After a prolonged delay, the Petroleum and Natural Gas Ministry on Monday said it had moved a Cabinet note for giving approval to London-listed mining group Vedanta Resources' $9.6-billion acquisition of Cairn India Ltd. (CIL).
“We have sent out the Cabinet note. When it should be put up before the Cabinet Committee on Economic Affairs (CCEA) depends on the Cabinet Secretariat,'' Petroleum and Natural Gas Minister Jaipal Reddy told reporters here.
The Petroleum Ministry, after incorporating comments on its draft note from finance and law ministries, circulated a final note for CCEA consideration. “It could be taken up anytime,'' Mr. Reddy said.
The Petroleum Ministry is learnt to have watered down the pre-conditions for giving approval to the Cairn-Vedanta deal that was announced in August and has almost withdrawn the Ministry's contention that Rs.21,802 crore in royalty and cess paid by ONGC on behalf of CIL on the Rajasthan oilfields should be equitably shared.
“As a Ministry, we are of the view that royalty should be treated as cost recoverable item. Whether it is to be pre-conditioned or not, it is another matter,'' Mr. Reddy said. His Cabinet note lists two alternatives. In the first, five pre-conditions are listed, instead of the 11 it had originally proposed to Cairn/Vedanta in January. These pre-conditions include royalty being made cost-recoverable, CIL withdrawing arbitration disputing its liability to pay cess, CIL obtaining partner ONGC's no-objection and Vedanta providing performance and financial guarantees.
As an alternative to the pre-condition of royalty and cess, the Ministry has suggested that the government will pursue all legal recourse for establishing its rights under the production sharing contract (PSC) in the case of cess. On royalty, it will take appropriate decision to enforce the provisions of the PSC to make royalty cost-recoverable. “We have given two options to the Cabinet. I cannot speculate on what the Cabinet will decide,'' he said.
