With parent company Cairn Energy having accepted the riders imposed by the government for granting clearance to the $6-billion stake sale to Vedanta Resources, the board of directors of Cairn India is scheduled to meet on Wednesday to consider royalty and cess on its Rajasthan oil fields. The Cairn India board, which had in February opposed changes in the Rajasthan contract making it liable to pay royalty and cess (Rs.2,500 a tonne) will meet on Wednesday.
Cairn Energy, which owns 52.11 per cent stake in Cairn India, has voted to accept the two government conditions. Vedanta, which has already bought 10 per cent stake in the company from Cairn Energy and another 18.5 per cent from Petronas of Malaysia and other minority shareholders, has also voted for acceptance of the conditions.
Cairn Energy Chairman Bill Gammell is understood to have arrived in New Delhi for the meeting. Mr. Gammell had last month skipped the Cairn India shareholders' meet, apparently to escape uncomfortable questions on the change of position. After Cairn India's board agrees to make royalty cost-recoverable and pay cess on oil produced from the Rajasthan fields, it will write to its partner Oil and Natural Gas Corporation (ONGC) for consent for the Vedanta transaction.
The ONGC board may consider waiving its pre-emption or right of first refusal and give Cairn a no-objection certificate to conclude the deal at its board meeting on September 27.
The Cabinet Committee on Economic Affairs on June 27 gave consent to the Cairn-Vedanta deal, subject to Cairn or its successor agreeing to charge or deduct the royalty paid by ONGC from revenues earned from the sale of oil before the profits are split between the partners. Cairn will have to pay Rs.2,500 a tonne cess on its 70 per cent share of oil production. Cairn Energy's request for the two government conditions to be voted on by shareholders is being done through a postal ballot. The results of the postal ballot will be announced on Wednesday afternoon, after which Cairn India board will meet. Cairn Energy is selling 40 per cent stake in Cairn India in two tranches. The first tranche of 10 per cent was completed in July and the second tranche of 30 per cent will be done after final government approval for the deal.
Keywords: Cairn India