In view of the dismantling of the administrative pricing mechanism (APM) and complete pricing and marketing freedom for the oil sector from the year 2002, the Sengupta panel had suggested mergers and amalgamation of independent refineries and marketing company (IBP LTD) with other national oil companies.

On the other hand Finance Ministry opposed the mergers and acquisitions saying that the method suggested was not transparent and might not result in maximum possible benefits to the government, sources said.

Responding to anearlier cabinet note circulated by the Petroleum Ministry, the Finance Ministry suggested that stand alone refineries should be put on the block and international competitive bids should be invited for getting the best offer.

Even the Planning Commission asked the Petroleum Ministry not to move the cabinet directly and instead refer the issue to the committee of secretaries in view of the sensitivity of the issue.

Petroleum Ministry sources said a formal proposal, containing objections of Finance Ministry and Planning Commission vis-a-vis its position, was being prepared for consideration of the cabinet.

The Petroleum Ministry would argue that it had taken nearly 50 years to build these oil companies and these should not be handed over to the private sector, they said.

Moreover, private sector companies are there in India to takeover these oil giants, having a turnover of thousands of crore of rupees and profits running into hundreds of crore, they said.

Finance ministry officials, on the otherhand, contend as to how the valuation of stand alone refineries would be done in a totally transparent manner if these were to be merged with the other oil companies.

MRL and other refineries have also opposed their merger with national oil companies and have shown preference for seperate marketing tie-ups.Petroleum ministry had set up the Sengupta panel last year, when global refinery margins had come down substantially from about 3-4 dollar a tonne to one dollar a tonne, to suggest ways for survival of stand-alone refineries and marketing companies when India's phased liberalisation is accomplished by 2002.

Sengupta committee had suggested that the government should consider both IOC and Bharat Petroleum (BPCL) to partner MRL.

Recommending that BPCL should also buy the entire government equity in Cochin refinery (CRL), the panel said BPC should be given sufficient time to decide on its ties with MRL so as to stabilise its takeover of CRL.It also asked government to consider creation of `A umbrella orholding company' to combine the strength of Hindustan Petroleum, BPC, IBP along with stand alone refineries CRL, MRL and Numaligarh Refinery (NRL) that would be "equal in size to IOC".

The holding company concept should be explored only after implementation of the committee's other recommendations in its report submitted to the government in March.

The committee, set up by the Petroleum ministry, was asked to suggest ways for survival of stand alone refineries and marketing companies in the deregulated era while ensuring that there were no supply disruptions.