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.
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)."
The 25-year contract for exploration and production of oil and gas from Barmer block RJ-ON-90/1 is due for renewal on May 14, 2020, but Cairn India, which has since merged with parent Vedanta, has to, as per a new policy, apply for a 10-year extension.
The company moved Delhi High Court as it felt that the May 1995 PSC for the block provided for an automatic 10-year extension on same commercial terms if there is oil and gas left to be produced. But the government had midway retrospectively changed fiscal terms.
State-owned Oil and Natural Gas Corp (ONGC), which as a government nominee picked up 30 per cent stake in the Rajasthan block in 1995, also was of the opinion that PSC provides for an extension on the same terms.
ONGC had first in May 2015, then again on at least two occasions in 2016, concurred with Cairn's interpretation of the PSC for extension of the Rajasthan contract by 10 years on same terms.
Vedanta had moved the court after its request to the government in 2009 to extend the PSC did not elicit any response. It had claimed that the delay in a decision by the government was preventing it from infusing further investment of over Rs 30,000 crore in the project.
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