In his budget, the finance minister had also indicated that the centre's holding in non-strategic public-sector units (PSUs) be reduced to this level. IPCL falls in this category, and sources say the issue now is the mode and timing of such divestment of government holding.

The paper examines some key issues on the need to rope in a strategic partner with a 25 per cent stake as suggested by the commission. As sources say, there are four basic reasons to have such an ally, which include money, feedstock, technology and marketing. The only critical area for IPCL is feedstock, as it is quitecapable of holding its own in the other three spheres. Apart from butyl rubber, experts say the corporation is "comfortably planned" even in technology. The question, therefore, is - should a strategic partner be brought in merely to fill a gap like feedstock, which could be handled by some local players, especially some of the oil PSUs? Observers maintain that this is just not worth it or justifiable, as there are other pragmatic alternatives.

The issue of an alliance with IOC's Gujarat refinery is not a new idea, for it was suggested even three years ago to the ministry of petroleum & natural gas. In fact, at that time, a merger was also part of the brainstorming session, but for reasons unknown, the plan fell through. The idea behind such a move was to ensure ready and easy availability of naphtha from IOC's Koyali unit for IPCL's Gujarat complex. The others at Nagothane and Gandhar are gas-based. The two PSUs are now exploring various options of working together in the future.

For a start, apetrochemicals complex has been envisaged at Panipat, where IOC has its refinery, and if found feasible, will translateinto a 50:50 joint venture between IOC and IPCL.

This apart, proposals are being evaluated at Nagapattinam, Tamil Nadu, where IOC and Madras Refineries have planned a nine-million-tonne refinery, and where IPCL's probable role is also being examined.

Sources say the IPCL paper strongly supports the disinvestment commission's suggestion that government holding should be brought down to 26 per cent. "This will be good for the corporation, as it can have greater flexibility in day-to-day operations and ensure quick decision-making and more profits," they add. The government's stake, according to the paper, can be distributed to a clutch of investors like financial institutions, instead of offering a 25 per cent chunk to a strategic investor.

No comment is believed to have been made in the paper on the mode of dilution, as this is an issue that would largely depend on the state of themarket and an appropriate price for the IPCL scrip. The centre's stake will, in any case, be down to 51 per cent once the corporation is through with its $175-million foreign-currency convertible bond issue in 2002.

A recent UTI Securities Research report on IPCL says that it has the benefit of capital cost, as capacity has been created at a low cost. This results in a high return on average asset employed. The corporation, according to the report, also has a strong managerial and technical team to steer its operations. "The managerial team has been very successful in its strategy to build up capacity in a phased manner to consolidate its position in a liberalised business environment," it concludes.