India plans to complete by 2006 a 180,000-bpd refinery, which has been under a cloud because of the proposed privatisation of the company that is building it, Oil Minister Ram Naik said on Tuesday.

State-run Hindustan Petroleum Corp Ltd began building the refinery in Punjab in the late 1990s but was forced to review its plans after Indian oil product sales declined for two years until the middle of 2002.

India's decision to privatise HPCL raised doubts about the project as it is located far from the ports from where crude oil is imported and is close to Panipat, where Indian Oil Corp is doubling its refinery's capacity to 240,000 bpd.

"The project has been included in the Tenth Five Year Plan (2002-2007). It will be built by December 2006," Naik told Parliament.

India's divestment ministry says it could ask HPCL's bidders to submit two bids -- with or without the new refinery.

If the new management does not build the new refinery, the government will ask another state-run firm, Indian Oil or Oil and Natural Gas Corp, to complete the project.

India has 17 refineries that can refine 2.3 million bpd. It imports 70 per cent of its crude oil needs.

India's oil product demand fell for two years, forcing several refiners to defer expansion plans but demand has started rising again, encouraging companies to plan new investments.

Higher demand from the transport sector helped India's April-January oil product sales rise 1.5 per cent to 75.21 million tonnes.

India's largest private refiner, Reliance Industries, is raising the capacity of its 540,000-bpd Jamnagar refinery by 20 per cent this year and Essar Oil has started building a new 240,000-bpd refinery.

Several state-run refineries are also contemplating expansions although the plans have not been finalised yet, oil ministry officials say.