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The Cabinet Committee on Economic Affairs (CCEA) on 24 July 2017 gave in-principle approval for sale of government's 51.11 percent stake along with management control in HPCL to ONGC, Oil Minister Dharmendra Pradhan has informed.

HPCL will continue as PSU after ONGC acquisition of stake, Pradhan added.

While ONGC buying HPCL will help the government meet as much as 40 percent of its target for raising Rs 72,500 crore in the current fiscal through stake sales, more deals in the oil sector including one where refiner Indian Oil Corp (IOC) buys out explorer Oil India Ltd or Bharat Petroleum Corp Ltd (BPCL) merges with gas utility GAIL may be in the offing.

Prior to the merger, HPCL is likely to take over Mangalore Refinery and Petrochemicals Ltd (MRPL) to bring all the refining assets of ONGC under one unit. ONGC currently owns 71.63 percent of MRPL while HPCL has 16.96 percent stake in it.

MRPL will be the third refinery of HPCL, which already has units at Mumbai and Visakhapatnam in Andhra Pradesh.

Jaitley had in his Budget for 2017-18 fiscal talked about creating an integrated oil behemoth. After that oil companies were asked to give their options.

ONGC had evaluated options of acquiring either HPCL or BPCL -- the two downstream oil refining and fuel marketing companies.

It found the nation's second-biggest fuel retailer BPCL too expensive and conveyed its choice to the parent oil ministry.

BPCL has a market cap of Rs 1,01,860.56 crore and buying government's 54.93 percent would alone have entailed an outgo of about 56,000 crore.

HPCL on the other hand has a market cap of Rs 58,485.55 crore and buying government's entire 51.11 percent stake would entail an outgo of Rs 29,900 crore.

There are only six major companies in the oil sector -- ONGC and Oil India Ltd being the oil producers, IOC, HPCL and BPCL in refinery business and GAIL in midstream gas transportation business.

The rest, such as ONGC Videsh, Chennai Petroleum Corp (CPCL), Numaligarh Refinery Ltd and MRPL, are already subsidiaries of one of these six PSUs.

HPCL will add 23.8 million tonnes of annual oil refining capacity to ONGC's portfolio, making it the third-largest refiner in the country after IOC and Reliance Industries.