Union Petroleum and Natural Gas Minister Jaipal Reddy on Tuesday said his Ministry had decided to refer to the Vedanta Resources' buyout of Cairn India to the Union Cabinet to resolve the dispute over the deal.
Talking to journalists here after dedicating the largest naphtha cracker plant at Indian Oil Corporation's (IOCs) Panipat complex here, Mr. Reddy said the $9.6-billion deal was going to the Cabinet Committee on Economic Affairs (CCEA) because of a standoff over the excess royalty Oil and Natural Gas Corporation (ONGC) pays on Cairn India's oilfields in Rajasthan. “As it is a huge issue, we are trying to go to CCEA. It will take around two to three weeks,'' Mr. Reddy said. The note for the CCEA was being prepared and views of all Ministries concerned, including Finance, Law and Corporate Affairs, will be taken on board before it being put to the Cabinet, he said. “We cannot bailout any seller or buyer. We will not compromise on concerns of ONGC. The claim of ONGC that royalty should be a cost recoverable item is being supported by us,'' he remarked.
ONGC not just pays royalty on its 30 per cent share of oil from the Rajasthan block but also on partner Cairn India's 70 per cent share, making the nation's largest on land fields a losing proposition for it.
Cairn has asserted that ONGC is also contractually bound to pay Rs.2,500 a tonne cess on all of the 12 million tonnes of projected crude oil output from the fields in the 3,111-sq. km block.
The Petroleum Ministry wants the twin liability of Rs.21,800 crore on ONGC to be addressed before giving nod to Vedanta buying most of 62.4 per cent stake held by U.K.'s Cairn Energy in Cairn India. However, Cairn and Vedanta have strongly opposed the proposal to make partners share the levies equitably.