Cairn India takes the advertisement route to press its case3 min read . Updated: 09 Sep 2015, 01:26 PM IST
The Cairn India advertisement comes in the backdrop of pending extension to the production sharing contract of the explorer's Barmer field
New Delhi: Cairn India Ltd, which is credited with the largest onshore oil discovery in India, seems to have taken out a page out of the playbook of Anil Ambani-controlled Reliance Group to press its case with the government.
In an advertisement taken out in national dailies, the oil and gas subsidiary of Anil Agarwal’s Vedanta Ltd has sought early contract extension, free market price, cess linked to oil price and incentive for difficult fields.
In 2009, Anil Ambani took on late Murli Deora, the former minister for petroleum, accusing him of bias, through a series of unprecedented front-page advertisements in mainstream newspapers, during the gas dispute between Reliance Natural Resources Ltd (RNRL) and Mukesh Ambani’s Reliance Industries Ltd (RIL).
Cairn India has come under the income-tax department’s scanner over transfer of assets nine years ago. Cairn Energy Plc had transferred shares of Cairn India Holdings Ltd to Cairn India in 2006-07 before a proposed initial public offering (IPO) in India, resulting in a capital gain of about ₹ 10,000 crore. While the tax department slapped a tax demand of ₹ 10,247 crore on Cairn Energy, a demand of ₹ 20,495 crore was raised against Cairn India.
The Cairn India advertisement comes in the backdrop of pending extension to the production sharing contract (PSC) of the explorer’s Barmer field. Also, the explorer wants to renegotiate the pricing formula for the field, the PSC for which is set to lapse in 2020. In addition, the merger of Cairn India Ltd with Vedanta Ltd—which will give the latter access to Cairn India’s massive cash reserves to pare its debt burden and that of its London-listed parent company Vedanta Resources Plc.—is yet to be approved. Cairn India had cash and cash equivalent of ₹ 16,867 crore as on 31 March. Cairn Energy Plc and Life Insurance Corporation of India are the two major minority shareholders of Cairn India, each having a little below 10% stake in the company.
In response to a direct query about the rationale behind the advertisement, a Cairn India spokesperson said in an emailed response, “Cairn India has recently crossed some significant milestones clocking 300 million barrels of crude oil production from Rajasthan as it recently completed 6 years of successful operations in Barmer. We felt it was a good occasion to highlight how the oil and gas sector and Cairn India play a significant role in making India self-reliant by investing in domestic exploration and production in the oil and gas sector. This is in line with government’s Make in India campaign (thus the headline, Oil and Gas—In India for India)."
The advertisement claims that Cairn India has close to 30% share in India’s domestic oil production, with 300 million barrels of oil produced from the Rajasthan block in the last six years. Also, the advertisement states that the contribution to the exchequer has been ₹ 82,000 crore with an investment of ₹ 34,000 crore by the firm. The advertisement also claims that this has resulted in a ₹ 1,79,000 crore reduction in India’s crude oil imports.
India follows the US, China and Russia in total energy usage, accounting for 4.4% of global energy consumption. India imports 80% of its crude oil and 25% of its natural gas requirements. Petroleum product consumption in India has also been growing. According to the oil ministry, it grew 3.14% to around 163.17 million tonnes (mt) in 2014-15. India sourced 189.43 mt of crude oil last year.
“The ad also captures Cairn India’s footprint and unique achievements. We strongly believe that government’s attractive policies can bring in additional domestic investments and FDI which will lead to enhanced economic growth. This will get a further boost with support to the listed industry enablers, which will help tap the unexplored potential in the oil and gas sector, leading to improved Energy Security for the nation," the spokesperson added.
This comes in the backdrop of Cairn India posting its first-ever loss in seven years of ₹ 1,044 crore in the fourth quarter of the last fiscal year, followed by a profit of ₹ 322 crore in the first quarter of 2015-16. It has cut its capital expenditure programme for 2015-16 by almost 60% to ₹ 3,000 crore.