The Week in Review for 01 July 2011

The Week in Review for 01 July 2011

The cabinet committee on economic affairs gave a conditional approval to Vedanta’s planned acquisition of a majority stake in Cairn India. Its conditions are largely to do with protecting the interests of state-run ONGC, which jointly runs a lucrative oil field with Cairn India. The cabinet recommended that royalties from that field in Rajasthan be considered cost recoverable. It also said the case on Cairn India’s should be withdrawn. ONGC has been demanding compensation for the royalties it pays for the Rajasthan field. Cairn India, meanwhile, has been paying its cess, but under protest. If the deal goes through now, Vedanta will buy a 58.5 % stake in Cairn India for some $ 8.7 billion.Vedanta already controls 18.5% of the company, which it bought from Malaysia’s Petronas.

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Bengal chief minister Mamata Banerjee has suffered a setback in her face-off with Tata Motors. On Wednesday the Supreme Court kept her government from evicting the company from its factory site in Singur. It passed an order temporarily staying authorities from returning the land to farmers. But the court also refused to discuss the newly passed law that authorized the move. That’s because the Calcutta High Court is still hearing the case between Tata Motors and the Bengal government. Of course, Mamata Banerjee hasn’t given up. She says the Supreme Court decision does not stop authorities from surveying the contested land. What’s more, the court’s decision also doesn’t give back Tata Motors the abandoned factory the government took over in June.

Apollo Global Management has announced the second biggest private equity deal in India this year. It has decided to invest around $500 million in the Welspun Group. Out of that, some $300 million will go to group firm Welspun Corporation from a preferential allotment of convertible debentures, as well as global depository receipts.

Struggling national carrier Air India is planning an ambitious restructuring that it believes will return it to profitability. Its scheme, if approved, would drastically cut down its employee count and rely on investments from the government. Mint has learnt the airline plans to spin-off its engineering and ground handling units into separate businesses. And it wants the government to invest Rs500 crore in each of the units. Air India expects the separation to reduce its employees from 28, 500 to just 7000. Air India’s scheme will, of course, require government approval. But critics believe the idea is at best a short-term measure. Instead, they say the carrier suffers because of an incomplete merger with Indian Airlines.