Cairn India on Wednesday got shareholders’ nod for acceptance of government conditions, setting the stage for the completion of a transfer of its majority stake to mining MNC Vedanta Resources.
The oil and gas exploration company will now seek a no-objection certificate from Oil and Natural Gas Corporation (ONGC), partner in its three producing blocks, including one at Rajasthan’s Barmer. The 2006-formed firm will then get a formal nod from the government for the stake sale, as Cairn India saw 97.29 per cent of its shareholders voting for the resolution that sought to accept the government’s conditions.
In a communication to the Bombay Stock Exchange, Cairn India said the company, along with its subsidiary companies, shall communicate (to the government) an acceptance that the royalty being paid by ONGC on Barmer was cost-recoverable.
It would also withdraw the arbitration claim relating to dispute raised by the company’s subsidiaries on payment of cess on Barmer crude.
“The acceptance of royalty as being cost-recoverable and the withdrawal of the arbitration pertaining to cess will be concomitant with transfer of control of Cairn India,” the statement said.
In June, the government approved the stake sale in Cairn India to LSE listed Vedanta Resources only if the company accepted as cost-recoverable the treatment of royalty from its mainstay — Barmer block in Rajasthan. In addition to royalty, the cess of Rs 2,500 per tonne on the Barmer output that is being paid by Cairn India under protest will also have to be made cost-recoverable. Further, Cairn India will have to give up its right to challenge the above two conditions in future. Ever since output began at Barmer in August 2009, ONGC with its 30 per cent stake in that western border city, had been paying full royalty under the production sharing contract.
Vedanta group has so far acquired 28.5 per cent stake in Cairn India at the price of Rs 355 per share. Acquisition of another 30 per cent from Cairn’s UK-based promoting company is subject to the acceptance of the government conditions. UK-based Cairn Energy currently holds 52.2 per cent stake in Cairn India.