Mumbai: The government has allowed NRI steel baron Lakshmi N Mittal to pick up 49 per cent stake in the new 9 million-tonne joint sector Bhatinda refinery being set up by state-run Hindustan Petroleum Corporation.

Mittal Investments will acquire the stake for Rs3,365 crore through its 100 per cent arm, Mittal Energy Investments Pte Ltd, incorporated in Singapore.

The cabinet approval was required since current government policy restricts foreign direct investment in public-sector petroleum refineries to up to 26 per cent.

HPCL will hold 49 per cent stake in the Rs17,973 crore project, while the balance two per cent would be allocated to financial institutions.

The cabinet approved the formation of a joint venture between an arm of the Mittal group and a state-owned oil major for reviving a refinery project in Punjab.

Under the JV, Mittal Energy Investments, an arm of the Luxembourg-based Mittal Investments, and Hindustan Petroleum Corporation Limited (HPCL) will each hold 49 per cent equity in the Guru Gobind Singh Refinery and allied facilities at Bathinda, information and broadcasting minister Priya Ranjan Dasmunsi said after a meeting of the cabinet committee on economic affairs (CCEA) presided over by prime minister Manmohan Singh.

Financial institutions will hold the remaining two per cent stake in the JV, which will be the largest foreign direct investment in a public sector refinery.

"With the JV, the Bathinda refinery will be revived in a big way," Dasmunsi said, adding, "This will enhance the availability of petroleum products in the north. It will also lead to industrialisation and creation of jobs in Punjab, and will help in the globalisation of HPCL."

The government had approved the Bathinda project in 2000, stipulating that HPCL would induct a JV partner. However, seeking expression of interest from 17 MNCs did not yield favourable results. Eventually, an agreement with the Mittal was arrived at earlier this year.