State-owned Oil and Natural Gas Corp (ONGC) has given a no-objection certificate to British oil firm Cairn Energy's sale of a majority stake in its Indian unit to Vedanta Resources, paving the way for conclusion of the % 8.71 billion deal in the next few days.
ONGC, which partners Cairn India in its crown jewel oilfields in Rajasthan and seven other properties in India, has waived its preemption rights over the deal and given a no-objection certificate, sources privy to the development said.
The board of ONGC had in September agreed to waive its preemption rights if Cairn India gave a written undertaking to share royalty and pay its share of oil cess on crude oil produced from the Rajasthan fields.
ONGC, being the licencee of the Rajasthan block, pays 20 % royalty on not just its share of production, but also on the 70 per cent share of Cairn India. It wanted this payment to be treated like other project costs and taxes and recouped from revenues earned from oil sales, a demand opposed by Cairn India.
Cairn India also felt the Rs 2,500 per tonne oil cess was a liability of the licencee and was opposed to deviating from the signed contract to share any of this burden.
However, the firms's current and future promoters, Cairn Energy and Vedanta, ordered it to accept the twin demands, which the government had made a precondition for giving its nod to the % 8.71 billion deal.
Sources said the legal document, wherein Cairn India as well as its current and future promoters commit to accepting the conditions, was held up for two months over minor technicalities, but was signed a few days ago, after which ONGC gave its NOC.
The Home Ministry had on November 25 given security clearance to a Vedanta takeover of the operations of India's biggest onland oil discovery in more than two decades and other properties of Cairn India.
The two approvals complete the last of a long list of formalities and conclusion of the Cairn-Vedanta deal is likely to be announced within days, they said.
Cairn Energy had in August last year announced the sale of its 40 % interest in Cairn India to Vedanta.
After much debate, the Cabinet Committee on Economic Affairs (CCEA) in June this year agreed to give approval to the deal subject to Cairn Energy and its successor agreeing to pay oil cess on Cairn India's 70 % stake and make royalty payments on the Rajasthan fields cost-recoverable.
The CCEA had also made the deal conditional on security clearance of Vedanta, as well as ONGC waiving its so-called preemption rights.