Oil Minister Dharmendra Pradhan today said the government will challenge a Delhi Court order overturning its demand for higher tax for extension of contracts of producing oil and gas fields.
The Delhi High Court had on May 31 ordered extension of Cairn India's Rajasthan oil block contract for 10 years beyond 2020 on old terms and conditions.
"Government will go for appeal," he said at a news conference here.
The government had in March last year approved a new policy for extension of production sharing contracts (PSCs) that provided for an extension beyond the initial 25-year contract period only if companies operating the fields agree to increase the state's share of profit by 10 per cent.
Cairn, which has since merged with its parent Vedanta, challenged the policy.
The court last week ordered that the PSC for the block be extended till 2030 on the same terms and agreements when it was first entered into in 1995.
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It had also directed the government to formally communicate its decision extending the Rajasthan block production sharing contract within two weeks.
Pradhan said the extension policy flowed from its Discovered Small Field auction policy where it was provided that extension will be given on payment of additional 10 per cent profit petroleum.
"The government has the authority to frame policy," he said. "We will stick to that policy framework and government will go for an appeal (in higher court)."
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