Govt to take proper action on Cairn's license plea: Pradhan

Days after Cairn India dragged government to court over extension of Rajasthan block license, Oil Minister Dharmendra Pradhan today said no one should take judicial recourse in a "hurry" and decisions on such pleas are taken after full due diligence.
He said the government will take "appropriate action" on Cairn India's plea for extending license to explore and produce oil and gas from Barmer block in Rajasthan by 10 years beyond 2020.
"Nobody should go to judicial path in a hurry", he told reporters when asked to comment on the Cairn moving court.
Cairn on Friday moved the Delhi High Court over what it saw as delays in government extending the Rajasthan block license to 2030 as well as seeking higher price for its crude oil.

The High Court yesterday listed the matter for hearing on April 6, 2016 after issuing directions to government and Cairn on issues related to the extension.
"The government will take appropriate action in the overall interest of the country", he said. "Cairn and (its partner) ONGC has to fulfil due diligence (for extension)."

The Production Sharing Contract (PSC) provides for extension of the Rajasthan block license by 5 years in case it has oil producing fields and by 10 years if there is gas field. This extension, the PSC says, should be on mutually agreeable terms.
Cairn's Rajasthan license comes up for renewal in 2030.

Since the Rajasthan block now also has a gas discovery, it is given that the license would be extended by 10 years but the point of difference is the mention of "mutually agreeable terms" in the PSC.
While Cairn feels it is with reference to duration of the contract being decided through mutual agreement, the Oil Ministry feels it refers to terms or conditions of such extension.
The Ministry had taken a legal opinion on it, which concurred with the ministry's line of thinking. And one of the terms of such an extension could be raising the share of profit that the government gets from the field.

At present, the government's profit on petroleum from Cairn's Rajasthan block is 50 per cent after all capital and operating expenses are deducted.
Recently, a Committee headed by the Directorate General of Hydrocarbons (DGH) on policy for grant of extension to the PSC for small, medium-sized and discovered fields that were awarded to private firms in 1990s, has recommended a uniform 10-year extension but on revised terms and conditions including higher profit share for government.
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Cairn Energy still holds 9.8 per cent in Cairn India which the I-T Department has barred it from selling. Also, the department had slapped a demand notice of Rs 20,495 crore comprising tax of Rs 10,248 crore and interest of Rs 10,247 crore, on Cairn India for failing to deduct withholding tax on alleged capital gains made by its erstwhile owner Cairn Energy.

Cairn India is contesting the tax in Delhi High Court.
The Income Tax department had on February 4 issued a reminder notice to Vodafone over its Rs 14,200 crore tax dues, a move which the UK firm had termed as showing disconnect with Prime Minister Narendra Modi's promise of a tax-friendly environment, but the government defended it saying the step was a routine exercise.
The department in the notice to Vodafone International Holdings BV sought Rs 14,200 crore in taxes, which it says are due from its USD 11 billion acquisition of Hutchison Whampoa's India telecom business in 2007. The matter is under international arbitration.

"Cairn UK Holdings Ltd, a direct subsidiary of Cairn Energy plc, is in receipt of an assessment order from the Indian Income Tax Department relating to the intra-group restructuring undertaken in 2006 prior to the IPO of Cairn India Ltd in India, which cites a retrospective amendment to Indian tax law introduced in 2012," Cairn Energy said.
The company said it has commenced international arbitration proceedings against India under the UK-India Bilateral Investment Treaty.
"Based on detailed legal advice, Cairn is confident that
it will be successful in such arbitration. Cairn's claim will seek relief by way of indemnification in respect of the tax demand, plus full compensation for its losses (including the loss of the value in the Cairn India Ltd shares)," it added.

The company said its tax strategy is fully aligned with its overarching business objectives and principles.
"Cairn commits to managing its tax affairs in a transparent and responsible manner and ensuring that all statutory obligations and disclosure requirements are met.
"Cairn's aim is to comply with both the letter and spirit of the law in the relevant jurisdictions in which we operate, to ensure that the right amount of tax is paid, at the right time, within the right jurisdiction," it said.
The company said its "policy is to not enter into any artificial tax avoidance schemes and to build and maintain strong collaborative working relationships with all relevant tax authorities, based on honesty, integrity and proactive cooperation."

The Group aims for certainty in relation to the tax treatment of all items, it added.
Like Cairn, Vodafone had disputed the tax demand over its acquisition of 67 per cent stake in Hutchison, now called Vodafone India, arguing that no tax was due as the transaction was conducted offshore.
But the tax department's contention is capital gains were made on assets in India.
The basic tax demand for Vodafone was Rs 7,990 crore, but the total outstanding, including interest and penalty, is estimated to have risen to Rs 20,000 crore.