Cairn Energy said on Tuesday it wanted its Indian subsidiary, Cairn India, to accept all the government’s conditions and agree to pay royalty and cess on the Rajasthan oilfields to facilitate its stake sale to Vedanta Resources.
Cairn Energy, which owns a 52.11 per cent stake in Cairn India, “has voted to accept the (government’s) conditions”, the company said in a statement.
The Edinburgh-based firm, which is selling a 40 per cent stake in Cairn India to the London Stock Exchange-listed Vedanta, had maintained forcing its Indian unit to pay royalty and cess on the mainstay Rajasthan oil block was against the signed contract and would hurt minority shareholders’ interest.
“Two of the conditions, cess and royalty payable, are currently with Cairn India shareholders for approval. Cairn has voted to accept these conditions, with voting results due on September 14,” the statement said.
Along with Vedanta’s 28.5 per cent shareholding in Cairn India, Cairn Energy has enough votes to get any proposal passed by its shareholders, ignoring the resolution passed by the Cairn India board in February that opposed the government’s conditions.
In June, the government approved the stake sale in Cairn India to Vedanta only if the company accepted treatment of royalty from the Barmer block as cost-recoverable. In addition to royalty, the cess of Rs 2,500 per tonne on 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 a 30 per cent stake in Barmer, has been paying full royalty under the production sharing contract.