Though the government is selling its 34 per cent equity stake along with management control in HPCL, special clauses in the shareholders agreement would give the government a degree of continued control even after its shareholding falls to 12 per cent, highly placed sources said in New Delhi.

The special agreement would ensure that the strategic investor consults government in matters like altering memorandum of association, changing share capital, winding up of the company, disposing of existing assets of the company and pursuing a new line of business that may be detrimental to HPCL's interests.

Besides, the government can also block special resolutions that it deems not in the interest of public, they said.

The Cabinet Committee on Divestment on Sunday did not accept Petroleum Minister Ram Naik's contention of retaining minimum 26 per cent stake in HPCL, but decided that enough safeguards would be built in the shareholders agreement to protect government interests, sources said.

The CCD had also decided to offload 35.2 per cent state holding in Bharat Petroleum Corporation Ltd in domestic and overseas markets through a public offering, thereby bringing down government holding to 26 per cent- minimum statutory requirement to have a say in all matters requiring special resolutions under the Companies Act.

"In a strategic sale, there is no necessity to retain 26 per cent equity after divestment as, by providing suitable clauses in the agreements, government can retain all the rights that it wishes to through affirmative voting rights," the CCD decided.

HPCL and BPCL employees would be given government's 5 per cent equity shares on VSNL pattern - i.e. sale of shares to employees at one third of the sale price or one third of the past one month's average market price, whichever is lower, subject to the floor price of Rs 10 per share, sources said.

Besides, the employee stock option would have a one-year lock-in period.