MUMBAI (AFP) — Directors of India’s largest private sector firm Reliance Industries will meet Monday to discuss plans to absorb its subsidiary, Reliance Petroleum, and create an oil refining giant.

The merger would cut costs for both companies at a time of sharply lower global crude oil prices and falling refining earnings as demand for fuel slips due to the widening global financial crisis, analysts say.
Reliance Industries said it would hold a board meeting Monday “to consider and recommend the amalgamation” of Reliance Petroleum with itself.
The announcement came in a statement on the stock exchange web site Saturday issued by the Mumbai-based refining and exploration company controlled by Indian billionaire Mukesh Ambani.
Reliance Industries owns a 70 percent stake in Reliance Petroleum, which issued a separate statement saying its board would also meet Monday “to consider and recommend the amalgamation”.
Reliance Industries is India’s largest company by market value and owner of the world’s largest refining complex.
The merger would create a behemoth with a total refining capacity of 1.24 million barrels of crude a day.
It would also make the merged company one of the leading producers of polypropylene.
“The merger makes good business sense given the current global environment. It will help lower costs and give you size as a company,” Dharmesh Mehta, broking head of Enam Securities, told the Economic Times newspaper.
The merger would help the combined group save on operating costs and income tax and create a much bigger balance sheet that would help Reliance Industries raise money for working capital and expansion, analysts added.
Petroleum Minister Murli Deora said in New Delhi that the legal path to such a merger was clear.
“There should be no legal issues,” he said.
A merger between the two companies would mark a rerun of a similar amalgamation in 2002.
Reliance Petroleum was initially formed to build Reliance Industries’ first refinery in Jamnagar in western India and it staged an initial public offering in 1993.
Nearly a decade later in 2002, Reliance Petroleum merged with Reliance Industries, but it was spun off again as a separate entity in 2006 following a share offering.