New Delhi: A ministerial panel is likely to decide Friday if the government should approve Cairn Energy Plc’s sale of stake in its Indian unit to mining group Vedanta Resources with conditions or without any precondition.
The group of ministers (EGoM) headed by finance minister Pranab Mukherjee is scheduled to hold its first meeting at 4:30 pm on 27 May, an oil ministry official said today.
The Cabinet Committee on Economic Affairs (CCEA) had on 6 April asked the GoM to vet the $9.6 billion deal, but the panel has not held a single meeting in seven weeks since then.
Earlier, the then oil minister Murli Deora was accused of delaying approval for the transaction, but he moved to the corporate affairs ministry in late January and there is still no sight of a decision.
Industry sources said they were apprehensive about the prospects of the GoM arriving at any decision tomorrow as key oil ministry officials — special secretary P K Sinha and joint secretary exploration D N Narasimha Raju — who have been dealing with the subject for the past nine months, are on official tour abroad.
Oil secretary G C Chaturvedi, who came to the ministry of petroleum and Natural Gas only this month, is still grappling with the subject, while oil minister S Jaipal Reddy too is relatively new to the job.
Sources said things have also become complicated for the GoM after Solicitor General Gopal Subramaniam reaffairmed his earlier opinion that the government can impose preconditions like asking Cairn or its successor to share cess and royalty with state-owned Oil and Natural Gas Corp (ONGC) in the all-important Rajasthan block.
In his second opinion, which was sought by Mukherjee, the SGI said, “The government is not bound to grant consent ipso facto or mechanically.”
The precondition that Cairn/Vedanta agree to cost-recovery of Rs 18,000 crore in royalty that ONGC has to pay on the Rajasthan block would be “defensible on parameters of public and national interest,” the SGI said in the second opinion.
Sources said the GoM itself is split in the middle on the issue of treating royalty paid by ONGC as cost-recoverable from its revenues. While Reddy has played it safe by giving an alternative to ONGC’s demand, which was orginally made a month before the Cairn-Vedanta deal was announced in August last year, the Law Ministry and Planning Commission have backed making cost-recovery of royalty a precondition for approval.
The finance ministry is in favour of Reddy’s second option of the government giving consent without any precondition and taking appropriate decisions to protect ONGC’s interests.
It remains to be seen if Mukherjee will sideline the SGI opinion in approving the deal.