Sesa Goa’s open offer for Cairn India entered the third day today, but there is no news on the formation of group of ministers (GoM) for vetting the $9.6-billion Vedanta offer to buy Cairn Energy’s stake in its Indian arm.
The Cabinet Committee on Economic Affairs (CCEA) had referred the issue to a GoM last week, but any decision on the Cairn-Vedanta deal is expected to take a long time due to the ongoing assembly polls. While polling in Assam, Kerala, Tamil Nadu and Union Territory of Puducherry is over, elections in West Bengal — where Finance Minister Pranab Mukherjee, also the head of the GoM, is spearheading the campaign — will end only on May 10. Persons close to the development said the GoM was unlikely to have regular meetings before the West Bengal polls.
The petroleum ministry had circulated a cabinet note on the deal. The ministry gave the CCEA an option between conditional clearance and absolute clearance while leaving legal recourse open to both Cairn and its partner, Oil and Natural Gas Corporation (ONGC). Sesa Goa, the Vedanta Group company, however, went ahead with its open offer to buy an additional 20 per cent stake in Cairn India.
ONGC, which has a 30 per cent stake in Cairn’s primary producing asset — the Barmer block in Rajasthan, also opposed the deal. According to the original agreement, ONGC was to pay the entire royalty on Barmer’s produce, even though it is entitled to 30 per cent of Barmer revenues. Following the deal, ONGC took legal opinions and claimed the royalty was ‘cost-recoverable’. ONGC will end up paying Rs 14,000 crore as royalty for the life of Rajasthan block. There is also a separate issue of cess on Barmer production that is under arbitration.
In August, London Stock Exchange-listed Vedanta Resources had announced plans to buy up to 60 per cent in Cairn India for $9.6 billion. The deal ran into hurdles with the petroleum ministry insisting on written applications to clear it.
