India's oil ministry has decided to divert 30,000 barrels per day (bpd) of indigenous crude oil from refiner Hindustan Petroleum Corp, which is being privatised, to feed small state-run refineries in remote areas, officials said.

The ministry controls the distribution of the domestic crude output of 600,000 bpd among India's 17 refineries that can process 2.3 million bpd.

"The petroleum minister has approved a proposal to allocate 1.5 million tonnes of Ravva crude to Bongaigaon Refinery & Petrochemicals Ltd from 2003-04," an oil ministry statement said.

BRPL is a subsidiary of state-run Indian Oil Corp, the country's largest refiner.

The low-sulphur crude from the Ravva field will help BRPL produce fuels that abide by strict emission norms. It would otherwise have to invest five billion rupees to refine sour crude and produce fuels that meet the emission norms.

The oil will be shipped to Calcutta and then travel by pipeline to Bongaigaon in Assam state, where oil was first discovered in India in the nineteenth century during British colonial rule.

Ravva's crude is currently used by HPCL's 150,000-bpd refinery at Visakhapatnam near the oilfield on India's southeast coast. HPCL also processes crude oil from the Bombay High field off the west coast and imported crude.

Officials say HPCL will now have some spare capacity as BRPL will use its full capacity. It has been running its 47,000-bpd refinery at half its capacity as the northeastern region has a shortage of crude oil.

The remote region has four refineries which together can refine 140,000 bpd but were processing only 100,000 bpd crude produced in the region.

"These refineries are of sub-economic size and suffer from locational disadvantages," Oil Minister Ram Naik said.

Location and size did not matter until last year as a complex system of administered prices ensured all refiners made handsome profits, but after last year's liberalisation these refineries have been seeking and getting fiscal concessions.