Bharat Petroleum, India’s second-biggest state refiner, plans to almost double the combined capacity of two refineries at a cost of about $2.8 billion to feed the company’s growing network of gas stations.

Capacity would rise to 9 million metric tons from 3 million, costing about $2.4 billion, at Numaligarh refinery in Assam state and to 8 million tons from 6 million at the Bina site in Madhya Pradesh province, chairman S. Varadarajan said.

“The Numaligarh refinery expansion is still in the drawing-board stage and it would hinge on tax concessions and other benefits from the provincial and federal governments,” Varadarajan said in an interview.

BPCL, as the company is known, joins peers Indian Oil and Hindustan Petroleum in adding refining capacity to meet local demand. Indian use of petroleum products may increase by more than 21% to about 186 million tons by March 2017 from the fiscal year 2012-13, according to the oil ministry’s Petroleum Planning and Analysis Cell.

A 1,338-kilometer (830 mile), 6-million-ton-a-year pipeline will be built from Dhamra Port in Odisha state to Numaligarh to feed expanded refining capacity with imported crude. Bharat Petroleum owns 61.7% of Numaligarh Refinery. Bina, costing $2.4 billion, began output in June 2010 and is run by BPCL and Oman Oil Co.’s venture Bharat Oman Refineries.

“We will complete the Bina expansion before December 2016 through debottlenecking, tweaking some existing configuration and technological improvements,” Varadarajan said.

Kochi Refinery

BPCL is also spending $2.3 billion to raise capacity at its Kochi refinery in the south by 6 million tons to 15.5 million, according to figures in the company’s annual report.

More refining capacity will help expand its retail fuel business, particularly in north and eastern India, and push sales into neighboring countries like Nepal and Bhutan. BPCL sold about 18% more fuel than it processed in the year ended March 31, buying from rivals or overseas to fill the gap.

It added 1,257 outlets in the period and plans to add about 1,000 annually for the next few years, on top of the 11,637 it owned as of March 2013, giving a market share of 27.5%.

The government in June 2010 freed pump prices, and allowed state refiners in January 2013 to raise diesel prices by about 0.50 rupees a liter each month in a move toward deregulation.

“These changes could lead to greater competition from private players in the days ahead,” Varadarajan said.