The government will decide on giving approval to the $9.6 billion Cairn-Vedanta deal by February-end, Oil Secretary S Sundareshan has said today.
"I had earlier given a timeline of December-end (for deciding on giving approval to Vedanta Resources, buying majority stake in Cairn India) on the presumption that it will take 2-3 months to process (the case) from the date we get all applications.
"But given that we've got the application (seeking approval) only last week, we will certainly be able to decide on the case by February-end," he said here.
After months of dithering, UK's Cairn Energy on November 25 applied for government nod to transfer control in its three producing assets, including the prolific Rajasthan fields to Vedanta Resources.
Sundareshan said the oil ministry had told Cairn that it would have to apply for approval in all of its 10 assets for the government to consider giving consent to the deal.
Three separate applications were made for the Barmer oil fields in Rajasthan, the eastern offshore Ravva oil and gas fields and the Cambay fields off the west coast, which had previously been omitted from the applications for government approval.
"Yes, we have got the applications in last 2-3 days," Sundareshan said.
Cairn Energy had on August 16 announced sale of 40-51% stake in its Indian unit to London-listed Vedanta, but has been selective in approaching government for approval for the deal.
The applications stated that the company's legal advisers had stated that the consent of the government was not required for transfer of control in a company holding interest in the three blocks that were awarded prior to advent of the New Exploration Licensing Policy (NELP).
NELP explicitly has such provisions and so Cairn had sought government nod for seven exploration acreage it has.
Cairn in its application last week had stated that it was applying for the government consent on being asked to do so by the oil ministry, which backed its claim for prior approval based on an opinion by the law ministry.
Sundareshan said the law ministry had backed oil ministry's contention that Cairn needs government approval in all of its 10 blocks.
The law ministry has given the opinion that the transaction is nothing but transfer of control in all the 10 properties held by Cairn India and so requires government consent and trigger pre-emption or right of first refusal (ROFR) of ONGC that partners the company in all the three producing properties and several of exploration acreage.
Cairn, however, has maintained that the need for consent does not trigger ONGC's pre-emption rights.
Sundareshan said the pre-emption right had to be decided by ONGC "keeping in mind if it wants to exercise those rights."
Cairn, sources said, did not apply for consent under any specific provision of the Production Sharing Contract (PSC) that the company had signed for the three properties with the government.
The oil ministry too had not sought the application under any specific clause of the PSC.
The PSC has clause for prior-government consent in case of one of the companies deciding to sell its stake in the property (a situation referred technically as sale or transfer of Participating Interest).
Cairn has denied that it is selling its Participating Interest (PI) in fields like Rajasthan and that the Vedanta deal is a corporate transaction and Cairn India as a company will continue to exist and operate the properties.
If it were to make an application under the PSC, it would have been an acknowledgment of ONGC's pre-emption rights whose existence Cairn has been denying from Day one.
In its August 16 announcement of the deal, Cairn Energy did not say that the sale of its majority stake in Cairn India to London-listed Vedanta was conditional on government approvals.
However, on being shown relevant provisions of the contracts for exploration it has with the government, Cairn Energy -- about a month later -- made an application for permission that left out all of its three producing properties including its mainstay 6.5 billion barrels Rajasthan block.
"This position was not acceptable to the oil ministry, which sought law ministry's views on the issue. The law ministry opined that Cairn was contractually bound to apply for approvals in all the properties," a source said.
Earlier this month, the oil ministry wrote to Cairn Energy, citing the law ministry views after which the UK-based firm has had a change of heart.
Though the company conceded ground on the requirement of prior-government consent, Cairn has not yielded pre-emption rights to state-owned ONGC, which partners its Indian unit in most of its properties including the Rajasthan block.
"It remains to be seen how the government will react to the continued defiance of Cairn on pre-emption rights," the source said.
The pre-emption is a natural extension of the requirement of government consent and the same has been upheld by Law Ministry and the Solicitor General of India, the nation's second highest law officer, in their separate opinions on the Cairn-Vedanta deal.
The Law Ministry, in an opinion sent late last month, had held that the share sale was nothing but transfer of control (in all of the 10 properties of Cairn India), necessitating government nod in all of them and triggering ONGC's pre-emption rights.
Cairn India is primarily an aggregation of interests that it holds directly or indirectly through its subsidiaries in 11 blocks (in India and Sri Lanka).
A transfer of controlling stake in Cairn India amounts to a transfer of the respective participating interests, therefore, necessitating government approval, according to the legal opinion.
And transfer/sale/assignment of interest to third party will trigger pre-emption rights of state-owned ONGC, which partners Cairn India in most of its properties.
Cairn says the Vedanta deal is only a corporate transaction, involving share transfer, which does not trigger issues like examination of new owners' technical capability and ONGC's pre-emption rights.
