New Delhi/Mumbai:A ministerial panel set up to vet Vedanta Resources Plc’s proposed acquisition of a majority stake in Cairn India Ltd for $9.6 billion (around Rs 43,395 crore) has recommended that the transaction be approved by the cabinet committee on economic affairs (CCEA).
The move by the group of ministers (GoM) will delay the closure of the deal, but it does mean that the transaction is still alive.
“It (GoM) has looked at various aspects of the deal. It has taken a view on the matter... It will be placed before cabinet committee on economic affairs in two weeks’ time,” petroleum minister S. Jaipal Reddy told reporters after the ministerial panel’s meeting on Friday.
He declined to comment on whether the recommendation was unconditional or came along with riders to protect the interests of Cairn’s partner, state-owned Oil and Natural Gas Corp. Ltd (ONGC). Mint couldn’t ascertain whether the recommendation came with conditions.
Montek Singh Ahluwalia, deputy chairman of the Planning Commission and a member of GoM, declined to comment.
ONGC had made the resolution of a royalty payment dispute with its partner a precondition for the deal’s approval.
“Originally there was a condition that in any case Cairn has to take a formal approval from ONGC. If ONGC is allowed cost recovery, an approval will be readily given. If not, our board has to decide,” said a top ONGC executive who did not want to be identified.
ONGC is 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. ONGC wants to be compensated for royalty payments to the government that it has been making on the oil produced at this field. Cairn has declined to make these payments. Cairn India on Wednesday said “royalty is not a contract cost eligible for cost recovery”.
“So far as the concerns of ONGC are concerned, we can’t bail out any seller or buyer. We will not compromise upon the concerns of ONGC. The ministry supports ONGC’s claim that royalty should be made cost recoverable,” Reddy had said in February.
The ministry of petroleum and natural gas had earlier placed the issue before CCEA, which in turn recommended it to a GoM.
The ministerial panel was headed by Union finance minister Pranab Mukherjee. Its other members were telecom minister Kapil Sibal, law minister M. Veerapa Moily and Ahluwalia.
“Cairn has not yet received formal confirmation of any decision that has been made by the government of India. Cairn and Vedanta continue to work with the government of India to secure the necessary consents and approvals. A further announcement will be made in due course,” said a Cairn spokesperson.
A spokesperson for Vedanta declined to comment.
Earlier, ahead of a 20 May deadline to close the deal, Cairn and Vedanta agreed to extend the deadline indefinitely. On 6 May, Vedanta also announced that its subsidiary Sesa Goa Ltd had picked up a 10.4% stake in Cairn India from Malaysia’s Petronas International Corp. Ltd and a further 8.1% through an open offer from other shareholders that closed on 30 April.
Vedanta on Friday announced the sale of bonds to raise a total $1.65 billion to part-finance the acquisition of a 40% stake in Cairn.
The bonds were sold in two separate tranches—$750 million of five-year notes with an interest rate of 6.75% and $900 million of 10-year notes with an interest rate of 8.25%, the company said in a statement.