The government now wants OIL to look into the possibility of a strategic alliance with Bongaigoan Refinery and Petrochemicals Ltd (BRPL), either by way of an equity swap or purchase of the latter's shares.

OIL has been told to look into the cost-benefit of investing in BRPL or in NRL, and select what the company would think should be the best option.

OIL would have contributed Rs 90 crore in the Rs 900-crore equity capital of NRL. The latter has been able to tie up a little over 60 per cent of this risk capital amount -- BPCL holds 32 per cent, IBP 19 per cent and the Assam government 10 per cent. If OIL would have contributed its 10 per cent share, NRL's brass was confident of mopping up the balance 29 per cent equity (around Rs 253 crore)through private placements. IDBI has already been appointed as the lead manager and has garnered, it is claimed, commitments to the tune of around Rs 150 crore.

It is not yet known whether by asking OIL to look at BRPL as an investment proposal, the government is planning to revive a move initiated by then petroleum secretary Vijay Kelkar to merge the two companies. Kelkar was of the view that a merger would create an integrated giant in the north east, with exploration and downstream facilities. The idea was to form a public sector company with sufficient musclepower to survive in a deregulated environment. A special group was set up to study the entire proposal but the move died soon after Kelkar was shifted out of the petroleum ministry.

Indeed, OIL was a little reluctant to shell out Rs 90 crore for a stake in NRL. A 10 per cent stake would have meant no management control. What is more, OIL would have been a small player in NRL where the big brothers would have been BPCL and IBP by virtue of theirlarger equity stakes. But the proposal reached OIL's board apparently on the basis of a report by Icra, which sugggested that the investment (which is being made at par value) would be an attractive one capable of providing a reasonable return. At one point, doubts were raised about how NRL's product will be evacuated from its location in upper Assam.

The NRL brass had planned to export the products to Bangladesh by riverways and to other neighbouring countries by road. A part of the capacity will also be ferried by railways.

The spat over equity contributions does not seem to have had any adverse impact on the NRL project. The company plans to go on stream on schedule next year. Substantial cost savings have reportedly been made in the project which will go to plug the gap, if any, in equity financing.

NRL will make three million tonnes of petroleum products, including ATF, LPG, HSD and kerosene. It will also manufacture 5.10 lakh tonnes of naphtha.