Panipat: Cabinet committee on economic affairs (CCEA) will decide upon the vexed Vedanta Resources Plc.’s proposed acquisition of a majority stake in Cairn India Ltd for $9.6 billion said S Jaipal Reddy, union petroleum minister on Tuesday.
State owned Oil and Natural Gas Corp. (ONGC) has made the resolution of a royalty payment dispute a precondition for the deal’s approval. According to ONGC, royalty is cost recoverable. Cairn has declined to make royalty payments to the government, which at present is being made entirely by ONGC.
The state-owned firm expects the royalty to be $2 billion over the life cycle of the field. Cairn has also challenged its cess dues and is paying these under protest. ONGC paid Rs 812 crore as royalty for the first nine months of this financial year.
“The Cairn Vedanta issue is a huge issue and we are trying to go to the cabinet committee on economic affairs (CCEA). The CCEA will take a view…So far as concerns of ONGC are concerned; we can’t bail out any seller or buyer. We will not compromise upon the concerns of ONGC.
(ONGC’s argument)… that royalty should be treated as cost recoverable is supported by us. We are trying to expedite the process and the matter will go to the cabinet in two to three weeks,” said Reddy in a press conference after the dedication of the state run Indian Oil Corporation’s (IOC) naphtha cracker unit at its Panipat refinery.
Mint reported on 17 August that the acquisition will have to overcome significant regulatory hurdles and a possible challenge from ONGC, Cairn India’s partner in a joint venture that runs the latter’s main oil asset in the country—block RJ-ON-90/1 in Rajasthan.
A spokesperson for Cairn Vedanta could not be immediately reached.