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Murali Gopalan
Mumbai, Oct 16: The Indian Oil Corporation (IOC) is believed to have vehemently objected to the proposal of an alliance between IBP, Madras Refineries, Cochin Refineries and Bongaigaon Refinery & Petrochemicals. The ministry of petroleum and natural, however, feels the plan needs a careful look.
The issue came up for discussion in a meeting convened by the ministry on Wednesday with the oil companies. IBP has been pressing for such a tie-up, as in the opinion of its top brass, this would be the best bet in a deregulated scenario.
But IOC's contention is that it has been marketing the products of the three companies for years now, and hence, sees no reason why this should discontinue. Madras Refineries has also not been too enthusiastic about teaming up with IBP and is known to have made clear its preference for IOC.
In Cochin Refineries' case, sources reiterate that the refining company is open to the idea of working with Bharat Petroleum (BPCL) and this has prompted the ministry to think of analternative arrangement. This will involve a four-way arrangement linking IBP, BPCL, Cochin Refineries and the to-be-commissioned three-million tonne Numaligarh Refinery.
This could put an end to other problems related to IOC's present marketing arrangement involving both Madras Refineries and Bongaigaon Refinery. Cochin Refineries will, however, no longer be in its ambit, and it remains to be seen if this is acceptable to IOC. In any case, a restructuring committee headed by former Cochin Refineries chief J Jayaraman had suggested an alliance/merger between IOC and Madras Refineries as also BPCL and Cochin Refineries. This, sources say, is bound to find favour with the petroleum ministry and is under review.
IBP was reviewed by the disinvestment commission, which had recommended that government holding in the oil public-sector unit (PSU) be reduced to 26 per cent from 60 per cent. It had also suggested that 25 per cent be offered to a strategic partner, which did not go down well with IBP. In fact, oilPSUs like BPCL, Hindustan Petroleum (HPCL) and IOC were believed to have expressed their interest in picking up the 25 per cent stake.
IOC has a vice-like grip in marketing, with a share of about 55 per cent, followed by BPCL and HPCL with around 20 per cent each. IBP accounts for barely 5 per cent, but viewed in an alliance with Madras Refineries, Cochin Refineries and Bongaigaon Refinery, could become a formidable player as this will eat into IOC's share. International consultant Arthur D Little, in its study of the domestic downstream sector, had also recommended a pruning of IOC's dominant status by allowing IBP to market Bongaigaon Refinery's products and merging Cochin Refineries and Madras Refineries.
Experts believe that a pragmatic option will be to continue with the arrangement of IOC marketing both Madras Refineries' and Bongaigaon Refinery's products, while IBP, BPCL, Cochin Refineries and Numaligarh Refinery can work together. IBP would be justified, as it has a 19 per cent stake in theNumaligarh project, where BPCL is the biggest shareholder with 32 per cent. With Cochin Refineries included, the marketing structure could translate into an overall share of around 28 per cent and hence, the best bet for the downstream sector.
Rumours galore on transfers:
While the IBP alliance proposal took centrestage during the last two days, the grapevine is abuzz with rumours on other developments in the industry. The first is that the boards of the three oil PSUs - IOC, BPCL and HPCL - will have a new member, who will replace Nirmal Singh, joint secretary in the petroleum ministry. He is believed to join the boards of both Madras Refineries and Engineers India, though no official confirmation was available. The other bit of speculation doing the rounds concerns Madras Refineries chairman V Shyamsundar, who was reportedly not present at the meeting. Sources in New Delhi say there are other private companies keen on roping him to head their projects. Shyamsundar was unavailable forcomment.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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