The Centre on Wednesday approved a plan to sell the government's stake in state refiner Hindustan Petroleum Corp Ltd (HPCL) to explorer Oil and Natural Gas Corp (ONGC), a source said, in a bid to create oil giants to compete with global rivals.

The government owns 51.1 percent stake in HPCL.

"ONGC has forwarded a proposal to acquire HPCL. Process for in-principle approval for this proposal has been initiated," Oil Minister Dharmendra Pradhan told lawmakers earlier on Wednesday.