Cairn-Vedanta GoM meet postponed

The much-awaited meeting of a Group of Ministers headed by Finance Minister Pranab Mukhejree on London-listed mining group Vedanta Resources' $9.6 billion acquisition of Cairn India has been postponed.

"The meeting was scheduled for 1930 hours today, but it has now been postponed," a senior government official said.

No reasons were given for the postponement.

Besides Mukherjee, the GoM includes Oil Minister S Jaipal Reddy, Law Minister M Veerappa Moily, Telecom Minister Kapil Sibal and Planning Commission Deputy Chairman Montek Singh Ahluwalia.

"This was the first meeting of the GoM since it was asked by the Cabinet Committee on Economic Affairs on April 6 to vet the deal for according government approval," he said.

The ministerial panel was to deliberate on whether Vedanta, with no experience in oil and gas sector, should be given unconditional approval for buying a company that owns the nation's largest onland oil fields or given clearance after attaching reasonable conditions.

The official said Reddy had listed two options. The first was giving approval subject to state-owned ONGC being allowed to recover the Rs 18,000 crore it is liable to pay in royalty on behalf of Cairn India.

Alternatively, he suggested that the government gives its consent to the deal without any pre-condition and take an 'appropriate decision' to enforce ONGC's right.

Oil and Natural Gas Corp (ONGC) has a 30% stake in Cairn India's mainstay Rajasthan oilfields, but it is liable to pay royalty not just on its share but also on Cairn's 70% share of crude oil from the field.

Royalty at the rate of 20% of the crude price is payable to the state government and ONGC, a month before the Cairn-Vedanta deal was announced in August, 2010, had cited the provisions of the field contract to demand its cost recovery.

The Oil Ministry is backing the ONGC demand that royalty payment be added to the project cost, which can be recovered from the sale of oil before profits are split between the partners and the government.

However, such a move is being opposed by Cairn Energy and Vedanta as it will lower Cairn India's profitability.

The Solicitor General of India, the nation's second highest law officer, had opined that Vedanta must agree to cost recovery of royalty before the government nod.

Vedanta, a mining company controlled by billionaire Anil Agarwal, with no experience of the oil and gas business, agreed in August to buy at least 40% and as much as 51% in Cairn India from Edinburgh-based Cairn Energy.