Refinery Selloff Seen As Ibps Best Option

Divestment in favour of public sector oil refineries is seen as the best option available to IBP, an oil public sector unit under the administrative control of the petroleum ministry.

Sources point out that such a move would be mutually beneficial as this would help beef up IBP's direct trade abilities as well as provide a boost for the refineries which are clamouring for marketing rights for a long time.

Refineries which are eligible for picking up stake in IBP include Cochin Refineries, Madras Refineries and the Numaligarh Refinery in which IBP is already a stake holder.

IBP currently has a woefully small market share in direct trade, at around 16 per cent in all products compared to other players in the field.

It is expected that this will soar in the event of such a combination, insiders said. In contrast, Indian Oil Corporation has a market share of over 69 per cent, Hindustan Petroleum Corporation around 50 per cent and Bharat Petroleum 45 per cent, in direct trade.

Two other options available for IBP are merger with other oil PSUs or floating a global tender to invite private players, both foreign and domestic, to pick up the 33.6 per cent that will eventually be offloaded according to the fifth recommendation report of the Disinvestment Commission.

It is believed that merger with other oil public sector unit s will not really help.

Sources say that while a merger with market leader Indian Oil Corporation will give rise to a mega entity, which would offer little opportunity for other oil public sector units to operate in a level playing field, the merger with PSUs other than Indian Oil Corporation would simply duplicate strengths and weaknesses.

Besides, it would be unfeasible to offer stake to foreign and domestic private players at this juncture as this may trigger off a political debate for a coalition government which is currently not passing through the best of times, feel insiders.

While such a divestment may be an experimental lesson for further deregulation, it will lead to problems related to rapid changes in managerial philosophy and style, which might seem threatening to the workforce, points out a source.

Besides private oil companies are not governed by the Oil Industry

Safety Directorate (OISD), which rules all oil sector PSUs.

Sources feel that there are at least four multinational companies (Caltex, Mobil, Shell and Esso) who have a presence in the country through their joint ventures in the lubes segment, waiting for the oil sector to open up.

Similar, is the case with Reliance Industries and Essar, two other major players in the private sector. IBP currently has a woefully small market share in direct trade, at around 16 per cent in all products compared to other players in the field