Mumbai: The centre has approved ONGC''s plan to set up a petrochemicals complex but has advised against its proposal to enter the fuel retailing business.

ONGC has been permitted to set up units to manufacture petrochemicals from residue from its refineries and using natural gas, M S Srinivasan, petroleum secretary,said.

"Worldwide, refineries are being converted into refinery-cum-petrochemical complexes to gain from the high margins on petrochemicals. Naturally, ONGC would also be encouraged to set up petrochemical complexes wherever they have refineries or have a natural gas source," he said.

ONGC plans to set up a Rs4,900 crore (Rs 49 billion) aromatic complex and olefin complex adjacent to its subsidiary Mangalore Refinery and Petrochemicals Ltd and near its Dahej petrochemical complex in Gujarat.

He said selling petrol and diesel was a losing proposition and compensation in the form of oil bonds for selling fuel below the cost of production was only available to public sector oil retailers -- IOC, HPCL, BPCL and IBP.

"No such compensation mechanism is available to new players in this business, including ONGC," he said, adding that the company board will take appropriate decision keeping the economics of the business in view.