The Union Cabinet on Thursday approved raising the foreign investment limit in privatisation-bound public sector oil refiners, a move that will aid the sale of government stake in BPCL. Officials said the Cabinet has approved a proposal to allow foreign direct investment (FDI) limit in public sector refineries that are disinvestment candidates to 100 per cent from the current 49 per cent.

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At present 49 per cent FDI is allowed in oil refineries promoted by public sector companies under the automatic route.

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This limit meant Bharat Petroleum Corporation Ltd (BPCL) couldn't have been sold to a foreign player.

Two out of the three companies that have put in an initial expression of interest (EoI) for buying out the government's entire 52.98 per cent stake in BPCL are foreign entities.

"What has been allowed is raising of FDI limit only for disinvestment cases," an official explained.

The FDI limit in PSU-promoted oil refineries will continue at 49 per cent - a limit that was set in March 2008.

As of now, the government is selling the stake in only BPCL. Indian Oil Corporation (IOC), the nation's largest, is the only other oil refining and marketing company under direct government control.

Hindustan Petroleum Corporation Ltd (HPCL) is now a subsidiary of state-owned Oil and Natural Gas Corporation (ONGC).

The government had in March 2008 raised FDI in oil refineries promoted by public sector companies from 26 per cent to 49 per cent.

In any firm acquiring the government's 52.98 per cent stake in BPCL will also have to make an open offer to buy an additional 26 per cent stake from other stakeholders at the same price as per the takeover rules.

Mining-to-oil conglomerate Vedanta and US-based private equity firms Apollo Global and I Squared Capital's arm Think Gas are in the race to buy the government's stake in BPCL.

The stake sale in India's second-largest fuel retailer is crucial to raise a record Rs 1.75 lakh crore from the disinvestment proceeds in fiscal 2021-22 (April 2021 to March 2022).

BPCL will give the buyer ownership of around 15.33 per cent of India's oil refining capacity and 22 per cent of the fuel marketing share. The government is yet to call financial bids for the stake sale.