The Oil Ministry has refuted UK Prime Minister David Cameron's allegations that "unexpected regulatory hurdles" were delaying the $ 9.6 billion Cairn-Vedanta deal, and said the British firm was responsible for the deferment.
"Cairn Energy - which has agreed to sell a majority share in its Indian subsidiary to Vedanta, faces unexpected regulatory hurdles which are causing delay and could block the deal entirely (which is very time-sensitive) - thus preventing Cairn investors from legitimately exiting the market," Cameron wrote to Prime Minister Manmohan Singh recently.
In response, the oil ministry has told the Prime Minister's Office that Cairn Energy took more than three months to comply with regulation of seeking formal approval for selling most of its stake in Cairn India to Vedanta.
Sources in know said the ministry stated that the final applications came in only in end November, more than 3 months after the deal was announced on August 16, 2011.
It was pointed out that as per the terms of the production sharing contracts signed by Cairn and its units, it was mandatory for them to take prior permission from the Indian government for the proposed stake transfer.
Cairn apparently paid no heed to this stipulation and had said that no such governmental consent was necessary. Only after considerable pressure did the company apply to the government for its approval, it was pointed out.
The ministry assured that the deal is being processed expeditiously and a final decision would be taken very soon.
It has moved a note seeking nod to the transaction from the Cabinet Committee on Economic Affairs (CCEA) subject to certain conditions being met, sources said adding the Cabinet may consider the proposal at its meeting next week.
Though Cairn Energy and Vedanta have to close the deal by April, the deal would go through even if Cabinet was to give its nod by the month-end.
Once the government's nod is obtained, the two firms can approach their shareholders seeking extension of the April 15 deadline, saying the conclusion now remains a mere formality.
Sources said that in all likelihood, the deal can be closed by May-end.
"I want to encourage a growing appetite among British companies to invest and expand in India. But the sorts of difficulties which I have outlined above are a deterrent to potential investors. They risk jeopardising our joint goal of a much stronger trade and investment relationship," Cameroon had written.
"This is not to comment on the merits of individual Indian policies, which are, of course, a matter for you. But I want to highlight my concern that some UK companies are facing difficulties which are hard to explain and that this is, in turn, affecting the wider business climate," he added.