In a big jolt to NRI billionaire Anil Agarwal-promoted Vedanta Resources’ plans to take control of UK-based Cairn Energy Plc’s Indian unit — Cairn India Ltd, the government on Wednesday decided to refer the $9.6-billion (R43,200-crore) deal to a Group of Ministers (GoM) under finance minister Pranab Mukherjee.
“The deal was considered by the Cabinet Committee on Economic Affairs (CCEA) but as it involves some complex issues over royalty and cess sharing, it was felt that decisions should not be taken in a hurry,” petroleum minister S Jaipal Reddy told reporters after the Cabinet meet.
“A GoM will now look into the complex matters relating to royalty and cess on the crude oil produced from Rajasthan oil fields.”
While sources said there were sharp differences between various ministers on the royalty and cess issue, Reddy said the Cabinet was unanimous in its opinion that royalties related to a deal in which Vedanta Resources would take control of Cairn Energy’s India unit should be cost recoverable.
Cairn Energy agreed last August to sell a majority stake in Cairn India to Vedanta in a deal valued at up to $9.6 billion. The deal has been delayed due to a dispute over royalty payments by Oil and Natural Gas Corp.
ONGC has a 30% holding in the Cairn-operated Rajasthan fields in western India but pays 100% of the royalties.
“Cairn and Vedanda continue to work with the government to secure necessary consents and approvals” said a Cairn India spokesperson. ONGC has been saying that royalty, like any other levy, is cost recoverable. It had cited provisions in the field contracts to assert its point. However, the three private stakeholders—Cairn Ienergy, Vedanta Resources and Cairn India have maintained that royalty is not cost recoverable.
Cairn India has 10 oil and gas properties including India’s largest onland oil producing Rajasthan field. This field is capable of producing more oil than what India's largest offshore oil field at Mumbai High is presently producing.
Open offer on track, says Sesa Goa
Despite the government not clearing the $9.6-billion Cairn-Vedanta deal, Vedanta Group firm Sesa Goa said on Wednesday that there will be no change in its open offer plans.
Sesa Goa had informed in a filling to Bombay Stock Exchange on Wednesday that it will come out with an open offer by April 11 to acquire up to a 20% additional stake in Cairn India at Rs 355 per share.
“We will stick to our open offer plans to come out with the offer by April 11 and close by April 30,” the company spokesperson said.