The Oil and Natural Gas Corp said it was in talks with Russia's Bashneft and RussNeft to merge its Russian assets, but no approval had been received from the Government.
The Economic Times had reported on Monday that the cabinet had approved the merger proposal that would give state-run ONGC 25% stake in the combined entity and access to one of the biggest discovered oilfields in Russia.
"We are in discussion but nothing has been finalised. No such proposal was put up for cabinet," ONGC chairman AK Hazarika said.
"This news is incorrect."
ONGC has long eyed a deal with Bashneft, a unit of telecoms-to-oil group Sistema as well as involvement in the Arctic fields of Trebs and Titov, as it seeks to broaden its oil and gas base in Russia, the world's top energy exporter.
But a merger of Bashneft and RussNeft is a long way off.
Last week, Sistema President Mikhail Shamolin said the company may consider merging Bashneft and RussNeft once the latter's debt falls below $4 billion, but given current oil prices it may be a few years before that debt falls to the required level, the Interfax agency reported.
ONGC already has a stake in Russia's Sakhalin-1 oil and gas project in the Pacific, and in 2008 it acquired the Imperial Energy oil company in western Siberia.
Last December, Sistema and ONGC signed a non-binding agreement to consider asset swaps and joint tapping of Russia's energy deposits.
At 10:55am (0525 GMT), shares in ONGC were trading 2.1% lower at 260.30 rupees in a Mumbai market down 1.8%.