The Prime Minister's Office (PMO) has asked Oil Ministry to decide on giving consent to Vedanta Resources' $9.6 billion acquisition of Cairn India by January end, at least a month earlier than the deadline Murli Deora's ministry had set for itself.
The directive followed a one-on-one meeting mining group Chairman Anil Agarwal had with the Prime Minister Manmohan Singh last Wednesday to press for an early decision, sources privy to the development said.
Vedanta is buying 40 to 51 per cent stake in Cairn India from Edinburgh-based Cairn Energy.
Thereafter, London- listed firm's Indian unit Sesa Goa will make an open offer for an additional 20 pe cent stake to minority shareholders of Cairn India. Both these transactions are to close by April 15.
Sources said going by the February-end deadline set by Oil Secretary S Sundareshan, Vedanta could not have closed the deal by April 15.
This is because the open offer, which can be made only after government consent to the deal, will have to remain open for subscription for a total of 60 days.
If the government decision on the deal was to come by February end (and in March according to Oil Minister Murli Deora), the open offer could not have begun before first week of March and it would have closed in end-April or early May, missing the April 15 deadline, they said.
Agarwal, sources said, pressed for an early decision with the Prime Minister as oil ministry was adopting delaying tactics. The PMO promptly wrote to the oil ministry directing it to decide on the deal by month-end.
Sundareshan today said the ministry will decide on giving approval to the deal by January-end or early February.
Cairn had made applications for transfer of control in all the 10 properties it has in India and completed other formalities on November 23.
Sundareshan had then stated that his ministry "will need at two to two-and-half months to decide" on the application and set a February-end deadline.
Agarwal had also met Deora and Sundareshan after meeting PM.
State-owned Oil and Natural Gas Corp (ONGC), which holds interest in all the three producing properties of Cairn and five out of its seven exploration acreage, has claimed pre- emption or right of first refusal by virtue of its stake.
Its claims have been backed by the Law Ministry and the Solicitor General of India (SGI) in separate opinions on the deal, but Cairn has refused to acknowledge them.
Sources said it remains to be seen if the oil ministry will ignore law ministry and SGI opinion in deciding on the deal or ask Cairn to also seek ONGC's nod.
ONGC says the Rajasthan oilfields, which is Cairn's mainstay property, is a losing proposition for it.
This is because it has to pay one-fifth of the price realised on crude oil produced from the field in royalty on not just its share but also on the entire share of Cairn.
Sources said the oil ministry was previously hung-up on Cairn making formal applications in all the 10 properties it has in India, delaying initiation of the process to give government nod.
Cairn initially said it was a corporate transaction involving transfer of shares and Cairn India as a company would continue to exist.
However, oil ministry persisted with its view that Cairn will need its formal approval in all the 10 properties.
The Edinburgh-based firm finally relented and made formal applications.
Billionaire Anil Agarwal-run Vedanta, a mining firm with no prior oil and gas experience, agreed in August 2010 to pay as much as $9.6 billion for Cairn India Ltd to gain access to the country's biggest onshore oilfield.
ONGC partners Cairn in all three of the UK-based energy company's producing properties in the country, besides several exploration blocks, by virtue of which it claims to have pre-emption rights over the Vedanta deal.
In the applications, Cairn said it was seeking the government's consent on the advice of the Oil Ministry, which said prior approval was necessary, based on an opinion from the Law Ministry.
The Law Ministry had given the opinion that the transaction was nothing but the transfer of control in all 10 properties held by Cairn India.
As such, it would require government consent and trigger the preemption or right of first refusal (ROFR) of ONGC, as it partnered the UK-based company in all three producing properties and several exploration acreages.
Cairn, however, has insisted that the requirement for government consent on the deal does not trigger ONGC's pre-emption rights.
