Both the corporations, with free reserves totalling Rs 30,000 crore at the beginning of the current fiscal, had earlier put off decision on proposals to buy back their own shares.

Though the quantum of cross-holding under discussion was not clear, sources in the two corporations said buyout (equity swap) would be preferred over the buyback as it would be synergical to the business interests, sources said.

IOC sources, however, clarified that a final decision on buyback or buyout would be taken by the month end. ``We have discussed, deliberated and worked out a few options on buyback and it would be too premature to comment on these issues. Hopefully a decision is likely to be taken by month end,'' IOC chairman and managing director M A Pathan said.

IOC was alsoconsidering buyout options in two other companies though discussions were limited to ONGC at present, IOC sources said but declined to give details. They, however, said that buyout appeared to be a better option as it could give both the companies necessary financial leverage.

Besides, cross-holding between upstream (ONGC) and downstream (IOC) companies would be in mutual business interests, sources said. They also clarified that any decision on buyback or buyout would be independent of IOC's proposed disinvestment programme.

Finance secretary Vijay Kelkar as chairman of the tariff commission had floated the idea of cross-holding of equity last year while delivering a lecture in Mumbai.

Sources said that finance ministry was hoping to mop up about Rs 2500 crore through buyback of shares by six cash rich PSUs -- IOC, ONGC, Gas Authority of India (GAIL), Mahanagar Telephone Nigam (MTNL), Videsh Sanchar Nigam (VSNL) and National Aluminium Company (NALCO).

This was expected to bridge the likely gap ofabout Rs 2000 crore in the realisation of the disinvestment target, sources said. Even for the purpose of disinvestment, the government is pegging its hopes largely on IOC to mop up about Rs 1400 crore while another Rs 600 crore are expected from the GAIL issue and Rs 700 crore from VSNL. The government has already mopped up Rs 225 crore from selling shares of Container Corporation (CONCOR).