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| Edited By: Neeraj Thakur |Source: |Updated: Mar 17, 2018, 06:51 AM IST
The petroleum ministry is on a cautious footing in preparing its cabinet note on the $9.6 billion Cairn-Vedanta deal.
The ministry, which had earlier put various conditions for giving in-principle approval to the deal, has decided to reframe its conditions as it does not want to sound unreasonable while presenting its case at the upcoming meeting of Cabinet Committee on Economic Affairs (CCEA), where the issue is likely to be settled.
“Our top priority is to resolve the royalty payment issue for safeguarding the interests of Oil and Natural Gas Corp (ONGC). We want the new owner to share the royalty burden from the Rajasthan oil field or adjust it as the project cost and its profits calculated thereafter. The other pre-conditions for the deal can either be held back or changed,” a ministry official said.
Under the terms of the production sharing contract signed with Cairn, ONGC has to pay 100% royalty on crude produced from the Rajasthan field even though it owns only 30% stake in it. It is estimated that the state-owned company will pay a whopping $3 billion in royalty over the life cycle of field under the current terms.
The petroleum ministry had earlier put conditions like asking Vedanta Resources to accept the government’s decision on future exploration activities and expenditures as “final and binding” as well as unconditionally accept the government’s position on issues that have been challenged by Cairn in courts.
Cairn-India and Vedanta had categorically refused to accept these conditions.
Cairn is also disputing the matter of being liable to pay cess of Rs2,500 per tonne on all crude oil produced from the Rajasthan block. Though the company is paying the cess now, the matter is under arbitration.
On August 16, Cairn Energy had announced a stake sale of 40-51% in its Indian subsidiary to London Stock Exchange-listed Vedanta Resources. The government had made it clear to Cairn Energy that the company will need its approval for transferring all the 10 oil blocks in the country before it can enter into any stake sale in the company.
