Top petroleum ministry sources said the ministry is working on a proposal to make out its case against the open bidding for IBP, the exclusive marketing company in the petroleum sector. The proposal will also list out the benefits resulting from the sale of IBP to oil PSUs rather than auctioning it to foreign players.

On being contacted for a confirmation, union petroleum minister Ram Naik told The Financial Express that his ministry is in the process of evaluating all the options towards the successful sale of IBP. The best option, as per him, would be the one which will fetch the government the highest price.

However, the minister added, "multinational oil majors are keen to get a foothold in the lucrative areas of marketing and given a chance would logically bid for IBP. This will definately fetch us a big price. However, my logic is that if the Indian oil companies including IOC and BPCL, can give us this price then why should we sell IBP to foreign companies? To me, going by the auctioning route would mean offering lucrative company like IBP on a platter", added Naik.

A clearance from the cabinet, will however, have to be sought before this proposal is implemented. It may be noted that IBP has been listed for disinvestment during the current fiscal by the cabinet committeee on disinvestment (CCD) and the petroleum ministry has been asked to prepare a roadmap towards a profitable sale of IBP.

Sources informed that contrary to some news reports, the petroleum ministry has not taken any decision as yet over selling its entire equity in IBP to Indian Oil and is open on accomodating both BPCL and HPCL in this sale process.

The ministry also feels that sale of government stake through the open bidding route would give an easy access to a foreign company to the 1,560 retail outlets of IBP, many of which are in prime locations, without any significant investments in infrastructure.

This would put IBP in direct competition with IOC, BPCL and HPCL after the year 2002 when the marketing is thrown open to the private sector.

IBP with a chain of 1,560 odd product outlets all over the country is an attractive proposition for any foreign company as nearly 50 per cent of IBP's outlets are located in the north, a region having the largest consumers of petro-products in the country.

The ministry, therefore, is in favour of the public oil companies acquiring the government equity in IBP provided they can offer competitive price vis-a-vis foreign companies.

A final decision over the exact modus operandi to be followed for IBP will be taken during the next few months. A whole lot of other issues besides the above options need to be looked into. These relate to the employees of the company who will be directly affected following the sale of IBP. Moreover, a decision on hiving off the subsidiaries of IBP into separate companies is also to be taken.