Cairn-Vedanta deal has jurisdiction issues: Govt

Prior permission needed, it maintains; decision by the end of December.

For the first time after the announcement of the Cairn-Vedanta deal on August 16, the government today admitted to differences with Cairn over whether the deal required approval under the production sharing contract for the Barmer oil block.

Petroleum Secretary S Sundareshan said there were “jurisdictional” issues, with Cairn maintaining it did not require government permission for the deal.

Speaking at the Economic Editors’ Conference today, Sundareshan said Cairn believed the permission was not required for blocks awarded to it prior to the New Exploration and Licensing Policy (Nelp). The ministry was of the opposite view, he added.

Cairn’s three producing blocks, including Barmer, the oil-producing one, are pre-Nelp. “There are jurisdictional issues…Right now we are deciding on the jurisdiction issue. Once it is resolved, we will come to the merit of the issue,” he said.

Cairn had on September 9 applied for specific approvals in seven exploration blocks it had won under Nelp since 1999 but said consent was not required under the production sharing contracts (PSCs) for three producing blocks.

While Petroleum Minister Murli Deora maintained the "matter is under examination” and he could not comment on it, Sundershan read a provision of the joint operating agreement signed between government-owned Oil and Natural Gas Corporation and Cairn that stated any company assigning or selling its interest in a block must seek prior government approval. On being told the deal was not about assigning interest in the blocks, since it was a sale of equity, Sundareshan said, “That is your interpretation. Not ours.”

The Securities and Exchnage Board of India, the capital markets regulator, is yet to approve the mandatory open offer to shareholders by Vedanta group company Sesa Goa, following the ministry of petroleum’s letter to it stating that government approval for the deal is required under the PSCs.

ONGC is a partner with Cairn India in all its three producing blocks, besides five other blocks. Cairn India has 10 blocks in India, including the Barmer block in Rajasthan, which has added 18 per cent to India's crude oil production of 674,000 barrels a day. "We are completely neutral to the Cairn-Vedanta deal. The government has no particular views on merits of the deal," Sundareshan said, adding the government would decide on the issue by December-end.

The proposed deal, which could see Vedanta spending up to $9.6 billion to acquire 51-60 per cent in Cairn India, has not gone down well with the government.

The secretary said after receiving general letters from the company on August 26, it was asked to apply under the PSCs signed by Cairn India and its subsidiaries. Cairn Energy Plc applied for government approvals for sale of stake in its Indian unit to Vedanta Resources under the PSCs for only exploration blocks on September 9 but even after more than a month, the ministry is still examining the merits of the transaction.