The Petroleum Ministry may have watered down its preconditions for approving mining group Vedanta Resources’ acquisition of Cairn India, but the $9.6-billion deal will still hinge on no-objection from partner ONGC.
The Ministry has watered down the 11 preconditions it had in January proposed for giving Vedanta the nod to buy a 51 per cent stake from UK’s Cairn Energy, officials with direct knowledge of the matter said.
“But the condition that Cairn India will have to obtain no objection certificate (NoC) from its partner (ONGC) has been retained,” one of the officials said.
State-owned Oil and Natural Gas Corporation (ONGC) holds a stake in eight out of 10 properties held by Cairn India in the country. The Ministry is of the view that the change of control of Cairn India amounts to an indirect assignment or transfer of participating interest in the blocks and so there is a need for the Government as well as the partner’s nod.
“The Oil Ministry has moved a Cabinet note seeking approval for the deal subject to Cairn India and its subsidiaries seeking a NoC from partner ONGC.” The issue may come up before the Cabinet next week.
The Ministry has, however, completely withdrawn the precondition asking Cairn India to give up its legal rights on future disputes over its mainstay Rajasthan oilfield and abide by the government and oil regulator DGH’s diktat.
“The Law Ministry, in its opinion on the preconditions, stated that any terms and conditions to be stipulated should be mutually agreed and they cannot be unilaterally imposed,” the official said. “The condition that Cairn has to forego its legal right shall be void under the Indian Contract Act.”
In a draft Cabinet note circulated for approving the deal, the Oil Ministry has almost withdrawn its precondition that Rs 21,802 crore in royalty and cess paid by state-owned ONGC on behalf of Cairn India on production from the Rajasthan oilfields should be equitably shared.
“In January, the Oil Ministry wanted the Cabinet to give its nod only after Cairn India agrees to equitable sharing of royalty and paying its sharing of cess,” an official said.