The petroleum ministry has recommended a hike in the foreign direct investment cap in government-owned refineries to 49 per cent from the current 26 per cent.

The proposal has been sent to the Department of Industrial Policy and Promotion.

The government had considered lifting the cap to 49 per cent when steel magnate LN Mittal-promoted Mittal Investment picked up 49 per cent stake in Hindustan Petroleum Corporation's [Get Quote] Rs 17,000-crore (Rs 170 billion) refinery in Bathinda, Punjab. In private sector refineries, 100 per cent FDI is permitted.

"We have recommended that the FDI ceiling should be raised to 49 per cent for all state-owned refineries and not just for the Bathinda refinery. It will prevent complications and bring in more money," said a senior petroleum ministry official.

With the country being promoted as a global refinery hub, many foreign companies have been showing interest in participating in refineries in India. The country is set to add about 80 million tonnes per annum of refining capacity to the current capacity of 149 mtpa.

Foreign companies such as Venezula's Petroleos de Venezuela, France's Total and Saudi Arabia's Saudi Aramco have shown interest in buying stake in the government-owned refineries.

"The refinery sector is booming and we need to facilitate the entry of foreign players. There are billions of dollars waiting to be brought into the country," an oil ministry official said. The World Trade Organisation had also recently suggested that India should raise the cap to 49 per cent.

The proposal by the petroleum ministry comes after Mittal Investments picked up 49 per cent stake in HPCL's Bathinda refinery by bringing in an investment of over Rs 3,500 crore (Rs 35 billion).

Petroleum Minister Murli Deora had then described it as the single largest investment in the refinery sector by a foreign company.  "Such huge inflow of foreign money should be encouraged," Deora had said.