.