At that time, the objective of the partnership was to save on costs and do away with replication of facilities like depots and terminals. The companies were also keen on working jointly in areas like information technology, though both were categorical that this pooling of efforts would not apply to new refinery projects.

There was a semblance of progress when it was decided that the terminals at Manmad and Loni (owned by BPCL and HPCL respectively) could be shared instead of wasting valuable resources in building new ones. Since then, the core groups of the two companies have not even met to discuss either its implementation or to think of new proposals.

Sources say that the inherent problem lies in the "obvious cultural disparities" between HPCL and BPCL. Like other public sector units, they have their own work ethos which sometimes seems difficult for any outsider to appreciate or understand. While the idea of a strategic alliance seems fine on paper, executing it is a different ball game.

Interestingly, the ministry of petroleum and natural gas backed the proposal at the time it was being conceived and went one step further to work out the modalities of a holding company for HPCL and BPCL. The model was based on the structure for the Steel Authority of India (SAIL), which has different subsidiaries like Bokaro Steel Plant, Bhilai Steel Plant and Durgapur Steel Plant. Similarly, in this case, HPCL and BPCL would be the subsidiaries of the new holding company.

The idea apparently got the approval from the Nitish Sengupta committee too which was then working on a recast proposal for the refining sector. It seemed then that a merger between the two oil majors seemed a fitting solution to prevent needless competition between PSUs in a free market.

HPCL officials, in fact, said that this combined entity could take on the might of IndianOil and Reliance Petroleum, which had already announced their plans for a marketing joint venture. Thr truth remains that as much as cartelisation prevents erosion of market share, it takes away the basic spirit of competition in a deregulated scenario. Sources say that this could have stood in the way of building a strong alliance between HPCL and BPCL. Each company has its agenda in place and now with the possibility of acquiring Kochi Refineries, BPCL will have its hands full.

Observers aver that the best bet for these oil companies is to confine themselves to a strategic alliance in some key areas instead of getting "too ambitious or idealistic" and go in for a merger. They say that there is no way the cultural identities of BPCL and HPCL will permit smooth functioning should this happen. An example of this can be cited in the case of the IOC-ONGC (Oil and Natural Gas Corporation) tie-up to participate in some crucial petro-related activities. While nothing concrete has emerged in the last 20 months since the alliance was announced, industry sources say that the two companies have just not been able to comprehend the other's work culture and ethos.

The common perception is that ONGC is a huge monolith where decision making is unbelievably slow, while IOC is a lot more aggressive and determined to make giant strides even if it means getting into the role of a predator. This disparity has contributed to the slow pace of the alliance though on paper it seemed the most prudent thing to bring India's two top oil companies together and create an entity that could take on the might of global counterparts.