New Delhi/Mumbai: Fresh regulatory issues raised by the petroleum ministry as well as concerns about the open offer price expressed by an institutional investor in Cairn India Ltd, will have to be addressed before Anil Agarwal-promoted Vedanta Resources Plc’s can close out the $9.6 billion (Rs44,736 crore) acquisition.

Separately, tax authorities, who held a meeting with Cairn India, did not rule out raising a tax demand on the deal.

Both the government and the tax authorities maintained that a clear view would emerge only after the proposal is submitted for approval.

Life Insurance Corp. of India (LIC), which holds a 2.57% stake in Cairn India, may not tender its shares in the open offer made by Vedanta, which has proposed to acquire a stake of up to 60% in the company. Vedanta will pay Rs405 per share—including a non-compete fee of Rs50 per share—to Cairn Energy Plc to buy up to 40% of Cairn India, but the open offer price for an additional 20% has been fixed at Rs355.

“It is not fair to discriminate (between) shareholders. All shareholders should be able to sell their holdings at an equal price," said a senior LIC official. “If we are not given the offer to sell at Rs405 a share, we may hold on to our existing shareholding and look at the upside of the stock," said the official, who declined to be named because of the sensitive nature of the issue. With a stake of 14.94%, Petronas International Corp. Ltd is largest institutional shareholder in Cairn. It could not be ascertained whether Petronas will participate in the open offer.

Under India’s current takeover norms, any acquirer buying at least a 15% stake in a firm is required to make an open offer for an additional 20%, but no shareholder is obliged to sell shares.

Meanwhile, the petroleum ministry is concerned that by acquiring Cairn’s assets in India, Vedanta will also get access to the exploration blocks already awarded to the company under India’s new exploration and licensing policy (Nelp) bidding rounds. The ministry is concerned that the acquisition would enable Vedanta, which is making its debut in the oil business, to get around the criterion of proven experience in exploration.

“This is a point that stands ground. The focus of Nelp rounds has been exploration and production. All these issues need to be examined in detail when the government gets the proposal," said a senior official of the petroleum ministry, who did not want to be identified.

Nelp auctions started in January 1999 to boost oil and gas exploration and reduce India’s dependence on hydrocarbon imports. The government?allocates rights to explore blocks through auctions under the programme based on a bidder’s technical and financial expertise. For deepwater blocks, technical capability and experience has more weightage during bid evaluation.

The government has already indicated that the deal will require its go-ahead and Oil and Natural Gas Corp. Ltd (ONGC) said it would have to study the so-called right of refusal it has with Cairn India in the joint venture that runs the latter’s main oil asset in the country to understand its rights in the Vedanta-Cairn deal. However, Vedanta was confident of closing out the deal by the end of the current fiscal.

Murli Deora, petroleum minister, and spokespersons of Cairn India and Vedanta declined to comment.

Separately, a senior official in the tax department, who did not want to be named, said its officials met Cairn’s representatives following an informal request made to the company. “We didn’t want to be in the blind," the official said.

According to the official, it was not possible to judge if there would be a tax liability on account of the deal as it had not yet taken place. “Opinions have no place. Facts will come in only after the event has taken place," the official said.

While Vedanta plans to enter the oil business by paying up to $9.6 billion for a majority stake in Cairn India, ONGC is a partner with Cairn India in the joint venture that runs block RJ-ON-90/1. Cairn is the operator in the block, its main asset in India, while ONGC is the licensee and a partner in the field with a 30% stake.

Meanwhile, R.S. Sharma, chairman and managing director of ONGC, did not rule out a counter offer on Wednesday. “We have not yet decided," he said.

“When we get a directive, we will do due diligence after discussing it in the board," added a senior ONGC executive, who did not want to be identified. “ONGC has not yet decided on anything."

Cairn India shares continued their rise and closed 1.46% up at Rs343.60 on the Bombay Stock Exchange on Wednesday.