No time will be lost in deciding Cairn issue: Reddy | business | Hindustan Times
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No time will be lost in deciding Cairn issue: Reddy

business Updated: Jan 20, 2011 21:41 IST
PTI
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The new Oil Minister S Jaipal Reddy on Thursday said that he will "not lose time" in deciding on giving consent to Vedanta Resources' USD 9.6 billion acquisition of Cairn India.

"The issues relating to Cairn-Vedanta have legal implications. So some of them have been referred to the law ministry for clarification," said Reddy, after taking over as the ministry which was previous held by Murli Deora.

Reddy's response to questions on the deal which had been hanging for almost six months now, showed he was well versed with the issues involved and the decision to be taken.

"I can assure you that we will not lose time in expeditiously processing (the case)," he said referring to the requirement of government's nod for Edinburgh-based Cairn Energy Plc to sell its 40 to 51% stake in its Indian unit to billionaire Anil Agarwal-led Vedanta.

The Prime Minister's Office (PMO) had earlier this month asked Oil Ministry to decide on giving consent to the deal by January end, at least a month earlier than the deadline the ministry under Deora had set for itself.

"All fairness will be pressed into seriously (in deciding on the case). We will go by the rule book," Reddy said.

The PMO had to press for early decision as shareholders of Cairn and Vedanta have approved the deal subject to conclusion by April 15.

After acquiring Cairn Energy's stake, London-listed firm's Indian unit Sesa Goa will make an open offer for an additional 20% stake to minority shareholders of Cairn India.

Sources said that going by the February-end deadline set by oil secretary S Sundareshan, Vedanta could not have closed the deal by April 15.

This is because the open offer, which can be made only after government consent to the deal, will have to remain open for subscription for a total of 60 days.

If the government decision on the deal was to come by February end (and in March as had been indicated by Deora), the open offer could not have begun before first week of March and it would have closed in end-April or early May, missing the April 15 deadline, they said.

After the PMO directive, Sundareshan had on January 10 stated that his ministry will decide on giving approval to the deal by January-end or early February.

Cairn had made applications for transfer of control in all the 10 properties it has in India and completed other formalities on November 23.

Sundareshan had then stated that his ministry "will need at two to two-and-half months to decide" on the application and set a February-end deadline.

State-owned Oil and Natural Gas Corp (ONGC), which holds interest in all the three producing properties of Cairn and five out of its seven exploration acreage, has claimed pre-emption or right of first refusal by virtue of its stake.

Its claims have been backed by the Law Ministry and the Solicitor General of India (SGI) in separate opinions on the deal, but Cairn has refused to acknowledge them.

Sources said that it remains to be seen if the Oil Ministry will ignore law ministry and SGI opinion in deciding on the deal or ask Cairn to also seek ONGC's nod.

ONGC says the Rajasthan oilfields, which is Cairn's mainstay property, is a losing proposition for it.

This is because it has to pay one-fifth of the price realised on crude oil produced from the field in royalty on not just its share but also on the entire share of Cairn.

Sources said that the Oil Ministry was previously hung-up on Cairn making formal applications in all the 10 properties it has in India, delaying initiation of the process to give government nod.

Cairn initially said that it was a corporate transaction involving transfer of shares and Cairn India as a company would continue to exist.

However, Oil Ministry persisted with its view that Cairn will need its formal approval in all the 10 properties.

The Edinburgh-based firm finally relented and made formal applications.

Billionaire Anil Agarwal-run Vedanta, a mining firm with no prior oil and gas experience, agreed in August 2010 to pay as much as USD 9.6 billion for Cairn India Ltd to gain access to the country's biggest onshore oilfield.

ONGC partners Cairn in all three of the UK-based energy company's producing properties in the country, besides several exploration blocks, by virtue of which it claims to have pre-emption rights over the Vedanta deal.

In the applications, Cairn said that it was seeking the government's consent on the advice of the Oil Ministry, which said prior approval was necessary, based on an opinion from the Law Ministry.

The Law Ministry had given the opinion that the transaction was nothing but the transfer of control in all 10 properties held by Cairn India.

As such, it would require government consent and trigger the preemption or right of first refusal (ROFR) of ONGC, as it partnered the UK-based company in all three producing properties and several exploration acreages.

Cairn, however, has insisted that the requirement for government consent on the deal does not trigger ONGC's pre-emption rights.

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