The oil ministry said on Thursday that any refiner laying a pipeline to carry oil products from ports or building one longer than 300 km must allow other companies to share the facility.
This is designed to prevent one company from gaining exclusive control over pipelines, as state-run oil giants have done until now, and marks another step towards liberalising the energy sector from decades of government control.
"This policy will speed up the clearance of pipeline projects," Oil Minister Ram Naik told reporters.
He said companies sharing a pipeline could do so on mutually agreed commercial terms while the final tariff would be subject to government regulation, but he did not give further details.
"Every project will be approved on a case-by-case basis," Naik said.
State-run Indian Oil Corp dominates India's pipeline network, giving it a huge competitive advantage over new players like private-sector Reliance Industries, which is setting up a country-wide retail network.
Naik said that pipelines are forecast to transport more than 45 per cent of the country's petroleum products in two to three years, up from 32 per cent now. Most are currently transported by rail and road.
Naik said the government would soon also announce a policy for the laying of gas pipelines.
"We hope to come out with a gas policy as early as possible -- maybe in three months," he said.
Such a policy will be crucial for liquefied natural gas terminals such as the one Shell India is setting up in Gujarat.
Shell has asked state-run GAIL India Ltd, which operates the country's main gas pipeline, to carry its gas to the main markets in northern and western parts of the country.
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