State-run Indian Oil Corporation [Get Quote] has sought a 50:50 partnership with Reliance Industries [Get Quote] for operating the private firm's closed 1,432 petrol pumps.

Besides IOC, Royal Dutch Shell is believed to have evinced interest in reviving the petrol pumps, industry sources said.

Reliance, as part of a two part bid process, had sought expression of interest from IOC, Shell, Bharat Petroleum and Hindustan Petroleum by Friday for a possible partnership for reopening the petrol pumps.

The company will set up a data room and interested parties will now do due diligence before making a firm financial proposal, based on which billionaire Mukesh Ambani's firm will choose a partner.

Sources said while Reliance had wanted the retailers to select between 26, 50 and 74 per cent equity stake they would like in the proposed joint venture company that would be set up with the hived-off pumps, IOC had preferred equal partnership.

An equity lesser than 50 per cent did not make sense for IOC as it was not looking for a portfolio investment. Also, a stake higher than 50 per cent would turn the company into a public sector company which was also not what IOC was looking for.

The 1,432 petrol pumps, that were shut in March 2008, had captured 15 per cent auto fuel market share, selling 4-4.5 million tonnes of petrol and diesel annually.

IOC, sources  said, feels it can get atleast 2 million tonnes of additional sales through the pumps considering the fact that the RIL's pumps would eat into volumes of the three retailers -- IOC, BPCL [Get Quote] and HPCL [Get Quote] -- in proportion to their current share of 50:25:25 respectively.

For Shell, it made business sense as these petrol pumps would add to the 75-80 outlets it already as on the ground and help it get a respectable market share. Of the 75-80 pumps it had set up, Shell is currently operating about 55.

IOC has about 17,600 petrol pumps.

The partnership with state-run firms would help Reliance overcome the handicap of not being able to use fuel from its two refineries at Jamnagar in Gujarat because they have been converted into only-for-exports units.

Sources said branding, fuel sourcing and operational issues would have to be sorted out between Reliance and the prospective partner.

HPCL was not favourably inclined to the proposal while BPCL has not made up its mind yet.

A Reliance spokesperson was not available for comments.

The company, which had invested Rs 5,000 crore (Rs 50 billion) in setting up the retail network, had previously worked on three different models to reopen the 1,432 pumps, the source said.

Firstly, RIL wanted the government to free fuel pricing so that it gets a level-playing field to compete with the dominant public sector that had last time forced it out of business by selling fuel below cost.

Simultaneously, it tried to get approval for selling fuel from its only-for-exports labeled refinery as it would have otherwise attracted penal duties that are levied to discourage export oriented units from selling domestically once they avail income tax breaks by virtue of that label.

Facing election, the government refused to free fuel pricing while the finance ministry rejected its other demand, the source said.

RIL then sought fuel from the public and private refiners to reopen the outlets. Essar Oil [Get Quote], which runs a refinery close to the firm's twin refineries at Jamnagar, offered fuel.

Mangalore Refinery, a unit of state explorer Oil and Natural Gas Corporation, may also feed some of the Reliance outlets.

To begin with, outlets in Gujarat and Maharashtra will be reopened.

The source said the positive margins on petrol and diesel was the primary mover behind Reliance deciding to reopen its outlets.