Apart from this, 26 per cent of the Centre's holding in Engineers India will be sold to Indian Oil and 33 per cent of its stake in IBP to BPCL. Hence, the Government will continue to hold 26 per cent in IBP as per the recommendations of the Disinvestment Commission.

As for Oil India, the PSU will pick up 10 per cent in the equity of the three-million-tonne Numaligarh Refinery which is scheduled to be fully operational by June. IOC will get the exclusive marketing rights for Bongaigaon Refinery and Petrochemicals even though there is no indication if the Centre plans to sell its stake in the PSU.

Back-of-the-envelope calculations show that BPCL will need to fork out roughly Rs 700 crore for buying out the Centre's stake of around 55 per cent in CRL and 33 percent in IBP. IOC's outgo for the Government's holding in MRL of around 53 per cent could be lower at barely Rs 400 crore while the estimate for EIL is not known. Either ways, the revenue will contribute to part-funding the disinvestment target of Rs 10,000 crore for the current fiscal. Sources have also indicated that four years down the line, when the oil sector will operate in a scenario of market-determined pricing, BPCL and Hindustan Petroleum Corporation will be encouraged to work more closely in a series of petro-related activities. This could also mean joint involvement in refining, marketing, exploration and production.

With the cabinet having given the go-ahead to the centre reducing its stake to 26 per cent in non-strategic PSUs (which would now include the oil companies), there could then be every likelihood of a crossholding arrangement being envisaged for HPCL and BPCL.

For the moment, however, it is clear that most of the recommendations of the Nitish Sengupta committee have been accepted.The oil companies had protested most of the suggestions and IOC, in particular, had insisted that stand-alone refiners could hold their own in a deregulated scenario.

Experts, however, have reiterated that it makes more sense for both MRL and CRL to be aligned with stronger marketing companies and that is exactly what the government is striving to do now.

The news in industry circles is that Bharat Petroleum is categoric that there is no way Cochin Refineries' identity would suffer because of this alliance. Though officials were not available for comment on the issue, sources have indicated that BPCL could consider a crossholding arrangement where a part of its equity (translated as a portion of the Centre's 66 per cent stake in the PSU), say 3 per cent or more, could be sold to CRL.

There would also be a CRL nominee on the board of BPCL while ensuring that the stand-alone refiner's board stays intact with possibly an addition from Bharat Petroleum. Experts say that MRL is better off with IOC whichhas the infrastructure in place to evacuate its production of base oil. Both BPCL and IOC were in the running to formalise marketing arrangements with MRL which, in turn, was awaiting the recommendations and consequent acceptance of the Sengupta Committee report. As for BRPL, IOC had reiterated that it was only keen on a marketing tieup with the company instead of buying out the Centre's holding. It is still not clear if the Government has come to a final decision on this aspect though all indications are that it is keen on disposing of its stake to IOC.

In the case of EIL, there were indications that IOC would have preferred a situation where an investment in the company would mean a complete exit by the Government. Sources say that Larsen & Toubro is also being considered for a stake in EIL and that, in the long run, the Centre would sell its entire stake to other strategic investors. Oil India's entry to the Numaligarh refinery with a 10 per cent stake could mean doing away with the Rs 350-crore publicissue. Oil India's equity will translate as an infusion of around Rs 100 crore and the balance could be funded by promoters, BPCL and IBP, who hold 32 per cent and 19 per cent apiece in the equity of the Rs 2,600-crore project. The government of Assam will account for 10 per cent.

This move implies that in the long run, Oil India would gradually be part of the fold that comprises BPCL, CRL and IBP. It also sends a clear signal that the Government is keen on a strong presence of the oil sector in the northeast.

Further, both BPCL and Oil India have similar cultural backgrounds (Burmah Shell and Burmah Oil Company) which would allow them to work together comfortably.