Differences between ministries of divestment and petroleum are likely to surface at Friday's meeting of the Cabinet Committee on Divestment as the former is believed to have proposed keeping public sector units, particularly Oil and Natural Gas Corporation, out of the bidding for Hindustan Petroleum Corporation.

In a note circulated for CCD, the divestment ministry has proposed to sell 34 per cent equity in HPCL to a strategic partner and suggested that no PSU be allowed to bid for the oil major whereas the petroleum ministry is in favour of allowing ONGC to bid, sources close to the divestment process said.

Divestment ministry is also understood to have proposed a public offer of 38 per cent, both in domestic and global/American markets, in Bharat Petroleum Corporation, besides offering two per cent equity to employees in both the oil PSUs, slated for divestment.

Following suggestions from the finance ministry that offering higher quantum of equity to strategic partner could lead to better realisation in HPCL, divestment ministry improved its proposal for strategic offer from the earlier 26 per cent to 34 per cent now.

If accepted, the proposal would lead to lowering of government equity in HPCL from 51 per cent to 15 per cent and in the case of BPCL it would come down to 26 per cent from 66 per cent now.

The divestment ministry's note, however, does not contain the opinion from Attorney General on the legality of divestment in the companies that were acquired and nationalised through Acts of Parliament, sources said, adding that this was likely to be brought before the CCD directly.

The issue of eligibility of bidder was likely to generate some heat in the CCD meet, to be chaired by Prime Minister Atal Bihari Vajpayee, as petroleum ministry is understood to be making a case for allowing ONGC to bid for HPCL.

Apart from ONGC, fertiliser giant IFFCO had announced that it would be interested to be the strategic buyer of equity in HPCL and Fertiliser Minister S S Dhindsa appears to have favoured the same.

Even the Parliamentary Standing Committee on Petroleum, headed by Samajwadi Party leader Mulayam Singh Yadav, had recommended last week that the government should not keep oil PSUs like ONGC out of the bidding process for HPCL and BPCL.

In its last meeting on September 7, CCD had decided to keep all the PSUs out of the bidding process, but kept the provision of considering exceptions in case an administrative ministry felt that its PSU be allowed to bid for a particular company being put on the block.