"I have written to the consular general about this quoting him the Home Office website that says this. The matter is now being discussed with the Indian Overseas Affairs ministry I gather. "
I will not hold my breadth on that
- especially anything that Indian govt. may pick up for discussion!
In fact if you read this document here, http://www.mha.nic.in/oci/intro.pdf
even the Indian govt. themselves are using these words: OCI commonly known as "dual citizenship".
Also if you read through fruther, you see that OCI is granted to only those eligible people from the eligible countries which allow some form of dual citizenship.
If as you say if Indian govt. intends OCI to be a visa, then why would the Indian govt. want to insist on those words. Why can't they saimply say all eligible people from the eligible countries can be given this visa. But they insist on saying that opeople from only those countries that allow "dual citizensip in one form or other" can apply for OCI.
Think about this (Just like the UK govt. does) : Why would the Indian govt. need to say that the other country will have to allow "Dual citizenship in one form or other", if all it was doing was issuing a lifetime VISA to the eligible applicant? I can clearly say they are saying this visa sticker is a citizenship status, no matter, if it is accompanied by a "passport" or not (although I agree to your point on that "passport document not being issued" along with the OCI document, effectively makes it only a Visa!)
That is a grey area - to me!
With these specific words of requirement, i am not surprised that the UK govt. or any govt. for that matter can defenitely be confused and will have every right to call OCI as another / dual citizenship status, irrepspective of how much ever discussions one may initiate with Indian HC or govt.
All that i want to express here in this post is that all the above looks like a grey area (in my view/interpretation) and so i would not risk it by putting my status under confusion later on, as to whether I am a Dual citizenship holder or not, especially with governments other than India - because if they decide i am holding dual citizenship for any of their procedural purposes, there is nothing that i can argue. And i am sure I cannot call Indian govt. at that point, to help me to provide an argument too to sort out any issue (if any!)
PIO takes away all of these confusions.
But if the Indian government clearly does something in public domain confirming to all that OCI is not a citizenship in any way, then i might go for it in future!
But maybe, not until then!