Under the terms of the deal, which is an extension to agreements signed between Russia and India in 2014, Rosneft will supply crude oil to the refinery for the next 10 years.
Essar Oil expects the deal to help diversify its supply sources, expand geographical market.
A non-binding term sheet has also been signed by Rosneft to acquire up to 49% stake in the refinery.
The deal also envisages the two firms to enhance their refining and marketing businesses in the country. Essar will operate a retail chain of 1600 stations across India.
The proposed transaction is expected to increase the Rosneft’s earning capacity of operations in the region as well as promote the expansion of the potential trading business.
Rosneft management board chairman Igor Sechin said: "The performance of the terms of the signed documents will have a substantial impact on the scale of economical cooperation between Russia and India.
"The goods turnover between two countries will grow more than 50%. The new formula of integrated cooperation opens wide perspectives for the development of dialogue, both in specialized and related areas."
Claimed to be one of the biggest refineries in India and Asia Pacific region, the refinery processes 20 million tons per annum.
