The finance ministry has turned down the Myanmar government's proposal to buy diesel from the Numaligarh refinery in rupee terms.
The ministry rejected the proposal on the grounds that the level of trade between India and Myanmar is too low.
However, the ministry has said the situation can be reviewed in case India starts importing natural gas from the country.
Myanmar had proposed to import 125,000 tonnes of diesel from the Numaligarh refinery during the next financial year. It was also proposed that the diesel would be transported from the refinery to Myanmar by road.
The Numaligarh refinery, which has a capacity of 60,000 barrels a day, is a subsidiary of the state-run Bharat Petroleum Corporation Limited. It sells one-third of its output in Assam and the rest to other states.
The export of diesel from the Numaligarh refinery to Myanmar was discussed between officials of the two countries in January when Myanmar's Energy Minister Lun Thi visited New Delhi. This was followed by a petroleum ministry delegation's visit to Myanmar.
So far, Myanmar has been importing most of its diesel from Thailand.
Myanmar is also looking at India as a market for its gas reserves. GAIL (India) Limited is studying the feasibility of building a pipeline to bring gas from Myanmar to India.
GAIL, along with ONGC Videsh Limited, is a partner of South Korea's Daewoo International Corporation and Kogas in the A-1 gas field off Myanmar's northwest coast, which can produce up to 18 trillion cubic feet of gas.
Proposed deal