Cabinet to consider 49% FDI in PSU refineries

The petroleum ministry has asked the Cabinet to raise the cap on foreign direct investment (FDI) in government-owned refineries to 49 per cent from the current 26 per cent.

A senior petroleum ministry official said allowing higher foreign capital flow into refineries would help make the country a refinery hub. India is already a net exporter of petroleum products. In private sector refineries, 100 per cent FDI is allowed.

"The Cabinet is likely to take up the issue next week," said Petroleum Secretary MS Srinivasan.

The move follows steel baron LN Mittal's purchase of 49 per cent stake in a new oil refinery being built by Hindustan Petroleum Corporation (HPCL) in Bathinda. That was the largest-ever foreign investment in a state-run refiner.

The petroleum ministry had at that time said that the move was a one-off deal for the 9-million-tonne per annum Bathinda refinery.

Global oil majors have been reluctant to invest in India due to heavy government control in the sector and an uncertain outlook for global refining margins.

The policy change would also provide financial support to state-run refiners which also market petroleum products.

The companies "" Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and HPCL "" is facing huge losses from selling products at discounted rates while global crude oil prices have surged in excess of $95 per dollar.