Sibal, however, had cautioned the state against going it alone as Gujarat and Assam had done earlier, saying these states are finding it tough to identify technical partners to overcome operational problems.

The move to set up the joint venture comes amid concerns over the state losing its 'due share' in the resources found off its coast.

Earlier, the chief minister had said that the state has to get its due share of the hydrocarbon asset found in the KG basin.

Opposition parties have claimed that the gas was being taken out of the state without meeting its requirements.

Out of four companies that were awarded various blocks in the KG basin by the government, only the Mukesh Ambani-led Reliance Industries (RIL) has started gas production.

RIL started supplying gas from the first week of April beginning with five million units. Its production reached 31 million units Aug 1.

Besides setting up the joint venture, APIIC has also decided to take 5 percent equity in Bhagyanagar Gas Ltd (BGL), a joint venture between HPCL and GAIL India.

Bhagyanagar Gas along with Krishna Godavari Gas Network, another state-promoted firm, will execute a Rs.1,000-billion city gas distribution project.

Under the project, the companies will source KG gas and supply it fort domestic, commercial and industrial purposes in Hyderabad and other major cities in the state.