Cairn-Vedanta deal: Govt nod to take time

The government nod for the Cairn-Vedanta deal will take more time with the ministry of petroleum and natural gas today conveying pre-conditions for an approval to the companies.

Though petroleum secretary S Sundareshan said he was hopeful of a “positive solution”, another round of meeting is expected tomorrow.

A Cairn statement said the proposed transaction would be closed before April 15, 2011. “We are discussing the various issues that concern the finalisation of the deal. Discussions were in extremely positive framework. We hope to move forward,” Sundareshan told reporters after the meeting.

Cairn chairman Bill Gammell and chief executive Rahul Dhir, besides Vedanta director Tarun Jain and chief executive officer MS Mehta were present during the meeting.

London Stock Exchange-listed Cairn Energy Plc had on August 16 announced selling 40 to 51 per cent stake in Cairn India to Anil Aggarwal-controlled Vedanta group. The government approval is crucial to the deal since it has come in the way of Sebi approval for a mandatory 20 per cent open offer to Cairn India minority shareholders.

The consent of government and Oil and Natural Gas Corporation (ONGC), a partner in Cairn’s three producing blocks, is required under the production-sharing contracts for any change of interest in the blocks.

Though the government approval was not required for the deal, involving stake sale in Cairn India, Cairn Plc applied for the approvals on November 23 as an afterthought after a ministry letter blocked the Vedanta open offer.

The government had so far not conveyed any precondition to Cairn and Vedanta in writing but senior officials explained the government’s predicament during the 90-minute meeting on Sunday. Any approval now without resolving concerns of ONGC could create controversy for the government.

ONGC had to pay the entire royalty sum of Rs 1,183 crore on crude oil during the first nine months of the current financial year despite being only a 30 per cent stake holder in the Barmer block.

Though ONGC has refused to exercise its first right of refusal, it has been insisting that the royalty issue be resolved before its follow on public offer in March. After having insisted on an approval, the ministry might find itself in a bind over giving a go-ahead without providing relief to the company.