Within 24 hours of the Supreme Court halting the privatisation of Hindustan Petroleum Corporation Ltd, the petroleum ministry appears to have hit upon a magic formula to divest the oil marketing company while keeping it in the government's fold.

The petroleum ministry is drawing up a proposal for the Cabinet to offer more than 26 per cent of the government's equity in HPCL to the Oil and Natural Gas Corporation on a nomination basis.

With this, while management control of HPCL will be pass on to ONGC, it will still remain a government company. The other option is to merge the two companies.

This will help the government to get closer to its divestment target of Rs 13,200 crore (Rs 132 billion) for the current fiscal, and also comply with the Supreme Court ruling that a company nationalised by an Act of Parliament cannot be privatised without parliamentary approval.

The benefits for ONGC from the takeover are the two HPCL refineries on either coast, apart from a readymade oil retailing network. If the proposed Bhatinda refinery comes up, ONGC will have a fairly good spread of refineries.

The petroleum ministry is confident that the proposal will not face much opposition. Since HPCL would remain with a government-owned company, Opposition parties should not have any problem, ministry officials pointed out.

The move follows Petroleum Minister Ram Naik describing as historic the Supreme Court ruling that nationalised oil companies could be privatised only after parliamentary approval.

In February 2002, Naik had insisted that public sector units should be allowed to bid for oil companies that were being put on the block. However, he was overruled at the Cabinet Committee on Divestment in September 2002.

Even the standing committee of Parliament on petroleum and chemicals had recommended that HPCL and BPCL be first merged before merging them with ONGC.

In its 42nd report, the committee, headed by Mulayam Singh Yadav, had also criticised the government for restraining public sector undertakings from bidding for other PSUs, saying "this negated the concept of competition and countered the essence of right to equality".

ONGC officials said the corporation had substantial cash in hand to pay anything up to Rs 8,000 crore (Rs 80 billion) for acquiring management control of HPCL.