The finance ministry has consented to state exploration firm Oil and Natural Gas Corp buying out Hindustan Petroleum Corp Ltd in the loss-making Mangalore Refinery and Petrochemicals Ltd.

"The finance ministry convened a meeting of top oil ministry and ONGC brass to seek certain clarification on the state-run firm's proposal. After deliberating the pros and cons at length, the finance ministry gave its go ahead," sources in the government said in New Delhi.

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The meeting was convened on the petroleum ministry's Cabinet note seeking approval of ONGC buying out HPCL's 16.95 per cent stake in MRPL.

The proposal to buy HPCL's 29,71,53,517 shares will now be put before the Cabinet for final approval, sources said,  adding that if approved, ONGC stake in MRPL will climb to 87.95 per cent.

ONGC had last year bought out Aditya Birla Group's 37.4 per cent stake in loss-making MRPL for Rs 59.43 crore (Rs 594.3 million) at Rs 2 a share.

It infused additional Rs 600 crore (Rs 6 billion) as fresh capital as part of a debt-restructuring package.

"The acquisition price will be decided as per Sebi norms," they added.

The ONGC board had on September 24 last year decided to submit a formal proposal to ministry of petroleum and natural gas for ONGC's intent to acquire entire shareholding of HPCL (29,71,53,518 shares being 16.97 per cent of aggregate equity capital of MRPL) at a price of about Rs 37.75 per share.

But since then MRPL scrip price has soared and going by the acquisition price may change accordingly, they added.