New Delhi: Delhi high court on Wednesday reserved its order on the extension of the production sharing contract (PSC) between Cairn India Ltd and state-run Oil and Natural Gas Corporation Ltd for the Barmer block in Rajasthan after it expires in 2020.

The court will pronounce on the application of the government’s March 2017 policy during the period so extended under the PSC.

Justice Rajiv Shakdhar noted during the proceeding that policy-making by government was a ‘unilateral’ act, which if applied to the PSCs would enable the government to change the terms of the contract unilaterally.

Cairn India had moved the high court in December 2015 seeking an extension of the PSC. Subsequently, in July 2016, Cairn India and ONGC mutually agreed to extend the PSC for the Barmer block by 10 years under the existing terms and conditions. However, the union cabinet in March 2017 granted extension of 10 years or economic life of the field, whichever is earlier, to PSCs for 10 oil and gas blocks, including the PSC between Cairn India and ONGC for the Barmer block, under different terms and conditions. The new policy mandated higher profit sharing with the government, a no-litigation clause and a compulsory clause on arbitration, among others.

During the course of hearing, ONGC sided with the government, arguing that the terms and conditions as per the new policy of March 2017 should apply as the mutual agreement to extend the PSC on existing terms was before the new policy came in.

The PSC between Cairn India and ONGC for the project was signed on 15 May, 1995 for a period of 25 years. While Cairn India operates the block with 70% participating interest, ONGC has the remaining 30%. The Barmer block comprises the Mangala, Bhagyam, Aishwariya and Raageshwari oil and gas fields.

Cairn India is now part of the Anil Agarwal-led Vedanta Group.

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