In a related development, the board of Cochin Refineries (now Kochi Refineries) has indicated that there is no objection per se to an alliance with Bharat Petroleum Corporation. The Centre holds 55 per cent in CRL and could consider selling this to BPCL.

Senior officials of the petroleum ministry have reiterated that no decision has been taken on divestment of the Centre's holding in stand-alone PSU refining companies.

However, the grapevine has it that IOC will pay around Rs 160 per share of MRL and back-of-the-envelope calculations show that this will work out to a little over Rs 1,000 crore for a 52 per cent share.

Interestingly, MRL has a marketing pact with BPCL which is barely a year old. Whether this will continue after the sale of Government stake remains to be seen. Sources say that IOC would prefer a change in control immediately as it desperately needs a foothold in the south where it has a relatively weak presence.

IOC has a marketing tie-up with Cochin Refineries but this will change should the Centre sell its holding in the company to BPCL. In that case, there will be a swap of marketing rights where IOC and MRL will get into a new alliance as also CRL and BPCL. There are other issues that need to be settled once IOC gets into the driver's seat at MRL. The former has only recently bought out the Centre's stake in Lubrizol India and is now in the additives business with Lubrizol Corporation of the US. MRL has, in a similar move, purchased 10 per cent of Chevron's stake in Indian Additives which is also in the same activity as Lubrizol India.

Sources say that there will be no way IOC can involve itself in Indian Additives as this would be in direct conflict with its own interests in Lubrizol India. This has, apparently, been conveyed by its American partner though no official confirmation could be received on this.

It is quite clear that the Centre is implementing a major part of the Nitish Sengupta committee recommendations on a recast proposal for stand-alone refiners. The panel had suggested that government stakes in IBP and CRL be sold to BPCL and in MRL and BRPL (Bongaigaon Refinery and Petrochemicals) to IOC.

According to top sources, in all these cases, the holding company will continue to be either IOC or BPCL with their respective subsidiaries being MRL/BRPL and CRL/IBP. However, as regards IBP, it seems more likely that the Centre will sell its 59 per cent stake in the marketing company through a process of open bidding. There have also been reports that IBP will be sold only to those private sector refiners in the country with substantial capacity which would only leave Reliance Petroleum and Mangalore Refinery and Petrochemicals as contenders.

The finance ministry had already objected to the Sengupta committee's suggestions saying that sale of government equity in PSUs should be through an open bidding route. It argued that this would not only be transparent but rake in more revenue as multinational oil companies could participate in the bidding process. The petroleum ministry, however, reiterated that it made more sense for the government to think of equity sale within PSUs as this would control their interests in a deregulated scenario.