The ministries of divestment and petroleum are likely to clash on many issues on privatisation of HPCL and BPCL, including eligibility of ONGC to bid and quantum of equity to be put on the block, at the meeting of the Cabinet Committee on Divestment on January 26.

The meeting has been called summarily following the receipt of a favourable legal opinion from Attorney General Soli Sorabjee on privatisation of public sector oil units and Divestment Minister Arun Shourie would cut short his Chennai visit by a day to attend the crucial meet on Republic Day, sources said.

The divestment ministry has proposed bringing down government equity in HPCL from 51 per cent to 15 per cent on the advice of the finance ministry by offering 34 per cent stake to a strategic buyer and another two per cent to employees, sources said.

Likewise, it has proposed to make a public offer for 38 per cent equity in Bharat Petroleum besides earmarking 2 per cent equity for employees to reduce the government stake to 26 per cent, sources said.

The CCD had deferred the contentious issue of privatisation of Hindustan Petroleum and Bharat Petroleum on December 27, which had virtually stalled the entire divestment process for the last four months, as AG had not submitted his opinion.

Sources, however, indicated that petroleum ministry would take cudgels against some of the proposals of the divestment ministry, including keeping at bay all the oil PSUs from participating in the bidding process despite the former's insistence that Oil and Natural Gas Corporation be allowed to bid and acquire HPCL.

Sources said that the CCD would meet on January 26 with the single point agenda of privatisation of HPCL and BPCL.

Finance Minister Jaswant Singh is unlikely to attend the meeting as he is away in Davos to attend the World Economic Forum meet.

The petroleum ministry is also likely to raise objection on the quantum of equity to be put on the block in case of HPCL on the ground that retaining of 26 per cent equity would help government in having a say in accordance with the provisions of the Companies Act.

Divestment ministry sources, however, said that such interests could be protected by explicit clauses in the share purchase and shareholders' agreement even if government's equity level came down to 15 per cent.

Against the 2 per cent offer for employees, the petroleum ministry is expected to seek provisions of 5 per cent equity each in BPCL and HPCL.

Completion of ongoing Rs 9,000 crore (Rs 90 billion) Bhatinda refinery of HPCL, where already about Rs 400 crore (Rs 4 billion) have been invested, could also see sharp differences with the petroleum ministry wanting it to be made a bid condition whereas divestment ministry feels that if the former desired so it could transfer the project to any of its other PSU.

The petroleum ministry is also expected to ask for imposition of the condition of Rs 2,000 crore investment in the oil and related infrastructure sector, mandatory for entering marketing of petrol and diesel, on those bidding for HPCL which has over 20 per cent share in the retail market.

This was made one of the bidding condition in case of IBP, sources said, adding that the divestment ministry would seek waiver to attract more bidders.