The official said the panel opposed a proposal that the stakes be sold to the local oil industry as part of a grand merger plan aimed at consolidating it in preparation for open competition in 2002.

The consolidation plan, put forward by a former bureaucrat, envisages the government selling its stakes to a few key firms that would form one new, big downstream player.

"The Hydrocarbon Vision 2025 panel has sought higher and higher value for government's share through disinvestment," the official told Reuters. "It has said that Sengupta's proposal will not lead to higher value," he added, referring to the man who penned the plan to merge stand-alone refiners with refining and marketing firms.

An open market sale of the government's share through open bidding would fetch better prices for the state, said the official, who did not want to be identified. Sengupta proposes that five state-invested firms -- Cochin Refineries, Hindustan Petroleum Corp, Bharat Petroleum Corp, Bongaigaon Refinery & Petrochemicals and Numaligarh Refinery Ltd - be merged into one company "as big as Indian Oil Corp".

Indian Oil is the country's largest refiner and marketing firm with more than 50 percent market share. Cochin Refineries, BRPL and Numaligarh Refinery arestand-alone refiners with one plant each. Bharat Petroleum and Hindustan Petroleum are refining firms with rights to sell products in India's controlled market. Sengupta had suggested Bharat Petroleum and Hindustan Petroleum form a strategic alliance and buy out the government's share in Cochin, BRPL and Numaligarh.