Govt gets two weeks to clear stand on Cairn India's excess crude

Company says it does not have enough storage capacity to keep the crude oil for long periods

In a plea filed by Cairn India, seeking permission to export excess crude oil extracted from its Barmer oil fields, the Delhi High Court has given the central government two additional weeks to clear its stand on excess crude oil extracted from Cairn India Ltd's Barmer oil fields in Rajasthan.

The court was hearing a plea where Cairn India said it is open to three options--selling the crude oil to the government as per the existing agreement, selling it to a domestic buyer at international rates, and exporting it. It added that it does not have enough storage capacity to keep the crude oil for long periods.

The court asked the government to clear its stand on the option that it is agreeable to, without any delay beyond the two weeks, the company said in a statement. The company had earlier said the government has already admitted that it has failed to lift the entire volume of oil extracted from the field, and despite repeated requests, the government has not allowed it to export the excess oil that it has not been able to lift.

Cairn India told the Delhi High Court that a loss of Rs 1,400 crore has been caused to the government as the company was forced to sell its share of crude from its Rajasthan oil field to private players at prices 20% less than the global rates.

The contention was opposed by the Ministry of Petroleum and Natural Gas which told Justice Manmohan that the loss to the government as calculated by Cairn was "notional" and the company was incurring no loss either as it was selling the crude, not picked up by PSUs or the government, to private domestic players.

Cairn, a subsidiary of UK-based Vedanta group, told the court that as per the production-sharing contract (PSC) it has with the government, it gets 70% of crude produced from the well while the government gets 30%.

Under the PSC, the government or its nominee can pick up the company's share of the crude and what was not picked up, could be sold to private players or exported, Cairn said.

However, after the crude is sold, the government gets 70% of the profits, the company told the court. It claimed that as a result of selling the excess crude to private domestic companies like Reliance and Essar, at rates lower than international prices, government was losing about Rs 4.5 crore per day.

Cairn also claimed that while the government was losing around Rs 1,400 crore, the company's losses came to about a third of the amount.

Justice Manmohan, thereafter, observed that if the excess crude was sold at lower rates then finally it is the the government would suffer. He asked the central government standing counsel Anurag Ahluwalia to take instructions in two weeks as to whether the ministry was willing to pick up the excess crude or can the company export it.

The court said it was the last and final opportunity for the government to get back on the issue as earlier too on December 14 last year, the ministry had sought time to take instructions, but no decision had been taken till now.