After a long delay of 15 months, the $8.67 billion (Rs 43,350 crore) deal by the India-focused and London based company - Vedanta Resources Plc to take a controlling stake of 58.5% in UK based Cairn Plc’s Indian unit—Cairn India, was finally closed on Thursday.
Immediately after the company’s announcement to close the deal, the chairman of the Vedanta Group, Anil Agarwal spoke to Anupama Airy about his group’s plans and strategies to take the company ahead amidst long procedural delays that are coming in the way of Cairn India’s plans to move ahead and increase oil production from its mainstay field — the Rajasthan oil field that has the potential to produce more than 30% of India’s total crude oil.
It took you over 15 months after you first announced your deal to acquire Cairn India. What’s your reaction to these delays?
But what can you do? We being on the other side of the table can just wish things to happen fast.
But do you also feel that there is a policy freeze within the government that is resulting into such delays?
On whether it is a policy freeze or not, I would put it as 'better late than never.' I am running over 10 companies in India and the way I see it is that you need patience to do business in India. As the government is also a partner with us-- sharing revenues on the oil and gas production from Cairn India’s fields-- the approval delays equally affects the government’s revenues as well.
It was not just delays but also arm-twisting on part of the government in asking the companies concerned to agree to the changes in the original contract over payment of royalty and cess.
Such a thing has happened perhaps for the first time in the world that a contractual agreement with the government has not been honoured. The international community is watching India for sure but investors are damn scared to put in money to participate in NELP opportunity (platform where the Indian government invites bids from global investors for its oil and gas block).
NELP is a very important platform where investors put in billion of dollars. Once they (investors) are here you have to build their confidence and it is incorrect for the government to deny approvals.
But we all are part of it and we have to make it happen and keeping all this behind, I am very optimistic about the road ahead. The government is an important partner for us and we have to work together to achieve India’s energy security goals.
You want to double the crude oil production of Cairn India but the approvals are not forthcoming. How do you then move ahead?
These are normal approvals, which should not take long. The government as our partner should be equally concerned about these delays considering that out of every 100 that the company earns, 80 goes to the government. So at a time when the cost of crude oil is touching $110 a barrel and as the fundamental cost of oil production is less than $10 a barrel, the government will be itself more than willing to give such approvals. The government understands this very well.
What are your plans for vertical integration of Cairn India? Are you open to setting up a refinery and look at further integration?
At the moment my focus is just oil and gas. I would like to concentrate on oil and gas production and align my company’s goals with India’s energy goals of being self-reliant. All other related businesses will also be looked into but not at the cost of this goal in which I consider government as our important partner.