Top IOC officials confirmed that the two companies are engaged in advanced stage of negotiations and that there was a strong possibility of the two joining hands for buying the Centre's stake in IBP.

RPL officials, on being contacted, refused to comment but at the same time did not deny the move either.

Sources in the oil industry view this as a logical move considering the fact that IOC and Reliance Petroleum already have a marketing agreement. Under the existing tie-up, IOC will market 50 per cent of controlled products from Reliance's 27 million tonne gigantic refinery in Gujarat for a period of 10 years.

IOC is already having around 7,000 retail outlets under its fold and Reliance Petroleum has also applied for independent marketing rights from the government where it has submitted plans of opening around 3,000 petroleum outlets throughout the country.

IBP has a strong brand equity and is considered as one of the best retailers of petroleum products in the country. IBP commands over 8 per cent of market share in India with a network of 1,500 retail outlets.

For Reliance, buying IBP is crucial as it does not have a supporting marketing network of its own for selling the petro-products from its Jamnagar refinery.

Even for IOC, this assumes significance as it will help the public sector oil navratana in taking over the competition, which it will have to face after the deregulation of the sector in April 2002.

It may be noted here that both the companies had also agreed to form a joint venture in the area of marketing for other petroleum products. However, this venture is yet to get the government's clearance.

In addition to RPL and IOC, other global oil giants which are also bound to throw their hats into the ring include global giants such as Shell and BP-Amoco besides other companies like TotalfinaElf, Saudi Aramco, Kuwait Petroleum, MRPL, BPCL, HPCL and Essar. All have been itching to get into the retail segment. In fact, buying the government's stake in IBP will offer all these interested players a readymade base with a stronger presenceDespite intensive lobbying by Reliance, Essar Oil and MRPL, the government is yet to take a decision over giving rights to market controlled petroleum products. This is despite the fact that these companies have already fulfilled the eligibility criteria of investing Rs 2,000 crore in the sector.

One reason for this could be that the government wants to first finish with the process of selling 33 per cent equity in IBP to a strategic partner.

HSBC Securities and Capital Markets has been selected the global adviser to manage the privatisation of state-run petroleum-products seller IBP.

The government has recently invited expression of interest from strategic players for buying its 33 per cent stake in IBP. The EOI has to be submitted latest by February 28.