Lubrizol India is a 60:40 joint venture between the government and Lubrizol Corporation of the US. Over the last two years, the ministry of petroleum and natural gas has been working on a plan which would involve divestment of the government's stake to an oil public-sector unit (PSU) so that the final equity structure would be a 50:50 arrangement between Lubrizol Corporation and the PSU concerned.

At one point last year, the ministry indicated that it was in favour of the Oil & Natural Gas Corporation (ONGC) throwing its hat into the ring. ONGC agreed, and Lubrizol was believed to have given a deadline till December 1997 for the decision to be implemented.

The time schedule, however, did not work as plannedowing to a host of factors. One was the pool crisis, which saw outstandings to the oil companies mount to a figure of around Rs 18,000 crore and needed constant monitoring by the petroleum ministry. The other factor that delayed a decision on Lubrizol India was the political uncertainty at the centre.

By then, ONGC decided to opt out of the race and other PSUs were approached for the 50 per cent stake. The names doing the rounds at that time were the Indian Petrochemicals Corporation, Cochin Refineries, IBP and IOC, which eventually emerged the sole contender to buy 50 per cent of the government's stake. Sources in the petroleum ministry say that a decision on Lubrizol India will be taken in a couple of months.

According to them, the government is as keen on making an exit from the joint venture as "it makes little sense clinging on to a project that could be better handled by those in the oil business."

Anticipating the problems that could crop up while evaluating the centre's holding, the top brass inIOC is apparently of the view that seeking counsel from a merchant banker on the issue would save time. I-Sec is likely to be given the mandate as it has had a long-standing relationship with IOC.

Sources add that Lubrizol is yet to confirm its participation in the project with IOC. The American company is believed to have firmly stated that this would be an equal partnership with no question of IOC holding majority control in the venture.

Lubrizol had, apparently, made it quite clear to the government that it would not consider India as the nodal point in south-east Asia for its business if the December 1997 deadline was not met. It was believed to have contemplated Singapore and also China, though company officials refused to comment on the issue.

Lubrizol India was incorporated in 1966 and has its manufacturing unit in Turbhe village near Navi Mumbai. The company develops, manufactures and markets additive systems for automotive and industrial lubricants. It also develops other specialty chemicals. Asecond unit to manufacture extreme- pressure additives was commissioned at Taloja, Raigad district, in March 1995.

A new twist to the tale

A new twist to the Lubrizol India saga has occurred with the government's announcement in the budget on non-strategic PSUs. The finance minister had stated in his speech that government holding in this category of PSUs would be pared to 26 per cent. Those in this list included IPCL and IBP where the Disinvestment Commission had recommended that the centre's stake be reduced to 26 per cent.

The significant issue is this - does Lubrizol India fall in this category also? If it does, the American parent will have the prerogative to buy out 24 per cent of the government's holding to increase its own stake to 74 per cent. The centre's would be down to the required 26 per cent as befits a non-strategic PSU.

In this case, IOC's participation as a 50 per cent partner would not materialise. The last word on this will have to come from the government though insiderssay it would be more inclined to follow the 50:50 route instead of giving majority control to Lubrizol Corporation.