The Disinvestment Commission had suggested that the centre reduce its holding in IBP to 26 per cent and offer 25 per cent to a strategic partner who could be vested with management control. The commission had made a similar suggestion for the Indian Petrochemicals Corporation (IPCL).

The petroleum ministry may not, however, be inclined towards implementing IBP's suggestion as it is working on a different strategy for the three refining companies. The Jayaraman committee -- which worked on a restructuring proposal for MRL and CRL -- has submitted its report. The panel is believedto have mooted proposals for MRL's merger with Indian Oil Corporation and CRL with Bharat Petroleum.

Though the suggestions are still under review, sources say that the petroleum ministry would be open to the recommendations made by the Jayaraman committee. Both MRL and CRL would be better off with two strong marketing partners like IOC and BPCL, instead of IBP, whose retail share is barely 5 per cent. An alliance with BRPL is, again, difficult as a committee is working on a merger proposal of the refinery with Oil India. If this finds favour with the petroleum ministry, there would be little hope of finding a suitable partner for IBP. It seems more than likely that priority will be accorded to its public issue, which will reduce the centre's holding to 51 per cent from 60 per cent.However, sources say that it is still possible to rope in IBP in one of the proposals suggested for MRL, CRL and BRPL. They refer to the Arthur D Little report on the oil industry, which had suggested that IBP market BRPL'sproducts instead of IOC's. The study was also of the view that to curb IOC's marketing dominance, MRL could be merged with CRL. IOC's market share could be allocated to the new merged firm equal to the volumes marketed by IOC on behalf of MRL and CRL.

Arthur D Little then recommended that IOC's retail product outlets, terminal and distribution assets be divested to the new MRL/CRL company in proportion to the allocated market share, "ensuring that the merged company acquires approximately equal market shares in every region of India except Assam". IBP could then replace IOC as the marketer of BRPL's products and take over the latter's retail outlets, terminal and distribution assets in Assam to match the allocated market share. Interestingly, Arthur D Little had also suggested that all pipelines and associated terminal facilities be separated and placed in a new firm to be run on a cost-of-service basis.

Both MRL and CRL have been lobbying with the government for exclusive marketing rights, but with thefirst phase of oil reforms having begun, it makes more sense to rope in a strong marketing partner. The alliance with these two stand-alone refiners would help IOC and BPCL get a foothold in the south, where Hindustan Petroleum Corporation already has a presence in its Vizag refinery. Several oil companies, both here and abroad, have shown tremendous interest in picking up a stake in IBP as it would give them access to its 1500-and-odd retail outlets. The names doing the rounds are IOC, HPCL and BPCL and, in the private sector, Essar Oil and Reliance Petroleum. Latest reports indicate that Saudi Aramco and Exxon Corporation of the US have expressed interest, though no confirmation of this was possible.