INDIA plans to form a giant national oil company by combining other state-owned firms, finance minister Arun Jaitley said on Wednesday, as New Delhi wants to expand its foreign presence to meet growing domestic fuel demand.

India, struggling to lift its local oil production, imports about 80 percent of its oil needs. Prime Minister Narendra Modi in 2015 set the goal of cutting this import dependence to 67 percent by 2020. "We propose to create an integrated public sector oil major which will be able to match the performance of international and domestic private sector oil and gas companies," Jaitley said in his budget speech.

India has about a dozen state-run oil and gas companies - including Indian Oil Corp, Oil and Natural Gas Corp, Hindustan Petroleum Corp and others -but alone they do not have the financial

power to rival global oil majors in bids for overseas exploration and production assets. Combining them "will give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for shareholders," Jaitley said.

It was not clear if Jaitley was talking of a plan to combine all of the state-run oil companies or just some of them. To lift the share of natural gas in India's overall energy mix, Jaitley also announced a cut to the import tax for liquefied natural gas (LNG) to 2.5 percent from 5 percent.

The minister also proposed setting up strategic oil storage facilities at two new locations, one in the eastern state of Odisha and another in the northwestern state of Rajasthan. India is hedging against energy security risks by building emergency storage sites in underground caverns in southern India to hold 36.87 million barrels of crude or about 10 days of its average daily oil demand in 2016.