Reports doing the rounds in New Delhi indicate that IOC is keen on picking up 26 per cent in the Rs 1,100 crore pipeline where the present equity structure involves HPCL and Mangalore Refinery and Petrochemicals holding 13 per cent each and Petronet India 26 per cent.

HPCL is believed to have stated that the project already has two oil companies accounting for 26 per cent of the equity and any further representation from the petroleum industry should be confined to five per cent. While HPCL officials were unavailable for comment on the issue, sources said that the matter would now have to be referred to the board of Petronet India.

The original equity pattern of MBPL involved HPCL, MRPL and Petronet taking up 26 per cent apiece with the balance proposed to be offered tofinancial and strategic investors. Subsequently, MRPL and HPCL pared their stakes to 13 per cent each and this was the time IOC reportedly expressed its interest in taking a 26 per cent stake.

HPCL's objection to IOC's entry is still not clear as the PSU holding in MBPL will only be 39 per cent (26 per cent of IOC and HPCL's 13 per cent) well below the 51 per cent mark which would make the project government-controlled. This also holds good for the Cochin-Karur pipeline where Bharat Petroleum Corporation and Cochin Refineries hold 26 per cent and 23 per cent each as also the Chennai-Tiruchi-Madurai network where IOC and Madras Refineries will jointly account for 49 per cent.

Experts say that it makes enormous sense for IOC to participate in the equity of MBPL as the pipeline will not only carry products from MRPL but also imports from Mangalore and those diverted from Kandla. With mega refineries like Reliance Petroleum and Essar Oil adding to the refining capacity in Gujarat, the need for an additionalpipeline could ease the traffic on the Kandla-Bhatinda network.

IOC also has sufficient expertise in pipeline management and would therefore be an ideal support for the project, observers add. The Fortune 500 company has terminals at vital points along MBPL which would be of great help as regards the product distribution pattern.

While there is still no indication why HPCL and MRPL decided to pare their stakes in the pipeline, unconfirmed reports state that MRPL was "peeved" as it was not been given the right to nominate either a chairman or managing director for the pipeline. The government is believed to have made it clear that this prerogative would be confined to Pertronet and HPCL where each would nominate either the chairman or MD.

MRPL has apparently been pressing for this right for quite a while now and the government's stand could have prompted the company to reduce its stake in MBPL. Also, the fact that HPCL is the co-promoter of MRPL may have compelled the two companies to pare their equitycontributions for the project.

It may be recalled that the MRPL board had, only recently, given the go-ahead to take a 26 per cent stake in the pipeline. Till then, there were indications that the company was having second thoughts on participating in the equity as HPCL had already agreed to subsribe to its 26 per cent portion.