Companies

Terms of contract extension for Rajasthan block a ‘risk’: Vedanta

New Delhi | Updated on June 18, 2019 Published on June 18, 2019

Vedanta Ltd, in its annual report for FY19, has listed the existing terms for an extension of its Rajasthan block contract as a “risk”. The Centre has sought a 10 per cent higher share of profit petroleum in lieu of extending the contract.

“Cairn India has a 70 per cent participating interest in the Rajasthan block. The production sharing contract (PSC) of the Rajasthan B block runs until 2020. The Government of India has granted its approval for a 10-year extension at less favourable terms, pursuant to its policy for extension of Pre-NELP Exploration Blocks, subject to certain conditions. Production ramp-up versus envisaged may have an impact on profitability,” Vedanta said in its annual report.

The company said there is an ongoing dialogue with the government and relevant stakeholders to address the conditions prescribed.

Highlighting the steps taken to mitigate this risk, Vedanta said: “The applicability of the Pre-NELP Extension Policy to the Rajasthasn block is currently sub-judice. The growth projects are being implemented through an integrated contracting approach. Contracts have a built-in mechanism for risk and reward.”

“A project management committee and a project operating committee are being put in place to provide support to the outsourcing partner and to address issues on time to enable better quality control, as well as timely execution for growth projects. A third party is engaged to conduct a study on the growth projects with the key objectives of providing assurance on project delivery, highlighting risks, identifying areas needing management intervention and suggesting opportunities to deliver the outcome,” the company added.

Published on June 18, 2019
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