State-run gas distributor Gail India Ltd. (532155.BY) and refiner Indian Oil Corp. (530965.BY) Friday signed a pact to build a 300,000-tons-a-year petrochemical plant in the eastern state of Bihar.

The plant will use naphtha produced by Indian Oil's refinery in Barauni, also located in the same state, Indian Oil Chairman Sarthak Behuria said. "Naphtha prices are today at the bottom and lot of naphtha is being exported from the country because of increase in local gas availability," Behuria said at a news conference.

The two companies may spend about INR100 billion ($1=INR49.33) to set up the plant, which will be equally owned by both, GAIL Chairman U.D. Choubey said.

Indian Oil is also building a naphtha cracker at its Panipat refinery to process naphtha produced in the plant and Mathura, another refinery located nearby, Behuria added.

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